Tuesday, September 09, 2014
The question in this essay is who should pay for Detroit's bankruptcy? Today, the debt overhang rests on the poor because the wealthy and middle class left for the suburbs long ago. Even if it had been possible that Detroit could have kept its tax base evenly distributed, it wasn't likely. This, of course, is true for several cities around the US, urban centers that have been hollowed out and are surrounded by wealthy autonomous towns. To keep the wealthy and middle class, city administrations needed a long-term PR plan that involved taxes and services targeted to the middle and upper classes. Is this fair? Not really, but the wealthy and the middle class have the option to move and have done so over the decades as cities became less welcoming, cramped and poorly run. The reality is that cities have to compete for the wealthy and middle class against suburbs, first by keeping businesses in the inner core and secondly, by holding on to the well-to-do population. Once either has left, the other will follow. New York City, as wealthy as it is, nevertheless lost numerous corporate headquarters to the suburbs surrounding it and is in danger of losing more as its power as a financial center has declined. Mayors need to play a long game but often are constrained by short-term politics. It isn't fair that the wealthy and middle class get to leave, but that is the way it is. Laws won't change self-interested behavior.