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Detroit epitomizes demise of great American cities
By Dan Steinbock |
December 8, 2011, Thursday
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IN the past, the American Dream meant a steady career, financial security and, most importantly, a house. Today, that dream is struggling.
Recently, Michigan's Republican governor took the first step toward a potential state takeover of Detroit, to force the mayor and unions to spending cuts. The goal is to avoid a bankruptcy in spring.
In 1950, Detroit was the fourth largest city in America, with a population of 1.9 million driven in part by a post-World War II auto industry boom. But in the last decade, the city's population plunged by more than 25 percent to 714,000.
What was once known as the great Motor City, the world's traditional automotive center, is gradually turning into a ghost town.
The somber reality is that nobody knows what will happen to Detroit's nearly 140 square miles - enough to fit Boston, San Francisco and Manhattan - that now lie largely vacant.
Detroit personifies the impact of the great recession on US metropolises. It is an extreme case, but it illustrates a trend in urban America.
In most large metropolitan areas in America, unemployment rates, although lower than at the beginning of 2010, remain very high.
House prices have hit new lows in all large metropolitan areas, even as the pace of foreclosures slowed in half of those areas.
Workers' earnings have fallen in slightly more than half of the nation's large metropolitan areas since the beginning of the recession.
A new survey of US cities reflects bleak prospects:
1. Cities will be confronted with declines or slow growth in future property tax collections most likely through 2012 and 2013;
2. Consumer spending, unemployment and wages are struggling and will weigh heavily on future city sales and income tax revenues;
3. Large state government budget shortfalls in 2011-2012 will likely be resolved through cuts in aid and transfers to many local governments;
4. Underfunded pension and health care liabilities will persist as a challenge to city budgets for years to come;
5. Facing revenue and spending pressures, cities are likely to continue to make cuts in personnel and services.
In the future, urban America much do more with less. The Great Recession that began with the bursting of the housing bubble in 2007 and the sharp drop in stock markets in 2008 began to wreak havoc on cities' revenue profiles with a time lag.
If the sub-prime crisis began with the property and finance sectors, the problems of the latter were shifted to the public sector through recovery measures and industry bailouts in 2009-2010. As a result, US debt has soared to more than US$15 trillion.
As Washington cannot agree on an appropriate mix of spending cuts and tax increases, massive leverage shifts to US states and metropolitan centers.
Consequently, local and regional economies, characterized by struggling housing markets, slow consumer spending and high levels of unemployment, are driving declines in city revenues- while cities continue to cut personnel, infrastructure investments and key services.
Dr Dan Steinbock represents the India, China and America Institute (USA), Shanghai Institute for International Studies (China), and EU Center (Singapore). This is his first major column for Shanghai Daily.
Recently, Michigan's Republican governor took the first step toward a potential state takeover of Detroit, to force the mayor and unions to spending cuts. The goal is to avoid a bankruptcy in spring.
In 1950, Detroit was the fourth largest city in America, with a population of 1.9 million driven in part by a post-World War II auto industry boom. But in the last decade, the city's population plunged by more than 25 percent to 714,000.
What was once known as the great Motor City, the world's traditional automotive center, is gradually turning into a ghost town.
The somber reality is that nobody knows what will happen to Detroit's nearly 140 square miles - enough to fit Boston, San Francisco and Manhattan - that now lie largely vacant.
Detroit personifies the impact of the great recession on US metropolises. It is an extreme case, but it illustrates a trend in urban America.
In most large metropolitan areas in America, unemployment rates, although lower than at the beginning of 2010, remain very high.
House prices have hit new lows in all large metropolitan areas, even as the pace of foreclosures slowed in half of those areas.
Workers' earnings have fallen in slightly more than half of the nation's large metropolitan areas since the beginning of the recession.
A new survey of US cities reflects bleak prospects:
1. Cities will be confronted with declines or slow growth in future property tax collections most likely through 2012 and 2013;
2. Consumer spending, unemployment and wages are struggling and will weigh heavily on future city sales and income tax revenues;
3. Large state government budget shortfalls in 2011-2012 will likely be resolved through cuts in aid and transfers to many local governments;
4. Underfunded pension and health care liabilities will persist as a challenge to city budgets for years to come;
5. Facing revenue and spending pressures, cities are likely to continue to make cuts in personnel and services.
In the future, urban America much do more with less. The Great Recession that began with the bursting of the housing bubble in 2007 and the sharp drop in stock markets in 2008 began to wreak havoc on cities' revenue profiles with a time lag.
If the sub-prime crisis began with the property and finance sectors, the problems of the latter were shifted to the public sector through recovery measures and industry bailouts in 2009-2010. As a result, US debt has soared to more than US$15 trillion.
As Washington cannot agree on an appropriate mix of spending cuts and tax increases, massive leverage shifts to US states and metropolitan centers.
Consequently, local and regional economies, characterized by struggling housing markets, slow consumer spending and high levels of unemployment, are driving declines in city revenues- while cities continue to cut personnel, infrastructure investments and key services.
Dr Dan Steinbock represents the India, China and America Institute (USA), Shanghai Institute for International Studies (China), and EU Center (Singapore). This is his first major column for Shanghai Daily.
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