Lessons from Detroit’s Financial Crisis
By: Sen. Bill Heath (R-Bremen)
During the early to mid-twentieth century, the City of Detroit represented American industrialization and ingenuity at its finest. After a series of world wars and a debilitating national depression, the resurgence of the American automotive industry in Detroit helped revitalize a struggling national economy. In only a few short years, this small Midwestern city became known as “the Motor City” – nearly doubling in population and providing thousands of jobs for American workers.
However, Detroit’s modern landscape looks vastly different today. Factories that were once bustling with American workers are now empty facades of their former glory. Over half of the buildings within Detroit’s city limits are vacant, city services are diminishing by the day and retirement pensions have all but run dry.
The City of Detroit has been governed by liberal policies for over 50 years. Unwilling to curtail the city’s insurmountable debt and benefit liabilities including health care and retirement pensions, the City of Detroit recently filed for Chapter 9 Bankruptcy – making it the largest municipal insolvency in our nation’s history. It’s apparent that the misguided spending policies and unregulated bureaucratic control of the city may take years to repair, if repairable at all.
Although Detroit was not the first city to file for bankruptcy, these events certainly point to something much deeper. These wounds were self-inflicted through irresponsible action and poor financial management. We must learn our lesson now on all levels- within our homes, within the state, and within the federal government. Spending money we don’t have and avoiding bills we can’t pay will bankrupt, demoralize and destroy this country.
While it’s hard to imagine a modern-day city without functioning traffic lights and responsive police departments, this is gradually becoming a reality in cities across America – not simply in Detroit. This should be a sober wake-up call to all Americans as we consider whether our wants exceed our ability to pay. There are no free lunches. Someone must pay the bills and if we’re not careful, we could easily find ourselves on the same road to economic ruin.
Appropriate or not, Detroit made commitments to employees who trusted their employer. Today, many of these employees who are now unable to work due to their age are finding themselves without the pensions and health benefits they expected. They have killed the goose from which they expected golden eggs.
There is a lesson here for those who continue to out spend their ability to pay. It is easy to get carried away enjoying the fruits of another’s labor. The goose can lay only a finite number of “golden eggs.” Whether in our homes, local, state or federal governments, we must control spending. There is nothing wrong with enjoying a good season, just be willing to give up those luxuries when the good season ends. Don’t become addicted to luxury. Use debt wisely and sparingly. And finally, be sure that you put something away for the rainy days that are sure to come.
Today, Georgians on an individual level face a debt of approximately $53,000 attributed to our federal government and approximately $952 attributed to our state government. Georgia and its local governments are not permitted to use debt for maintenance and operations. Debt is permissible for capital improvements such as schools and other infrastructure. The federal government should exercise the same financial responsibility.
At every level of government, we must exercise financial responsibility. America is too valuable to be allowed to fail due to unmanaged debt. We have postponed making the tough decisions regarding spending for far too long. If we don’t want our future to be like Detroit, we must reduce spending and obligations before they strangle us.