EagleTribune.com, North Andover, MA


July 28, 2013

Column: Detroit offers a valuable warning

Look at Detroit, the first major American city ever to file for bankruptcy, and, after bemoaning how it got there and the hurt that’s going to follow, say thank you for this object lesson in how a bad situation can be made worse.

Maybe the United States government will finally see more clearly what debt can do when politicians play silly games, such as right now making it seem some deficit reductions have made the debt issue nothing more than a shrug of the shoulders for the federal government. All those reductions did was temporarily slow down growth of a U.S. debt that will start spurting again and threaten us mightily if we don’t address unsustainable entitlements.

More on that in a minute, but first, some discussion of Detroit, once America’s queen city of manufacturing. That began going away decades ago, not because of bad calls by government, but because of changes in the national and international economies. The rich moved to surrounding suburbs, the poor stayed put and politicians had to decide what to do.

Some of what they came up with was pretty bad. The Heritage Foundation reviews how the city borrowed too much. It raised taxes enough to discourage new businesses from coming. A major error was putting off the funding of an unaffordable retirement system for public employees, thereby running up unfunded liabilities of $9 billion owed to retirees in health and other benefits as well as pensions.

A curse of electoral politics is that those seeking office promise everything to help them get elected, knowing very well they will not be around when the bill comes due. The unions cheer them on even as the office holders then keep other services going by failing to set aside sufficient money to pay for what’s to come. Negotiating new deals with unions is tough, and it’s easy to see why: People will have to live on less than they were told they would get.

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