Detroit’s fiscal plight would come as no shock to Friedman
Since Detroit was already circling the drain when Milton Friedman was alive, he would hardly be surprised by its imminent arrival in bankruptcy court. It is, after all, the ultimate culmination of all the big government evils he warned of all his life.
A fierce critic of the government monopoly on education, he championed school choice as the solution to children stuck in the downward spiral of failing inner city schools. Detroit illustrates the end result of schools run more for the benefit of the employees than the kids. Despite ever increasing sums being spent the graduation rate is atrocious. It’s no wonder one study estimated that 47% of Detroit’s adults are illiterate.
As the auto unions ever-increasing demands drove the Big Three into the ground, Detroit responded by taxing businesses in the area even more. This started a vicious cycle of increasing taxes on business and property, leading to more of the tax base exiting the city, resulting in lower revenues and even higher taxes. Detroit now has the highest property taxes in Michigan, but almost half the property in the city is delinquent in paying them.
The loss of over half its population has left Detroit with a bloated, inefficient public sector. Hundreds of millions poured into the city by the federal and state governments did nothing to reform the city, and only seemed to increase corruption. Struggling to pay the costs of retirement and health care for its retired workers, Detroit does not have enough left to provide adequately for public safety and service workers it employs today.
Despite all evidence to the contrary, much of Detroit still believes in what Dr. Friedman called the “Free Lunch” fallacy: that money spent by the government is somehow created magically out of thin air. A prime example of this is the new proposed hockey rink for the Red Wings team. The hundreds of millions in subsidies for the new building are raised from taxing those in the city, and are funneled to a private corporation that owns the Red Wings. There is no added productivity, just money taken by the government from the people and redistributed; money that could have been spent more productively if left in their hands in the first place.
By: Nansen Malin