Tag Archives: economics

A Broken City

I am in Detroit. I came with a colleague to present a paper at an academic conference at Wayne State.

The last time I was in Detroit was at least 50 years ago, and even then I didn’t go downtown–I was visiting friends in a suburb. So I really had no idea what to expect as I drove to the Motor City Hotel and Casino, the venue designated as the conference attendee’s accomodations. The hotel/casino is a huge fortress-like structure, surrounded mostly by empty parcels. After circling it twice, we found the valet parking entrance.

Since we were too late to catch the shuttle to the University, we took a cab. The mile or so drive went through a landscape that reminded me of a third-world country; boarded structures, lots where nothing remained of a structure but rubble and trash. Here and there, we passed a new development–forlorn evidence of periodic efforts to resuscitate a dying city.

It had been easy enough to get a cab at the hotel, but when I decided not to wait for the return shuttle at 5:30, and tried to return from campus mid-afternoon, I struck out. I called every taxi company on the list. No luck. Most didn’t even answer the telephone; the two that did explained that today was a “very busy” day, and they’d get a cab to me as soon as possible. After an hour and a half with no taxi in sight, I went back to the conference and waited for the shuttle. (Ordinarily, I’d have walked, since the distance was only a couple of miles, but the weather was gusty, cold and snowy, and the conference staff made it very clear that walking was not considered safe.)

The hotel I’m in isn’t the sort of place I’d choose–I’m not much on gambling and glitz–but the rooms are really luxurious and the service has been exceptional. Anywhere else, a room of this sort would run 250+ per night. (More in New York or Chicago.) Here, it’s 129/night. Granted, that’s a conference rate–but I think what the price (and the presence of the Casino) really reflect is the fact that not many people want to come to Detroit just to visit Detroit.

When a city is broken, it depresses the economy of the whole state. Michigan’s travails have been widely reported, and it’s no surprise.

As yesterday’s post pointed out, keeping a city healthy requires constant attention and talented leadership. It requires attention to infrastructure and economic development, and the “care and feeding” of the service industry folks who are the first ambassadors seen by visitors. When I was serving in the Hudnut Administration, I remember special outreach programs to the cabdrivers and other service personnel who represented Indianapolis to visitors from elsewhere. Those efforts, among others, translated into a reputation that eventually brought us events like the SuperBowl, and the dollars those events pumped into the local economy.

When a city looks like Detroit looks now, it’s hard to believe anything will fix it. It should serve as a cautionary tale to those who take a vibrant city for granted. With enough disinvestment, enough abandonment and neglect, it can happen anywhere.

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Lock, Stock and Bottom of the Barrel

Like so many Americans, I’ve been waiting for that promised light at the end of the economic tunnel, but I’ve come to the conclusion that all we are going to see for the foreseeable future is the bottom of the economic barrel. Today’s massive stock market drop is, I am afraid, the sort of swing we will see more and more.

Unlike all the pundits, left and right, who know with absolute certainty just why we can’t shake off the recession, I have a sneaking suspicion that it is a tangled and complicated number of things, some of which we could control if we had political will, some of which is global in nature and difficult or impossible to manage, and some of which is structural. The structural elements can be ameliorated but not reversed.

The question that scares me is this: if, in fact, my suspicions are correct and the economic picture is going to be fairly bleak for several years, what effect will that have on our political and social systems? We don’t have a very good track record of dealing rationally with economic adversity.

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State Workers Pay Taxes Too

During a discussion the other day, a SPEA staff member made a point that seems to be lost in the contending, highly ideological arguments about the standoff in Wisconsin. She noted that public employees are also taxpayers, and that the Governor’s insistence that he is acting in the “interests of the taxpayers” didn’t seem to include the interests of that particular subset of taxpayers.

Her observation has just been quantified and amplified by Robert Russell, a Wisconsin state economic analyst, who pointed out that state workers are not only taxpayers, but consumers.

According to Russell, if public employee salaries are cut through increased withholdings as Walker is proposing, by an amount large enough to fill the $137 million budget gap, the resulting drop in consumer spending will lead to: 1) a loss of over 1,200 nongovernment jobs; 2) a loss of about $100 million in business sales statewide; 3) a loss of nearly $35 million in personal incomes of nongovernment employee households; and 4)  a loss of nearly $10 million in state tax revenues.

This is not about economics. (Indeed,  Governor Walker seems blissfully ignorant of basic economics.) It’s about ideology, hubris, and political payback.

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