Gazing from the 14th floor toward the city center and the fragile sprouts of urban development along the river, Detroit's Caesar says laconically: "One hundred and thirty-one to go." Kevyn Orr, Detroit's emergency manager appointed by Michigan Gov. Rick Snyder, means that housing in this vibrant enclave is 97 percent leased. The enclave is, however, only eight square miles of this city's 139 square miles.
Here in Greece on the Great Lakes, Orr, a Washington bankruptcy lawyer, is Detroit's real government. He recently spoke in the governor's office in Cadillac Place, an enormous 90-year-old building with brass door frames and a lobby as cavernous as a cathedral. The building, an architectural echo of vanished grandeur, was General Motors' headquarters until the company moved into the magnificently misnamed Renaissance Center, a gleaming anomaly that towers over Detroit's decrepitude. It opened in 1977, when Henry Ford II proclaimed: "Detroit has reached the bottom and is on its way back up." Orr became "emergency manager" in March after the City Council, having accepted a 21-item consent decree stipulating reforms, ignored it. How many items did the council fulfill? "Not one," Orr says.
He is black, so some race-mongers of the sort who helped reduce Detroit to prostration, now, with tedious predictability, call him an Uncle Tom. Orr calls himself a "yellow dog Democrat," a Southern expression (although he has undergraduate and law degrees from the University of Michigan, he is a native Floridian) for someone who would vote for a yellow dog if it were a Democratic candidate.
He is empowered to alter budgets and labor contracts and to sell city assets. The City Council retains the power to complain.
In his five-month immersion in Detroit's dysfunction, Orr has been startled by "the fact that people had gotten used to the city like this — people were tolerating the abnormal." But Detroit's decline began in the 1960s, well before the auto industry's downward spiral (the United Auto Workers' membership peaked in 1979). A half-century of the abnormal made it the norm.
Orr has found "bureaucracy on steroids" — for example, "more than two dozen layers of approval for planning and zoning." Each layer was an opportunity for cronyism and corruption. And there was what he delicately calls "dissonance" in the political class's thinking, which he compares to the Tulip Mania that gripped Holland in 1637. His explanation for the heedless, unsustainable pension and other promises made to unionized city employees is: "IBG, YBG" — I'll be gone and you'll be gone when the reckoning arrives.
Orr's negotiations with unions and others having been unfruitful, a bankruptcy judge will allocate pain. Especially deserving of it are Detroit's enablers — the creditors who bought the city's bonds, assuming they would be paid first. But paid with what? Because the city is broke, they will be paid pennies on their dollars. Other cities will probably suffer the malfeasance Wall Street encouraged in Detroit: The cost of municipal borrowing should increase when lenders add a new risk premium to the cost of credit.
Also facing a rendezvous with reality are former city employees, some of whom retired at 50 on pensions exempt from some taxes. Government retirees have assumed that their benefits would be protected by Michigan's Constitution, which says pensions "shall not be diminished or impaired" by any Michigan government's actions. But Chapter 9 of federal bankruptcy law says insolvent cities may restructure their obligations, and the U.S. Constitution makes any U.S. statute "the supreme law of the land." Until now, the long shriveling of private-sector unions has been somewhat offset by the unionization of government employees. But when these workers realize that their union dues (which help to elect compliant officials who dispense the wealth of third parties — taxpayers) do not buy inviolable protection from arithmetic, will they still pay them?