Detroit Crosses the Rubicon
Its bankruptcy marks a turning point in American governance, and a crisis for democracy.

Michigan governor Rick Snyder


Michael Auslin

This week saw the inevitable denouement of decades of mismanagement and incompetent leadership in Detroit, the country’s eleventh-largest city. Once one of the symbols of American industrial power, the city declared bankruptcy and is seeking protection from creditors in federal court. It is one thing for a smaller city, perhaps even a county, to seek bankruptcy protection, but quite something else for one of the country’s biggest and most iconic cities to do so. It marks a watershed in modern American urban history, and has laid bare the unsustainable and misguided governing theories of the American Left.

In reality, Detroit had already crossed the Rubicon back in March, when Governor Rick Snyder stripped the city’s elected officials of their power and appointed Kevyn Orr as emergency manager. Under Michigan law, emergency managers (EMs) have extraordinary powers, essentially ruling as modern-day dictators like those in republican Rome. When confirmed by the state legislature, they have the authority to rip up and rewrite city contracts, renegotiate agreements, and control the budget. In the words of one Michigan EM, elected officials of a city under the control of an EM have only the powers delegated to them by the emergency manager. It is drastic medicine for equally drastic failures.

Michigan’s laws authorizing EMs are perhaps unique in the country and have evolved as the failures of several Michigan cities have unfolded. When the most expansive version of EM legislation, Public Law 4, was rejected by voters last November, Republican governor Snyder simply reverted to the previous law, which still gave EMs sweeping powers. Lawsuits by citizen groups challenging the legality of even the less powerful EM laws are working their way through the Michigan court system.

Little of this matters for Detroit. The city has been functionally bankrupt and all but ungoverned for years. From a peak of 2 million residents in the 1950s, during the heyday of U.S. automobile manufacturing, the city has shrunk to 700,000. Mainstream news organizations were finally jolted into paying attention by the bankruptcy, and are reporting that only 40 percent of the city’s streetlights are working, while residents have to wait an hour for police response (compared with just eleven minutes nationwide).

Such figures barely scratch the surface of Detroit’s ruin. Over 75,000 structures are estimated to be abandoned, including some entire neighborhoods, and many city blocks have just one or two homes occupied in a sea of empty houses. Once-grand office buildings look like they belong in 1945 Berlin, not 2013 America. The Detroit fire department was forced to let abandoned buildings burn instead of putting out repeated fires at the same address; several firefighters lost their lives trying to contain fires in unoccupied buildings. The city’s school system is a shambles, and businesses outside the city core struggle to remain open.

The cause of this ruin is decades of mismanagement by the city’s elected officials. Detroit’s voters kept returning to office a city council and mayors who negotiated huge contracts with public-sector unions, so city employees expected lavish pensions. Fraudulent accounting almost certainly played a role as well. When Orr took over earlier this year, Detroit’s long-term debt was estimated at a mind-boggling $14 billion; Orr now says that the city’s books hid the real amount, which is at least $16 billion and perhaps as high as $20 billion. The city has a budget deficit of at least $380 million, and it is out of cash; the state refused to pay the later installments of a bailout plan when the city council refused to accept certain conditions. Indeed, it was the obstructionist actions of the city council in March, in the face of almost certain bankruptcy, that forced Governor Snyder to appoint Orr in the first place.