What a Bankrupt Detroit Teaches Us About Investing

In 1948, Secretary of Commerce Charles Sawyer called Detroit's automobile industry "a symbol of the way in which the American economy could best provide the average American with a steadily increasing abundance of the things he wants and needs."

Two weeks ago, Detroit filed for bankruptcy.

Pundits this week pointed fingers at a city that promised too much, spent with abandon, and relied heavily on a single industry. They cite a poorly run government, myopic city planners, and even fraud. In most cases, they are right.

But the largest driver of Detroit's demise is a simple, startling fact: The city's population declined 65% in the last six decades. No city can survive such an exodus. It's actually amazing Detroit's finances lasted this long.

The Motor City was home to 1.9 million people in 1950, at the time nearly identical in size to Los Angeles. Today, 700,000 inhabit Detroit, or less than a fifth the size of L.A. That works out to 2.2 people leaving Detroit every hour, 24 hours a day, for the last 63 years. If the number of people who left Detroit in the last 60 years formed their own city, it would be the nation's ninth largest, ahead of Dallas, Texas.

The financial woes linked to Detroit's shrinking population have been known for decades. A 1991 article in the Times-News was prescient: "Detroit's population loss could be financial disaster," it wrote.

And Detroit tried to avoid its fate. Total city spending was cut by more than $1 billion, or 33%, between 2006 and 2010, including a 77% reduction in "recreation & culture" spending, a 72% cut in capital outlays, a 41% reduction in spending on roads, and a 44% cut in "health & welfare" spending.

But the city made pension promises during a period when its taxpayer base was more than twice the size it is today. With an unemployment rate of 16% -- more than double the nationwide average -- there is a shrinking base of workers left to tax. With a median income of $27,000, or about half the nationwide average, those who are employed have little income to tax. According to Detroit News, nearly half the city's 305,000 properties didn't pay their tax bill last year. Seventy-seven city blocks had only one owner who paid property taxes in 2012. You cannot run a city like this.

What Detroit's fall means for investors may be more symbolic than direct.

Investors hold some $1 billion in Detroit general obligation bonds, and $5.3 billion of bonds backed by the city's water and sewer revenue. That's barely a rounding error in the $3.7 trillion municipal bond market. And not all of Detroit's bonds' value will be lost; part will be recovered post-bankruptcy, and parts are backed by bond insurance companies. The direct investing fallout from the city's bankruptcy is nil.

Symbolically, Detroit teaches us three things about investing.

Firstly, it was overwhelmingly reliant on the auto industry. When the fate of three companies -- General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Chrysler -- turned, so went the entire city's fate. Evan Soltas of Bloomberg wrote: "Detroit's dependence on cars wasn't exactly the problem. It was dependence itself. Cities should never go all in on any industry, cars or otherwise. It didn't realize that until it was too late."

The same mistake often trips up investors. We preach diversification at The Motley Fool because a lack of it can be one of the surest routes to disappointment. William Goetzmann of Yale and Alok Kumar of the University of Texas once showed that the least diversified investors underperform the most diverse investors by an average of 2.4% annually. Things change unexpectedly, and often for the worse. Diversification is the best way to mitigate that risk.

Secondly, Detroit shows how organizations that can't adapt eventually crumble.

Before it was a technology hub, San Francisco relied on shipping, and before that, gold mining. Before New York was the financial capital of the world, it was the garment capital of the world. Detroit enjoyed the auto boom, but it never found its second act.

Adaptation is a key requirement for any organization's survival, including companies. We're always looking for companies that adapt to changing circumstances. Amazon (NASDAQ: AMZN  ) started as an online bookstore and adapted into the world's largest store, period. Netflix (NASDAQ: NFLX  ) started as a DVD-by-mail company and adapted into a streaming video service. History provides two constants: Change, and punishment for organizations that don't adapt to change.

Lastly, Detroit provides a sad lesson in the need to save for one's self. Tens of thousands of retired Detroit public workers wait anxiously for word on if, and how much, their pension benefits may be cut. Their story may not be unique. According to Credit Suisse, 97% of S&P 500 companies with pension plans are underfunded. The Congressional Budget Office wrote in 2011 that, "By any measure, nearly all state and local pension plans are underfunded." The hard lesson is that you can only truly rely on one person -- yourself -- to save for retirement and look after your investments.

Never let a serious crisis go to waste. That includes learning from Detroit's fall. 

If you're interested in more on how debt impacts the economy, check out my new report, "Everything You Need to Know About the National Debt." It walks you through step-by-step explanations about how the government spends your money, where it gets tax revenue from, the future of spending, and what a $16 trillion debt means for our future. 


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  • Report this Comment On July 30, 2013, at 12:23 PM, PEStudent wrote:

    Make no mistake that Detroit's problem wasn't that it

    "promised" pensions when the population was larger: it's that it did NOT fund pensions when the population was larger.

    Remember, Detroit does NOT pay into Soc.Sec. for its workers: it elected to replace Soc.Sec. with its pension. But it didn't pay in!

    So if the pensioners get stiffed now, it would be like you trying to collect Social Security and being told, "Sorry, we your employer didn't send all your or his contributions in. And we now need to use YOUR contributions to pay off your employer's bankruptcy debts."

  • Report this Comment On July 30, 2013, at 5:44 PM, xetn wrote:

    The reason Detroit lost so many tax payers is because the taxes were too high.

    The real issue is governments (tax consumers) always want more and always with a decline in service.

    I think Detroit will be much better off once the default is completed. Who in their right mind would ever loan them money? Oh yeah, probably the US Congress will, but they have never been in their right mind.

  • Report this Comment On July 30, 2013, at 6:19 PM, terrenze wrote:

    City didn't so much "spend with abandon", Her officials stole with abandon. Drove out two the only three Honest Mayors the city ever had! The third is still dealing with her problems.

  • Report this Comment On July 30, 2013, at 6:21 PM, cmalek wrote:

    And yet the city that just declared bankruptcy, is going to build their hockey team, the Red Wings, a brand spanking new arena, costing the taxpayers $440+ MILLION!!! Who the heck is setting their priorities?!

  • Report this Comment On July 30, 2013, at 6:28 PM, Dennis129 wrote:

    What a silly fellow you writer is. He cites a number of reasons why Detroit went bust, but then dismisses them because the “real” problem is population loss.

    Why did Detroit lose people? All the reasons he dismissed! People really aren’t stupid. Faced with disastrous mismanagement and unbridled arrogance in the auto business, three decades of Coleman Young’s racist and patronage heavy “administration“, collusion with the unions, criminal and pension fraud, and a steady drumbeat of service reductions, why would anyone expect population to grow?

    Get some serious reporter, and junk the airheads

  • Report this Comment On July 30, 2013, at 6:34 PM, TMFHousel wrote:

    ^ Nothing was dismissed.

  • Report this Comment On July 30, 2013, at 7:05 PM, golferman101 wrote:

    Morgan, everything you have said is true, but you left out the racial factor that plagues Detroit and other big cities. The exadius from Detroit started with Family and moral preservation. Black and white alike, who could, exited for better school systems and safety, did. Every attempt to help Detroit was meant with racial overtones if it came from the white community, and the black citizenry that tried were called uncle tom people. Detroit can be fixed when we put our preferences aside and work together.

    How can this happen, when the President of the United States weighs in on a political issue like George Zimmerman and tries to throw the Court system under the bus and the news medoia feeds off of the racial issues like the country shuld be run like a popularity contest??

    You touch the safe issues, but not the real ones. To many of the problematic cities, have racial tensions that are NEVER addressed.

    A born and raised Detroit native.

    Golferman101

  • Report this Comment On July 30, 2013, at 7:11 PM, gledmo wrote:

    Morgan --- you missed a fourth thing which may be more important than those three -- "how you vote"

    Way too much has already been written about how Detroit's population did this to themselves over a multi-decade period.

    Bankrupt Detroit should be a lesson for those who continue to vote for careless, incompetent, ineffective, crooked, self-serving and/or reckless government leadership.

  • Report this Comment On July 30, 2013, at 7:13 PM, LeeG3 wrote:

    I would add three points to this discussion having spent 35 years working in MI.

    1. Ford was NOT in Detroit. It was in Dearborn. So while some of its suppliers were in Detroit, Ford was not.

    2. Was anyone watching when the suppliers were going bankrupt? As the car companies spun off their parts plants, those new companies weren't viable either. So it was no surprise that the car companies themselves would go bankrupt.

    3. Nobody mentions Coleman Young's comment about staying north of 8 Mile. The bottom line was we (Detroit) want your money but don't ask us what we do with it.

  • Report this Comment On July 30, 2013, at 7:39 PM, NobodysFool666 wrote:

    I disagree that the largest driver of Detroit's demise is a simple, startling fact, i.e. that the city's population declined 65% in the last six decades and no city can survive such an exodus.

    The decline was a symptom - not a cause. The 65% decline in population came about because the single industry on which Detroit heavily relied was NOT reliable - thanks to the auto unions. When the car jobs left so did the auto workers - many fleeing to Texas where there is no state income tax. The poorly run government (i.e. Democratic administrations) promised too much to get their union employees and union teachers - and then spent with reckless abandon to keep getting the union vote. As the city's costs grew larger the working, taxpaying population was declining for lack of jobs - thereby causing a never-ending increase in property taxes which only caused more people to leave. This all traces it roots back to collective bargaining - it killed the auto industry and as FDR predicted it should never have gained a foothold into the public employee sector. We all - Detroit included - pay far too much in taxes due to collective bargaining; money that could be better spent elsewhere. Detroit may be the first large city but don't take you eyes off the news - there may be more coming.

  • Report this Comment On July 30, 2013, at 8:09 PM, shotel wrote:

    @ Dennis129 - The bottom line is population loss that leads to lower tax revenue and thus, unfunded obligations. People left Detroit over the past 60 years. Each wave that abandoned the city did it for various reasons; white flight, eroding market share in the auto industry due to global competition causing a hemorrhaging of jobs, the auto industry itself decentralizing manufacturing and offices outside of Detroit.

    Each individual exodus, irrespective of the reason, diminished the future tax base that was previously counted on to service future obligations.

    What is actually missing here is the much LARGER picture.

    The U.S. population is shrinking as well. That is to say the *effective* taxpaying base. Every day on average, 10,000 people retire now (baby boomers), and 11,000 people are born, and about 10,000 people die. By the time these new born's are of working age, only 6,000 new births/day will occur. Automation alone has displaced 50x more jobs than illegal immigration. So even though there is still a small net increase in the population, there are no net new jobs - and thus no net new future tax base to service the sweetheart retirement deals and social security obligations that baby boomers cut for themselves on the backs of future generations. So we will have the exact same scenario nationwide as Detroit is having now within the next decade; a lack of taxpaying population.

    "I think it (the fiscal disaster) was inevitable because the politicians in Detroit were always knocking the can forward, not confronting the issues, buying off public employees by increasing their pensions," said Daniel Okrent, a Detroit native who wrote a Time magazine cover story on the city in 2009. "They were always kind of confronting the impending crisis by trying to make it the next guy's crisis."

    Well, all politicians do this. They do this to placate their constituency, who could care less about who will be paying for their sweetheart deals down the road. If a politician said "Hey, our children will not be able to afford to carry our obligations, and we must cut back on Social Security benefits by 50%..." the majority of the voters would ride them out on a rail saying that they are *entitled* to having future generations pay for their retirements.

    When the equities (stock) markets crash again and loose 50% (which will happen within the next 24-36 Months) ..again, it will be yet another sign that an effective zero growth rate population is going through its bumpy ride down.

  • Report this Comment On July 30, 2013, at 9:09 PM, l123ga wrote:

    you're all right. Our government is a mess of messes.

  • Report this Comment On July 30, 2013, at 9:09 PM, mountain8 wrote:

    Well, besides the crooked politicians and the greedy poeple, I'd have to put a lot of blame on unions. They kept asking for more and more and the politicians wanted to buy their votes so they gave more and more. until there wasn't anything left to give. THe people wanted more for less. The unions wanted more for nothing. The politicians wanted votes for more money and now there are no car makers in Detroit and few in America. Sorry the unions are now faced with fewer dues payers. Absolute power corrupts absolutely. We made our mess. So live with it.

  • Report this Comment On July 30, 2013, at 9:12 PM, TMFHousel wrote:

    <<The U.S. population is shrinking as well. >>

    The U.S. population is neither shrinking nor projected to shrink:

    http://www.census.gov/population/projections/data/national/2...

    That's true for both the total population and the working-age population:

    http://www.fool.com/investing/general/2012/06/22/the-most-im...

  • Report this Comment On July 30, 2013, at 10:57 PM, shotel wrote:

    ^

    From your own census.gov link - the summary:

    "In 2056, for the first time, the older population, age 65 and over, is projected to outnumber the young, age under 18."

    Additionally, you conveniently took my quote -

    <<The U.S. population is shrinking as well. >>

    out of context, as I quantified it in the follow on sentence:

    The U.S. population is shrinking as well. *That is to say the *effective* taxpaying base. *

    Thus, the RATE of older non-working Americans is outpacing the RATE of new American workers coming into the workforce. Moreover, and I will reiterate, there are less jobs and lower paying jobs for these newer workers as more and more jobs humans once did are replaced by AUTOMATION.

    See, *automation* replaced human receptionist at offices with digital voice attendants and voice mail, automation replaced human bank tellers with ATM's and online banking, human check out clerks at super markets with self-check out scanners, human travel agents with online travel sites, human run print and copy shops with desktop printers, Circuit city and Borders book stores - staffed by humans- with Amazon, almost all manufacturing is done not by humans, but by robots. This website (and all others) has replaced printers - paper mills - delivery trucks - and human workers at outlets that once sold them.

    Therefore I stand by my premise that the <<The U.S. population is shrinking as well. >> *That is to say the *effective* taxpaying base. * is SHRINKING. I understand the reluctance to accept this, but This is an immutable fact.

    There are at least 7,000 articles published over the past 10 years the support this position as well. Not to mention the census.gov website you referenced.

    let me save you a google search:

    What's Driving the Decline in U.S. Population Growth?

    http://www.prb.org/Articles/2012/us-population-growth-declin...

    Many U.S. Counties Facing Shrinking Populations

    http://realtormag.realtor.org/daily-news/2013/03/15/many-us-...

    America’s declining youth: Census report reveals shrinking population of children for first time since 1970s

    http://www.dailymail.co.uk/news/article-2083248/US-Census-da...

    U.S. fertility first dropped to less than replacement level fertility in 1972,11 and by 2002 had dropped to a record low.19 (Replacement level fertility is 2.1 children per woman because of infant mortality

    http://www.susps.org/overview/birthrates.html

    The drop in U.S. births to their lowest level since 1920 is sounding alarms about the nation's ability to support its fast-growing elderly population.

    http://www.usatoday.com/story/news/nation/2013/02/12/us-birt...

  • Report this Comment On July 30, 2013, at 11:06 PM, mikecart1 wrote:

    Well Detroit does have one good thing going for it: TruTV's Hardcore Pawn!

  • Report this Comment On July 31, 2013, at 12:03 AM, Dadw5boys wrote:

    Goldman Sachs always gets bailed out so make sure they own the debt. Just like the Mexico bailout Goldman got all that money and how many South American Countries ? 3 or 4 ?

  • Report this Comment On July 31, 2013, at 4:07 AM, Dennis129 wrote:

    shotel commented on an article. 10:57 PM

    What a Bankrupt Detroit Teaches Us About Investing

    I am appalled at your most recent comments. would you have us believe that people are bred solely to pay taxes, without question and without demand that taxes result in an acceptable level of community service.

    your logic reminds me the discredited school busing programs, where minority schools demanded their "fair share" of whites and got bitchy because there weren't enough to go around

    concerned parents saw the damage to their children first hand and elected to move.

    you really need to come to terms with our human nature and the effects of choice.

  • Report this Comment On July 31, 2013, at 5:45 AM, kyleleeh wrote:

    @Shotel

    You quoted this:

    "In 2056, for the first time, the older population, age 65 and over, is projected to outnumber the young, age under 18."

    as proof of your argument that the number of taxpayers is shrinking? How many 1040 forms did you fill out when you were in kindergarten? Having more old people then children tells you nothing about the number of people in the 18-65 cohort who pay nearly all of the income tax. You can't even get a work permit until you're 15, why would you cherry pick the data to include everyone under 18?

  • Report this Comment On July 31, 2013, at 6:41 AM, TMFHousel wrote:

    <<Thus, the RATE of older non-working Americans is outpacing the RATE of new American workers coming into the workforce.>>

    Yes, but that is very different from saying the population is shrinking. I haven't grown in height since I was a teenager. That doesn't mean I'm shrinking.

    The working-age population is rising and projected to rise by nearly 50 million over the next 40 years. You can point to slowing growth or specific US counties or declining fertility, but that fact still remains. It resembles nothing close to Detroit.

  • Report this Comment On July 31, 2013, at 7:34 AM, KevinWayne wrote:

    What happened in Detroit is well understood. As an investor, this article reminded me to include population loss to the risk factors of Municipal Debt. Being close to retirement age I am looking at changing my portfolio to include more income assets. I won't be adding any Municipal Debt from Shrinking Cities though. Thanks for the warning/reminder.

  • Report this Comment On July 31, 2013, at 7:46 AM, devoish wrote:

    "Just as being more than 80% funded does not

    assure a plan is adequately funded, a plan with

    a funded ratio below 80% should not necessarily be characterized as unhealthy without further

    examination. A plan’s actuarial funding method

    should have a built-in mechanism for moving

    the plan to the target of 100% funding. Provided

    the plan sponsor has the financial means and the

    commitment to make the necessary contributions, a particular funded ratio does not necessarily represent a significant problem.

    In addition, the funded ratio is a measure of a

    plan’s status at one time. A plan that is responsibly funded easily can have its funded status vary

    significantly from one year to the next solely because of external events. Funded ratios should be

    looked at over several years to determine trends

    and should be viewed in light of the economic

    situation at each time. Higher funded ratios are

    to be expected following periods of strong economic growth and investment returns such as

    at the end of the 1990s. Lower funded ratios are

    to be expected after recessions or years of poor

    investment returns such as the economic downturn that began in 2008. Whether a particular

    shortfall affects the financial health of the plan

    depends on many other factors—particularly

    the size of the shortfall compared to the resources of the plan sponsor." http://www.actuary.org/files/80_Percent_Funding_IB_071912.pd...

    "Another Detroit pension debate that could have broader implications is the argument over how big the pension liability actually is. Depending on who is doing the math, the obligations range from $650 million to $3.5 billion. One big issue is how much the annual return on invested assets is likely to be. The optimistic estimate is 8 percent a year, but many insist this percentage is too high given investment returns over the last 10 years. The lower the estimate, the higher the debt -- in Detroit and elsewhere."- http://www.bankrate.com/financing/retirement/detroit-raises-...

    If an 8% ROI is too much to expect from a defined benefit plan, it is probably too much to expect from to be achieved by people who spend their days working on something other than investing to profit from other peoples labor.

    45% of Americans do not have any retirement funds or plans, the most common reason given is that they do not earn enough to save although the investors who profit from their labor and a system of privatization enforced by government decree seem to have succesfully picked off their workers paychecks, and pensions, 401k's and are now working on picking off SSI and each other. - Devoish

    "Though many workers are now enrolled in 401(k) plans, these have proven to be a poor substitute, as the typical household approaching retirement has less than two years’ worth of income saved in these accounts. The Fed survey found that the median households aged 55–64 had an income of $55,000 and just $100,000 saved in a retirement account, if they had a retirement account at all.

    The BLS overview shows that pension coverage is much higher in the public sector (78 percent) and among unionized workers (67 percent) in the private sector. In contrast, only 13 percent of non-union private-sector workers are covered. The drop in private-sector coverage reflects both a decline in unionization and a decline in coverage among both groups of workers (union and non-union), though the decline was more pronounced among non-union workers.

    Traditional pensions are the most cost-effective way to provide retirement security to workers but are not an option for many small businesses because they often require employers to take on long-term liabilities. Thus, 48 percent of private-sector establishments with 500 or more workers offered a pension plan, compared to only 8 percent of establishments with 50 or fewer workers. An exception to this pattern is small businesses in unionized industries such as construction and trucking where multi-employer plans are common and pension coverage is relatively high".

    - See more at: http://www.epi.org/blog/private-sector-pension-coverage-decl...

    Best wishes,

    Steven

  • Report this Comment On July 31, 2013, at 10:56 AM, williambonney wrote:

    Detroit should of had professional management of their portfolio. Oh, they did????

    Union leaders should of pushed the Democratic party. Oh, they did??

  • Report this Comment On July 31, 2013, at 11:05 AM, szcz wrote:

    Mr. Housel is not an airhead. He is a leftist like so many Fool writers. The socialist policies of the Detroit mayor resulted in poverty and the exit of most small businesses.

    A leftist cannot see that socialism and the vilification of capitalism and the private sector always creates poverty.

  • Report this Comment On July 31, 2013, at 11:17 AM, martyjbird wrote:

    Detroit's population decline started in the late-1950s. That decline started slowly and accelerated as the decades went by. A lot of factors (and people) contributed to the population loss--and yes, some more than others. But those commenting do themselves and others a disservice by cherry-picking factors that support their particular argument.

  • Report this Comment On July 31, 2013, at 12:45 PM, LegalizeMe wrote:

    As people started to flee Detroit the elected officials did not cut enough nor fast enough. Sure they made some serious cuts (as stated in the article) but by the time they were done (2006 and on) it was too late.

    During the 2008-2012 period tax revenue dropped at the federal level. What cuts did the federal government do to adjust for lower tax revenue? NONE! The federal governments budget has done nothing but INCREASE (regardless of economic conditions) for almost 50 years!

    God forbid we cut something without Democrats screaming "you hate old people, you hate women, think of the children!" Republicans aren't much better when anyone mentions the words "defense budget".

    Revenue reductions (whether by people fleeing or a terrible economy) must happen when revenue drops but no politicians have the balls to do it.

  • Report this Comment On July 31, 2013, at 12:46 PM, LegalizeMe wrote:

    Last sentence should have started with "Spending reductions".

  • Report this Comment On July 31, 2013, at 1:07 PM, hbofbyu wrote:

    What politician ever would cut themselves out of a job? None.

    And that is the crux of government.

  • Report this Comment On July 31, 2013, at 4:37 PM, shotel wrote:

    @ Dennis129: Me thinks you are being a bit extreme in your interpretation of my post. I will say that in any civilized society, there must be a commonly agreed upon government that enforces commonly agreed upon laws and policy. Typically this government is funded by a commonly agreed upon rate of taxation.

    Otherwise, the society would be one of anarchy.

    I am no defender of excess taxation, nor government mismanagement of resources. But the way to remedy excess taxation in a civilized society, is to compel citizens ( in our democratic REPUBLIC) to VOTE to reduce taxes. If a majority citizens refuse to do this, then we all get what we deserve.

    I can not respond to the remainder of your post as I find it theoretical reductionism.

    @ kyleleeh & TMFHousel: That single snippet you [kyleleeh] culled from my post illustrates the fact that demographics are in fact skewing towards an older population as majority.

    As much as I would like to post a one-liner as to my opinion, typically this isn't enough to present an overview of my position. So I included a few components, that when put together, showcases my thesis of an ever, gradually decreasing (shrinking) taxpayer base. The other components were increasing automation that replaces human jobs, and I will add now the trend of household incomes decreasing (shrinking) over the past 12 years - which is a indicator of shrinking tax base as well (search the term: "Household income in the United States" for further facts).

    If the 700,000 remaining residents of Detroit were all millionaires, we would not be having this discussion as their taxable base could easily service the debt and obligations that the city has encumbered itself with. So again, irrespective of why the population declines - the part of the population that are taxpayers are the only important element in terms of servicing obligations that were designed to be paid in the future by ... future taxpayers.

    I appreciate all of your opinions, your intelligent responses, and I respect your positions.

  • Report this Comment On July 31, 2013, at 4:45 PM, kyleleeh wrote:

    @Shotel

    << almost all manufacturing is done not by humans, but by robots>>

    This is completely untrue, at it's height of manufacturing employment in the 70s the US had about 25 million people working in manufacturing, today there are over 100 million people in China alone working in manufacturing. Just because someone else is doing a job that used to be done by Americans doesn't mean the job was destroyed.

    From your comments I can tell you come from a growing rank of people who have read a lot of Ivy league papers about automation written by people that have never actually worked with automated machinery. The people like me that use these Automated machines have experienced first hand the limitations of computers and machines in general. You would be amazed how much trouble a robot has doing something as simple as attaching a hose to a nozzle. Humans will work with, and along machines, but machines will not do anything without a human operator, and they have CONSTANT problems and breakdowns. In my field (medical diagnostics) Automation has eliminated the need for a army of people that do warm body jobs, but they have increased the number of skilled jobs necessary. Also the increase in productivity that has occurred because of this has allowed our wages to rise faster then inflation for the last 15 years.

    Most of the things you described are not even replacing labor with automation, it's just shifting the labor from an employee to the customer. It takes just as much work for me to scan my groceries in self checkout as it does a cashier, so I only use it if I can see that the cost savings are passed on to me, other wise I'll read a magazine while the cashier does it.. But the amount of labor required to do the job is exactly the same.

  • Report this Comment On July 31, 2013, at 6:51 PM, colleran wrote:

    Wow, people really have a lot of opinions about what happened in Detroit. So many of you seem to have an axe to grind. I think it is as simple as the loss of a tax base. I doubt that we will ever agree on the causes.

  • Report this Comment On August 01, 2013, at 5:04 AM, HeyPacketMan wrote:

    Can anyone point out a major city run by Republicans for the last 60 years that has gone bankrupt? I can recall some that have been rescued from fiscal cliffs like NYC when Rudy took over.

  • Report this Comment On August 01, 2013, at 5:13 AM, CAPSnGAIN wrote:

    Does anyone have any data for how many automotive jobs were created in other states at the same time that these jobs disappeared out of Detroit?

    My initial impression, from reading various news articles, is that despite the outsourcing of many jobs to Mexico and China, a combination of lower taxes and less unreasonable union demands has caused many auto jobs within the USA to shift to States like Indiana, N&S Carolina, Kentucky, Mississippi, and even Texas.

    I'd be interested in seeing how many new automotive jobs per year were created in these states, versus the loss of automotive jobs in the states where Ford, GM, and Chrysler historically employed the majority of their US employees.

  • Report this Comment On August 01, 2013, at 7:43 AM, SAMSCREEK wrote:

    As I see it, there are at least three good reasons

    why Detroit and other large northern cities are in serious financial condition.

    1. Why would you want to freeze your a__ __

    off and deal with all that snow up north. I had to suffer thru about 2-3 inches of snow last year,

    here in Nashville,Tn. I have spoke with many displaced northeners who left for that reason.

    2. Cost of living. Sure you make more money up north because of the unions, but while I was paying $3.25 a gallon for gasoline, my wife's family in Chicago was paying about a dollar a gallon more. I can buy a house here for $150,000

    to $200,000 that would cost $400,000 up north.

    3. Unions are not prevelent in the south, and are

    not really well received, so our city and state governments are not forced to pay out so much

    money in pensions and other benefits. We do have a lot of automotive jobs here in Tennessee

    and I have to believe the reason is the lack of unions and the lower cost of living and doing business here.

    I don't have any web sites or other info to back up my findings, other than living here in the south for 66 years and my observations.

  • Report this Comment On August 01, 2013, at 11:47 AM, fromthecenter wrote:

    Well, the left and the right and the pro and anti tax people have weighed in so far. Lets take a break and look at demographics. In 1950 Detroit's population of 1.9 million made up 2/3rd of the Detroit MSA's population of 3 million. The city's current population, 700 thousand, is only 16% of the MSA's population of 4.3 million.

    Detroit's people have moved out to the suburbs for a variety of reasons, taxes are one, but the "American Dream of a yard to mow and house payments to make are probably more important. As some of your comments point out race is also an issue, probably more so back in the 50s through 80s than later. These people expect the city to continue to provide jobs and services even though they live, un-taxed for those services, in the suburbs.

    Although Detroit's reliance on the top three examples of American Industry, at least for much of the last 60 years, may make it somewhat unique the exodus of tax payers to the suburbs is typical of almost every city in the US. Until we come up with a tax structure that requires the suburbs to contribute to the central cities that are their raison d'etre we will continue to see our city centers struggle and occasionally go bankrupt.

  • Report this Comment On August 01, 2013, at 12:24 PM, slickandjake wrote:

    I stopped reading the comments after the first several. Many things discussed to add to the article. Many things discussed which take away from the article. A lot of people profess to be experts on this downfall, and yet have different viewpoints and differing causes. I suspect all of them played a role in the downfall, and I profess not knowing at all but having just hunches.

    In other words, our country lacks the ability to learn from these problems. Why? Because we get our data and information from biased, and often times contradictory, perspectives. What is truly needed is an independent investigation into the causes of Detroit's downfall. That is the only way to determine all of the root causes and the extent each of those root causes contributed to the effect. Until we can get a good independent investigation all we will end up doing is fighting over who's causes and data is most important.

  • Report this Comment On August 02, 2013, at 10:43 PM, MartyTheCanuck wrote:

    @fromthecenter

    What are the services that the city centers provide to the suburbs ? Garbage removal ? Snow plowing ? Water treatment ? I believe those services are provided by the suburbs, not the city centers.

    Now the city center will build art centers, extensive libraries, sports complexes that will benefit a tiny minority of people. But they are not the basic services that people need. They are pet projects, nothing else. If people leave the center because they don't want to pay for these things, good for them. The suburbs shouldn't have to pay for these things ( neither should the city center residents ).

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