The Detroit Financial Crisis

By David Green

The national media have trumpeted the neoliberal narrative for Detroit’s financial woes. Detroit is portrayed as a mismanaged municipality whose corrupt politicians have driven the city into the ground. Our municipal debt (including pension obligations) approaches $18 billion. Our former mayor, Kwame Kilpatrick, was recently convicted of racketeering. He and his associates reportedly extorted a 10% premium on all city contracts. Over several decades, the city’s elected leaders allegedly negotiated sweetheart deals with municipal labor unions in exchange for political support. Recently, the New York Times reported in a front page story how Detroit’s pension fund managers had depleted the funds over many years by handing out annual bonuses to pension holders.

Though there is some truth to these charges, this is not the real story behind Detroit’s financial failure. The real story is demography and declining incomes. Detroit is one of the largest cities in the country by area—over 140 square miles of land requiring management. The population has declined from almost two million in 1950 to fewer than 700,000 today. In addition, Detroit has suffered from profound de-industrialization with the decline of the auto industry. One marker for this is that UAW membership has fallen from a high of 1.5 million in Walter Reuther’s day to approximately 350,000 today. This loss of good paying jobs has further contributed to the erosion of Detroit’s tax base. Detroit leads the nation in the percentage of its residents living below the federal poverty line. State revenue sharing to the city is approximately half of what it was ten years ago. During his three years in office, Governor Snyder has cut state revenue sharing to the city by an additional $66 million. Suburban communities have compounded the problem by offering tax incentives to lure companies (and jobs) away from Detroit. Finally, Moratorium Now (a local coalition of community activists, retirees, and youth seeking to halt foreclosures and utility shut-offs) has estimated that criminal fraud perpetrated by large banks (JP Morgan Chase and Bank of America)—which placed 70% of Detroiters in predatory sub-prime loans—resulted in 100.000 home foreclosures between 2005-2010. This, in turn, caused a significant decline in the city’s population and further eroded the city’s tax base.

The solution for Detroit’s financial crisis depends upon the ideological lens through which one views the problem and its causes. From a neoliberal perspective (which views labor unions and regulation with disdain), the causes are mismanagement, greedy labor unions, and corruption. To proponents of this view, the solution is simple—austerity. They envision abrogating union contracts, paying pensioners ten cents on the dollar, and selling off city assets such as Belle Isle (a public park on the Detroit River), the water department, and the Detroit Institute of Art. The easiest way to accomplish this is through an emergency financial manager thereby circumventing the obstacles presented by democratically elected institutions. Last December, the Republican-controlled lame duck session of the Michigan legislature passed an emergency financial manager law weeks after Michigan voters had defeated a similar ballot measure. Furthermore, by attaching a small appropriation to the new law, the legislature rendered it referendum-proof (The Michigan Constitution makes all appropriation laws exempt from a referendum.). The new law mandates emergency financial managers to guarantee payment of bondholder debt service at the expense of city jobs, services, and pensions.

The problem with the emergency financial manager’s plan is that privatization of city services, reduction of retiree pensions and health care benefits, and abrogation of union contracts do nothing to restore Detroit’s long-term financial health. In fact, by reducing the city’s ability to attract population and by reducing the incomes of city workers and retirees (who pay city income taxes), these actions actually starve the city of revenue. The bankruptcy Detroit’s emergency financial manager proposes threatens the hard-earned, collectively-bargained, and state constitutionally-protected pensions of 20,000 Detroit retirees.

There is another solution—one based on human solidarity rather than the dog-eat-dog approach of the market place. The contours of such a solution include:

1)    Federal assistance for Detroit—In return for federal loan guarantees and grants to support a regional mass transit system, weatherization of homes, and investment in the Detroit Public School system, the federal government could insist that the city downsize to a land area more manageable for a population of 700.000. It should also make the federal aid conditional upon matching aid from the state.

2)    Restoration of previous levels of state revenue sharing—The state of Michigan now has a revenue surplus. It should immediately restore state revenue sharing to its level of ten years ago.

3)    Cancel the Debt—Criminal fraud perpetrated by large banks in marketing subprime loans to Detroit residents is the basis for canceling the city’s debt to the banks. This strategy recently worked in Jefferson County, Alabama where JP Morgan Chase repudiated 70% of the debt owed to it by the county due to the bank’s criminal activity.

4)    Regionalize Crucial Services—While the city of Detroit has suffered profound population loss, the population of the Detroit metropolitan area has actually grown to approximately three million. Crucial services such as public transportation, police, and fire protection should be organized on a regional basis and should be paid for by a modest progressive income tax on all of the residents of the three counties comprising the Detroit metropolitan area. This would require enabling legislation from the state as well as approval of the voters in Wayne, Macomb, and Oakland counties. The focus should be on regionalizing, rather than privatizing, public services.

5)    Homesteading—In an op-ed piece in the LA Times in March, Scott Martelle suggested that Detroit should offer land it holds for back taxes to homesteaders who would receive the property for free in return for a commitment to stay in the property for five to seven years, pay property taxes, and improve the property. This would hold the dual advantage of attracting population to the city and generating tax revenue from properties which presently provide no revenue to the city. The city could apply a similar strategy to abandoned industrial sites.

These suggestions offer a way out of Detroit’s financial crisis without resorting to the failed strategy of austerity. Detroit’s residents and municipal workers are not the cause of its financial crisis. They should not be asked to shoulder the burden of recovery by themselves.

DavidGreen2.jpgDavid Green is Chair of Detroit DSA.

Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership.



Film Discussion: When Abortion Was Illegal

March 26, 2017
· 13 rsvps

Directed by Dorothy Fadiman, When Abortion Was Illegal (1992, nominated for an Academy Award, Best Documentary Short Subject) reveals through first-person accounts the experiences of women seeking abortion before the Supreme Court legalized abortion in Roe v. Wade in 1973. We are one Supreme Court nominee away from a return in many states to back-alley abortions. Join Amanda Williams, Executive Director of the Lilith Fund, to discuss challenges to reproductive justice and abortion access. (Lilith Fund funds abortions for women in need in the Central and South Texas area.) Learn about how to participate in April Bowl-A-Thons to raise funds for low-income women. View the film here for free before the discussion. 8 ET/7 CT/6 MT/5 PT.

DSA New Member Orientation Call

March 30, 2017
· 39 rsvps

You've joined DSA - Great. Now register for this New Member Orientation call and find out more about our politics and our vision.  And, most importantly, how you can become involved.  9:30 PM ET; 8:30 PM CT; 7:30 PM MT; 6:30 PM PT.

LGBT Activism: A Brief History with Thoughts about the Future

April 01, 2017
· 50 rsvps

Historian John D'Emilio's presentation will do 3 things: Provide a brief explanation of how sexual and gender identities have emerged; provide an overview of the progression of LGBT activism since its origins in the 1950s, highlighting key moments of change; and, finally, suggest what issues, from a democratic socialist perspective, deserve prioritizing now. John co-authored Intimate Matters: A History of Sexuality in America, which was quoted by Supreme Court Justice Anthony Kennedy in the 2003 Lawrence v. Texas decision that ruled state sodomy laws unconstitutional. 1 pm ET; 12 pm CT; 11 am MT; 10 am PT.

  1. This webinar is free for any DSA member in good standing.
  2. You need a computer with good internet access.
  3. Your computer must have headphones (preferred) or speakers; you can speak thru a mic or use chat to "speak".
  4. If you have questions, contact Peg Strobel,
  5. If you have technical questions, contact Tony Schmitt,, 608-355-6568.

Film Discussion: Documentaries of People's History in Texas

April 02, 2017
· 30 rsvps

Join DSA members Glenn Scott and Richard Croxdale to discuss videos produced by People’s History in Texas (PHIT), a project that brings to life the stories of ordinary people in significant socio-political movements in Texas. They will discuss The Rag, their newest documentary, which tells the story of an influential underground paper based in Austin, Texas, from 1966-77. Click here to view Part I (the early years as an all-volunteer paper covering the student, anti-Vietnam and Civil Rights movements), Part II (the impact of Women’s Liberation on the paper) and Part III (building community: covering local politics, nukes, co-ops, feminist institutions). But also check out the video on the Stand-Ins about a group of university students who led a movement to desegregate Austin’s movie theaters in 1961. 8 ET/7 CT/6 MT/5 PT. Here's a blog post about PHIT.

Introduction to Democratic Socialism

April 04, 2017
· 53 rsvps

Join Rahel Biru, NYC DSA co-chair, and Joseph Schwartz, DSA Vice-Chair, on this webinar for an overview of what we in Democratic Socialists of America mean when we talk about "socialism," "capitalism" and the goals of the socialist movement.  9 PM ET; 8 PM CT; 7 PM MT; 6 PM PT.

  1. This webinar is free for any DSA member in good standing.
  2. You need a computer with good internet access.
  3. Your computer must have headphones (preferred) or speakers; you can speak thru a mic or use chat to "speak".
  4. If you have questions, contact Joseph Schwartz,
  5. If you have technical questions, contact Tony Schmitt,, 608-355-6568.

What Is DSA? Training Call

April 05, 2017

If you're a new DSAer, have been on a new member call, but still have questions about DSA's core values/strategy/core work and how to express these ideas in an accessible way to the media, as well as to friends, family and others who might be interested in joining DSA, this call is for you. 

We will talk through the basics of DSA's political orientation and strategy for moving toward democratic socialism, and also have call participants practice discussing these issues with each other. By the end of the call you should feel much more comfortable thinking about and expressing what DSA does and what makes our organization/strategy unique. 8 pm ET; 7 pm CT; 6 pm MT; 5 pm PT. 70 minutes.

Feminist Working Group

April 12, 2017
· 15 rsvps

People of all genders are welcome to join this call to discuss DSA's work on women's and LGBTQ issues, especially in light of the new political reality that we face after the elections.  9 pm ET; 8 pm CT; 7 pm MT; 6 pm PT.

DSA New Member Orientation Call

April 16, 2017
· 6 rsvps

You've joined DSA - Great. Now register for this New Member Orientation call and find out more about our politics and our vision.  And, most importantly, how you can become involved.  8 pm ET; 7 pm CT; 6 pm MT; 5 pm PT.