Cato: Detroit’s failure lies in big government, bad choices

111149Not a week after Detroit’s bankruptcy filing, left-leaning pundits and big government believers hit the ground running, blaming “free trade” for its failures in the case of Michigan’s former Governor Jennifer Granholm, or “market forces” from the New York Times’ Paul Krugman, or simply “small government” from MSNBC’s Melissa Harris-Perry.

For nearly 50 years Detroit has been led by Democrats, and its failure lies solely on its own failed policies, government bureaucracy and a slew of unfunded liabilities, writes the Cato Institute’s Michael Tanner.

Unfunded liabilities cost the city dearly.  Almost ALL of the city’s healthcare obligations are unfunded.  Pension programs city-wide paid out far more than what they took in, and have for nearly 8 years.  Unfunded liabilities account for half of the city’s $18 billion debt.

Nearly 1 in 15 Detroit residents work for the city, draining the city of more than a third of its revenue to pay the salaries of its workforce.  “Legacy obligations, which include pension contributions and benefit payments, take an additional 39 percent of revenue. That leaves little to invest in the failing infrastructure,” wrote Tanner.

The city spends more than $14,000 on each student, annually, in the city’s education system, even though city students are notorious for low test scores in national proficiency tests.  In 2009, the city recorded its lowest scores ever.

As a result of this spending, Detroit’s city income tax is the highest in the state and leaves businesses shouldering a undue burden of tax obligations.  Understanding the reality of economics and the laws of human nature, Tanner wrote: “The income tax burden on residents is significantly higher than that for those who live in the surrounding area, which helps drive more affluent and successful residents out of the city.”

“A few years ago, the nonpartisan Bay Area Center for Voting Research rated Detroit as the most liberal city in America. The city’s own choices, not free markets and limited government, are really responsible for Detroit’s failure.”