Friday, October 27, 2006

Spreading the Pain II: Intern Paul

As I mentioned below, I was going to seek some expert counsel to figure out how to stem the growing malaise in the Detroit area, because we can't solve it alone. My first guest blogger, my pal Intern Paul*, grew up in Detroit, attended Renaissance high school, and went to college and has been employed in the area. His father recently retired from more than twenty years as a Detroit police officer, giving him a unique inside perspective on law enforcement in what is perceived as one of America's more dangerous cities. Here's his take on our problems and how to fix them. A very thoughtful response:
Well, Detroit has problems. No doubt about that. That, in my view, is primarily due to overwhelming dependence on one industry -- the auto industry. This is not to say that Detroit doesn't have a diversified future, but it will take us a long time to dig ourselves out of our current dependence. From my experience, there are more and more non-auto companies opening up. Especially, we are getting a lot of foreign companies opening their North American headquarters' in Detroit. It really is an international town with exposure and recognition across the world -- thanks mainly too our not-so-benevolent automotive-father companies.

The housing market does suck. Unemployment rates in MI, OH and other "rust-belt" states has compounded the housing problem that the rest of the country is sharing in. That being said, I don't buy the doom and gloom being sold in the media about Detroit. To start with, the Census numbers are for the city of Detroit, not the Detroit Metropolitan area. The city-proper is significantly more depressed than the rest of the area. That has been true for over 30 years.

In addition, the numbers are only comparing near the top of the recent economic cycle to what is hopefully a trough or near to it. But, there are definitely problems. The biggest of them being a large geographic racial and economic segregation, between Detroit and a couple of suburbs and the rest of the metropolitan area. Lack of mass transit -- that might actually CHANGE as we diversify and become less dependent on the goodwill of the auto companies. Mass transit loosens the labor market, creates more cultural energy, incentivizes people to live downtown, etc.

End the war on drugs! Much of the crime problem in Detroit can be directly and indirectly linked to the illicit sale of drugs. If you legalize, regulate and tax the heck out of formerly prohibited drugs, we can at least monitor that the concentration of the narcotics are smaller, making them less dangerous. We can also fund drug-education programs, as well as the necessary re-habilitation programs. Now, obviously, that is not the end-all of crime prevention in Detroit. This would only be effective if we also create more opportunities for city residents to have freer access to the legal job market (see mass transit).

I grew up in Detroit, and I can testify that it is better now than it was 20 years ago. This, too, shall pass. It will be nice if we could institute some of the changes above though!
Excellent. Many more guest posters on deck. Comments? Please jump in below.

*Paul and I met as interns on the General Motors tax staff, which ranks as one of my life's most outstanding experiences. Paul went on to about 17 more internships before graduation.


Maureen Francis said...

I grew up in the 'burbs, and I have to say, no matter how unpopular this may be, that the city is not solely responsible for its problems, and any solution is going to to have to come from the region.

It's too late to say what should have been done to prevent the situation. You have some of the steps we need for moving forward. Transportation is key. A different means of financing health care is important for our whole state. The Big 3 are burdened by retiree and employee health care costs that make them unable to compete.

The housing market, by the way, does NOT suck if you are a buyer. There has never been a better time to be a home buyer in Metro Detroit. Sellers need to be priced according to market conditions, which can be a hard pill to swallow.

Paul said...


I like your comment and agree that the housing market is GREAT for a buyer. The problem is that the vast majority of buyers are also sellers. And a large % -- I'd be interested in seeing how large, if the info is out there -- had really low % of downpayment when they purchased their house. This means all of their equity, if they had any to begin with, is gone or they owe more than their house is currently worth.
Compound that with the seeming mistake of finance through a variable interest rate mortgage and now the homeowner can't afford the monthly payments because interest rates have gone up!
I'm glad I didn't get into the market before I was ready but it sickins me to think of all those who stretched to buy more house than they could afford.

Maureen Francis said...


I am a Realtor, so I could go on for hours about the Metro Detroit real estate market.

Yes, many (most) buyers have to sell to move. If they are 'moving up' then they should recognize that the seller of the home they are 'moving up' to is taking a bigger hit than they are. Lots of well priced homes in good condition are selling here. As a matter of fact, home sales are not down over last year. Its the number of homes on the market that is up.

Yes, easy money and adjustable rate loan products have helped people get in over their heads. I see it just about every day. It IS sad. And it happens in our every segment of the market. The 'rich' are not untouched.