Money for Nothing

Detroit bailout comes at expense of statewide taxpayers

At a press conference Wednesday, Gov. Rick Snyder explained why he wants to give $350 million in state money — which he insists is not a bailout — to Detroit.

Details are lacking, but Gov. Snyder says he wants an "investment" from state tobacco revenue settlement funds to match a generous offer of support from private foundations. He says this would protect Detroit pensioners and the Detroit Institute of Arts collection.

Gov. Snyder says this is not a "bailout" but a "settlement" because a bailout (I am paraphrasing) involves giving money to bankers and not getting anything in return. This seems a bit of a stretch.’s second entry on "bailout" reads: "an instance of coming to the rescue, especially financially: a government bailout of a large company." (Emphasis in the original.)

Last week, I listed just some of the reasons Detroit should not be bailed out. Among them, taking precious state resources that could be used for other state spending (road funding, for example) to give to Detroit is fundamentally unfair to all those Michigan residents who were never part of the Detroit equation. It requires statewide residents to give up something of value (future government services or tax cuts) to cover the bad policy decisions and mismanagement of Detroit.

At the same press conference, Senate Majority Randy Richardville, R-Monroe, tried to deflect such criticisms, arguing in effect that this is a Michigan problem, not just a Detroit one. Perhaps, but it still leaves outstate residents paying for Detroit's past spending (and promised spending to pensioners) while not having ever benefited from that spending.

The reality is that with plenty of help from enablers in Lansing, Wall Street, unions and many more, Detroit leaders so thoroughly fouled their own nest that the city now finds itself in federal bankruptcy court. State taxpayers have already shelled out plenty to support the city's fiscal malpractice, and that wasn't fair. Piling another $350 million now just compounds the unfairness.

The financial burden for cleaning up this mess should fall more closely on those who made it. The solution isn't more state taxpayer subsidies and bailouts but aggressively selling off existing assets, contracting out core services, ending unnecessary ones, and creating a business climate that welcomes real entrepreneurs and investors rather than chasing them away. 

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.