Economics woodward_010101

Published on December 18th, 2012


Shikha Dalmia: Detroit Needs a Regime Change

Shikha Dalmia, a columnist (The Daily) argues that Detroit must be liberated from its moribund government if it is going to survive.

This is a time of high political drama in the Motor City as Detroiters debate whether a state takeover of its books is necessary to avert bankruptcy. But in the larger scheme of things, this is a minor issue. A takeover won’t cure the root cause of Detroit’s fiscal mess: a dysfunctional government that has killed growth and made the city a living hell. Fixing that will require radical solutions, such as the one that brilliant New York University economist Paul Romer is recommending for Third World countries in a similar trap: charter cities.

An Ernst & Young audit earlier this month found that, absent drastic action, Detroit will run out of cash by April. This is no surprise to anyone familiar with the city’s perennial budgetary shenanigans.

Detroit’s current mayor, Dave Bing, a well-meaning but politically clueless former basketball star, came to office in 2009 (after his predecessor was carted off to jail) promising to eliminate Detroit’s $300 million-plus accumulated deficit. But the deficit has grown, and Detroit is drowning in debt because Bing maxed out the city’s credit card, pushing Detroit’s credit rating into junk territory. The city has used up all its borrowed cash and, come spring, it will be flat broke, since it can’t borrow more.

Source: The Daily. Read full article. (link)


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