September 20, 2013

Chart of the Week: How Detroit went bust

detroit

In The Sun Also Rises, impoverished Scottish war veteran Mike Campbell is asked how he went bankrupt. “Two ways,” he replies. “Gradually and then suddenly.”

That pretty well describes how Detroit became the largest U.S. city to file for bankruptcy protection this summer.

A stellar analysis of the city’s troubled financial history by the Detroit Free Press concluded that Detroit’s bankruptcy was the result of decades of poor decisions by city leaders — failure to trim payroll in the 1960s and 1970s as the city’s population and property-tax base began to fall, heavy borrowing to cover operating expenses in recent years, mismanagement of urban redevelopment projects, paying $1 billion in pension bonuses from 1985 to 2008, and much more. The paper distilled five decades’ worth of data into a series of graphics (of which this is just one) and accompanying text that clearly lay out a series of lost opportunities to avoid tumbling into a fiscal black hole.

“There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget,” the paper states. “But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.”

 

Category: Chart of the Week

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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2 Comments

  1. chris11 months ago

    Detroit now spends $8 billion a year yet brings in only a little more than $1 billion.

    I don’t envy Kevyn Orr. He can sell assets and negotiate debt but that city needs to go thru a massive restructuring beyond the debt or it will be here again soon.

    This is what will happen to America if congress and the white house don’t start addressing debt and spending.

    Reply
    1. bumcyk11 months ago

      dyou do not know how to read charts, do you?

      Reply