With Detroit bankrupt, is 'blue model' to blame?

Did the progressive “blue model” of city governance destroy Detroit? And if so, is Detroit’s bankruptcy a deeper concern to progressive cities like Chicago, Oakland, and Santa Fe, which are beginning to teeter under the weight of unsustainable pension liabilities?

To be sure, Detroit’s multi-decade fall into despair, disrepair and ultimate bankruptcy had myriad causes: the shrinking US-owned auto industry, unsustainable pension deals, and city council investments in gee-whiz development deals instead of a focus on basic maintenance and services.

But critics say the failure of the Democratic one-party machine in Detroit to build racial peace, control crime, and boost business, in fact, represents a cautionary tale for more robust but politically similar “blue” cities like Chicago, which took a three-notch credit rating hit at the same moment Detroit leaders announced its Chapter 9 bankruptcy intentions.

“Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long,” writes Walter Russell Mead, in the American Interest magazine. “The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.”

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Reaction to Detroit’s bankruptcy is part of a greater teetering of political and economic philosophies, roughly translated into “red” right-to-work Southern states – yes, the very ones who stole Detroit’s thunder by providing incentives for foreign automakers to build factories in Alabama and South Carolina – and “blue” unionized Northern states struggling to rebuild from the ruins of the industrial muscle it build up during World War II, when Detroit built 75 percent of America’s war machine.

The clash of skyrocketing debt with pension deals secured with key constituencies, including civil servants, has become a major narrative in cities, states, even Washington, where Republicans and Democrats continue to grapple over debt and liabilities that some say are choking national economic momentum.

Closer to home for Detroit and Chicago, that struggle was at the heart of the upheaval in Madison, Wisconsin, in 2011, as a Republican governor, Scott Walker, pushed through controversial laws giving the state and cities greater flexibility to adjust union contracts.

Indeed, a major significance of Detroit’s bankruptcy is that Michigan Gov. Rick Snyder, a Republican, and the legislature, dominated by rural and suburban lawmakers, refused to lend a helping hand. Following in Gov. Walker’s footsteps, Mr. Snyder signed a 2012 law giving municipalities more autonomy and power in rewriting union pension and benefit deals.

"Detroit getting into trouble? Not a surprise. State of Michigan not coming to help? It is a big surprise, and I think I am not the only one to say that," Richard Larkin, director of credit analysis at HJ Sims, tells Reuters.

Indeed, pension liabilities have become a key culprit. A large cohort of cities, many of them in deep-blue California, have pension liabilities up to five times their operating revenue.

But behind the crime rate and falling property values, which accelerated to the exodus of people from the crumbling Motor City metropolis, the real culprit that doomed Detroit is bad governance, said Kevyn Orr, the emergency manager appointed by Gov. Snyder.

Quoting Mr. Orr as saying that Detroit must impart “best practices of 21st century government,” Washington Post columnist Rick Plumer notes: “Detroit has been a one-party city run by Democrats since 1962.”

On that note, says New York Times conservative columnist David Brooks, appearing on PBS NewsHour Friday night: “[Y]ou  look at some of the bad urban policies that were attempts at revival, fancy downtown office buildings, it's not about building – that's not what you do. You build families. You give families a reason to build there and stay there. The crime, the education, it's just one thing after another – the corruption.”

To be sure, much of the havoc in Detroit and other cities has been caused by a stubborn economy, which has taken years to drag out of the Great Recession that took hold in 2008.

While some debt-burdened “blue” cities are considering following Detroit into bankruptcy in order to reorganize overwhelming debt, the Motor City to some urban experts remains a specialized case, whose plight can be avoided if the national economy keeps improving, thus quenching thirsty municipal coffers.

"Detroit should not be seen as emblematic of cities or as a harbinger of what's to come," Clarence Anthony, executive director of the National League of Cities, told Reuters.

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