Massachusetts Daily Collegian

A free and responsible press serving the UMass community since 1890

A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

Detroit: A lesson in economics

Courtesy of Wikimedia Commons

During the 2012 presidential election, candidate Mitt Romney caught a lot of flak for saying in a 2008 Op-Ed for the New York Times that he would let the city of Detroit go bankrupt. And today, under President Barack Obama, it basically is.

While admittedly Romney was talking about the car companies based in Detroit, and not the entire city, I still find it funny. Apparently I’m not the only one who sees the connection: Ingham County Circuit Court judge Rosemarie Aquilina that the city withdraw its federal bankruptcy filing in part because it was “not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.”

The other reason she ruled against the city is a clause in the Michigan state constitution saying that pensions are inviolable, and bankruptcy would diminish or endanger them.

Aquilina then that a copy of her judgment be sent to President Obama. I guess that’s how you ask for a raise when you work for the Feds.

As crazy as it may seem to many of us in the under-30-year-old crowd, there once was a time when Detroit was not a decaying mess and was the pride of 1960s America. In 1960, Detroit was the fourth-largest city in the United States and had the highest per capita income in the country. It was culturally vibrant as well, famous as the birthplace of Motown music.

The median income was approximately $40,000 a year, unemployment was at around 10 percent and the homicide rate was 10.3 people per 100,000 residents. It was the closest you could get to a suburban-style city.

Fast forward to 2013. Now it is America’s 18th largest city, and a third of its land is vacant. Approximately 60 percent of all children in Detroit live in poverty. Detroit’s greatest cultural export is pictures of the decay, referred to derogatively by some as “ruin porn.” Nearly half of the population (47 percent) is functionally illiterate.

In 2010 it had a median income of $27,808 a year, 23.4 percent unemployment, and a homicide rate of 43.4 victims per 100,000 residents. It is facing $20 billion in debt and total unfunded liabilities (basically, potential debts), or more than $25,000 per resident.

In order to cut costs, the police department has been grossly underfunded. The security situation in Detroit is so bad that bus drivers stopped driving their routes in 2011 out of fear for their lives. They did so after one of their own was beaten to a pulp in downtown Detroit and it took the police a half an hour to respond. That is actually faster than the average Detroit police response time, which stands at 58 minutes.

So now we look at what has happened in Detroit between 1960 and now. Detroit has been run by Democratic mayors every year since 1962 and by African-American mayors since 1974.

Detroit reached its peak median income, $59,439, in 1970, after which it began its decline. By 1982, it had shed nearly 80,000 of its 180,000 manufacturing jobs and the median income had fallen to around $39,000. Although the decline has not been constant in every category, it has never recovered. Detroit is relatively unique in that it has been run by black Democrats for 39 years, but the problems of Detroit are not unique.

The combined debt and unfunded liabilities of the United States Government stands at roughly $100 trillion. That is a conservative estimate, by the way: other people have stated much higher numbers. Others have given artificially low numbers by saying that the money the U.S. government has pledged through entitlements such as Medicaid, Social Security and Medicare does not count as an unfunded liability.

But anyone who thinks any politician would dare cut entitlements is living in a fantasy world. The federal government has been able to sustain a debt over 10 times per person greater than Detroit mostly because it prints its own money.

However, the same principal that drove Detroit to bankruptcy holds for the country as well. You can’t spend money you don’t have. It’s that simple.

It’s high time to abandon the economic fantasy that spending money creates value. While favored corporations may be able to get the government to wipe away their debts with taxpayer money, we don’t all have that luxury. The key to a financially stable individual, household, city, state and country is a stockpile of saved money for hard times.

What we have instead, at every level, are larger and larger piles of debt. Detroit is our ghost of Christmas-yet-to-come, here to warn us of the perils of continuing along our chosen path. We would be foolish to ignore it.

Rane McDonough is a Collegian columnist and can be reached at


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  • R

    Rane McDonoughFeb 6, 2015 at 10:14 pm

    What’s shocking is your lack of reading comprehension. I would add your complete disregard for any standards of common decency and reasonable debate, but while it is disappointing it is no longer shocking to me. I sincerely hope that you never have to leave the bubble of arrogance and self-righteousness you exist within. You might find that not every person who you slander is the evil vile racist scumbag you believe them to be, and then what would you do?

  • J

    JFeb 9, 2014 at 8:37 pm

    The racism in this piece is disgusting and it should have never been published.

  • J

    Johannes RaatzFeb 9, 2014 at 8:36 pm

    I disagree fully with your economic analysis, but that’s not what is upsetting. What I find shocking is that you link the city’s distress with blackness. You write, “Detroit has been run…by African-American mayors since 1974.” Regardless your intentions, to associate African American governors with failure or incompetency is racist. I also am troubled that the Collegian editors let this article go to press without removing the line. One might argue that the author has the right to their free speech, but the paper has no obligation to publishing statements that support white supremacy and anti-black racism.

  • P

    Professor DanOct 9, 2013 at 4:11 pm

    Detroit’s economy was “driven” primarily by GM, Ford, and Chrysler. Unfortunately, the big three were driven by their respective unions, who drove them down the tubes with their unrealistic, selfish, and ridiculous pension plans. Don’t believe me? Just google “union rubber rooms” to see an example of how damaging the unions have been to Detroit. Too bad detroit now has no relevant or sustainable business climate, and their claim as the car capital of the world is a distant memory. Should have listened to Mitt.

  • C

    CrhSep 13, 2013 at 11:52 pm

    I completely agree. It’s time for the federal government to fix its debt problem by doing that thing it has not been willing to do since the 1950s: raise taxes on the rich.

  • J

    JackSullivanSep 12, 2013 at 7:16 pm

    You only need to consider the words of Judge Aquilina to understand one prominent root of the problem. We have become a culture that in many cases feels compelled to reward intentions and effort, not results. So, when a city declines causing a significant population shift of earners outward (and maybe just ‘over the line’), many see those who freely moved as the problem. Not the leaders. Hence, obligations made by failed leaders must be met. And the likely pool of taxpayers to meet than obligation? The Michigan residents outside of Detroit, if not the non-Michigan residents of the U.S. The failure is not assigned to those who “tried”.

  • N

    n.Sep 12, 2013 at 5:23 pm

    huh? that’s a ‘lesson’? ‘a penny saved is a penny earned’? thanks ben franklin.
    how about this: capital creates accumulations of workers during such times as profit can be extracted relatively effectively from their labor. when stable, such accumulations may appear as ‘successful, suburban-style cities’, etc. but eventually the profits are reinvested into technological advances that cut down the need for labor, and eventually into off-shoring the plants. then the human communities formed around the plants and other structures of capital’s heyday are left high and dry, to inhabit the ruins.
    and your ‘solution’ to this massive, systematic dispossession is that individuals should save up for a ‘rainy day’? what if (to extend the metaphor) it isn’t a rainy day but say, catastrophic climate change? anyway, you could have broached a more interesting aspect of this topic by asking just what this money *is* that we are all supposed to be saving. it never ceases to amaze me that not merely undergraduate columnists but leading politicians continue to talk about economics as if we were all elementary school students playing ‘store’.