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NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

Two Ways to Approach a Deficit



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Detroit, the standard specimen of urban dysfunction, has, you will not be terribly surprised to learn, a serious municipal deficit. The numbers and trends will be familiar to anybody who has monitored the evolution of that fascinating modern parasite, the government employee: Having destroyed the city’s economic base and rendered most of the city proper unlivably dangerous, the political powers of Detroit have maintained a consistently large government work force, which subsequently has grown entirely out of proportion to its declining population. Detroit today employs one city worker for every 55 residents, as opposed to one city worker for every 109 residents in Charlotte, which is just barely bigger than Detroit (the Motor City has indeed declined so much) and one city worker for every 101 residents in El Paso, which is one spot down from Detroit on the population rankings. And on its Spartan city budget, El Paso maintains the nation’s second-lowest crime rate among large cities (behind Honolulu), despite its being conjoined to besieged Juarez, Mexico, one of the world’s most dangerous cities. Detroit was found to be America’s most dangerous city in a 2009 Forbes study.

Detroit maintains 13,000 government workers but has 22,000 government retirees burrowed into the body politic, and their health-care subsidies alone account for nearly $200 million of the city’s budget. Pensions alone already account for a quarter of city spending; in three years, they will account for half. Pensions and city workers’ health-care subsidies account for $561 per year from every resident of Detroit, which has a very poor population — average monthly income of barely $1,200 before taxes, a fifth of the population in poverty, etc. The official unemployment rate is 30 percent; the real rate is much higher.

One would think that a city in that condition would engage in some austerity measures, if only small and largely symbolic ones. But then one would fail to appreciate the sort of willful malevolence that put Detroit into its current condition. Rather than cut corners, the city recently finished a multimillion-dollar renovation of a single library branch, installing designer chairs from Allermuir at $1,000 a copy. That’s a lot of library for a city in which about half of the adult population was estimated to be functionally illiterate in a 1998 National Institute for Literacy study. (I was not able to find a more recent estimate, but I cannot imagine that the numbers have much improved, especially since Detroit mayor Dave Bing is pressing to include Detroit natives currently resident in out-of-town abodes of the sort with armed guards and doors that don’t unlock from the inside as part of the city’s population. (That is not purely a matter of civic pride; with its population fallen below 750,000, Detroit is not legally entitled to collect a city income tax.)

Having exhausted all its other options, Detroit’s nominal city government finally is turning to the root of its fiscal problem, and is asking for concessions from the labor unions, which are the city’s real government. The main targets are pensions and health-care costs, along with sheer  work force size. The unions are not inclined to budge. The city council is poised to make things worse by reducing its payments to the city’s pension fund, which will not save money — the pension payments still will be made – but will simply hasten the day on which those pensions will either be rendered insolvent or will require even more direct taxpayer support, i.e., it’s fiscal nonsense on stilts.

Dartmouth College faced a big deficit this year, too, its endowment having been double-decimated (it declined by one-fifth) as a result of the market turbulence of 2009 and after. Dartmouth enjoys many benefits not available to the city of Detroit: Its governance is democratic in only the very loosest sense, and its left-wing maniacs are of the variety who mostly know how to count money. But it also has disadvantages: It cannot levy taxes, for instance, nor issue tax-free bonds on the muni market.

This is how Dartmouth closed its deficit: It fired about 40 employees outright and bought out more than 100 more. It eliminated 82 more positions through attrition, cut raises, and reduced health-care benefits. Dartmouth does not have the ability to levy taxes, but it did raise the cost of attendance (by replacing some grants with loans). The faculty howled and no doubt will continue howling. But Dartmouth acted more or less as if the school believed that its main obligation is to the students, present and future, that it will educate, and not to its employees, whose professional duty is to serve that obligation. Detroit, on the other hand, like most cities (and states and other government groupings) proceeds as though its main obligation is to its employees; in Detroit, that probably is the politically intelligent thing to do, since the citizens are fleeing as fast as they can, while the bureaucrats are staying put.

If there is a lesson to be had from these examples, which admittedly are very different, it is this: Matters of essential fiscal prudence should be isolated from democratic pressures to the extent that it is possible to do so. The main reason that our states run balanced budgets (other than their ability to mask their deficits) is that they are not legally able to do otherwise. While I remain skeptical of the model of problem-solving that says, in essence, “Pass a constitutional amendment saying the problem is solved,” I am increasingly sympathetic to the case for a balanced-budget amendment, and for attaching one to the debt-ceiling bill. True, it would take years for such a thing to become law, if ever it did. But it would be worth the wait.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.


Tags: Debt , Deficit , Despair , Fiscal Armageddon , Municipal Bonds


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