What’s Next for Bankrupt Detroit?

What’s Next for Bankrupt Detroit?

If you need a firm and gripping reminder that the American economy is not doing so hot, you don’t have to look any further than the city of Detroit. The city is in bankruptcy! It has made U.S. history by being the largest U.S. city to go bankrupt, according to the Detroit Free Press. It’s hard to believe that such a large city within the U.S. could fall into such decline. Now what’s to be done? Could ‘Economic Freedom Zones’ revive a bankrupt Detroit? Could this revive the city without going the route of a traditional government bailout?

In an interview with Sean Hannity, Paul stated that we need to try something different.

“For 50 years we have been trying government stimulus, trying to bail out cities that have been gone bankrupt. …We ought to find a new way. So what I’m promoting is something called economic freedom zones. It’s kind of similar to what Jack Kemp talked about when he talked about enterprise zones 20 years ago. But this is enterprise zones on steroids. This is a massive giveback of money that’s already yours. We are not going to take it from Houston to bail out Detroit. We’re going to let Detroit keep their money and let Detroit bail themselves out. But it’s phenomenal how much money can be left in Detroit simply by lowering the taxes in Detroit. …”

“We’re going to take the personal income tax and the corporate tax down to five percent. We’re going to get rid of the capital gains tax. We’re going to bring the payroll tax down for the worker and employer. And we’re going to reduce the red tape and let businesses thrive.

And we’re also going to invite entrepreneurs from around the country and around the world who want to come to Detroit and make it like a mini Hong Kong.” (“Rand Paul’s Recovery Plan for Detroit“, FOXNEWS/Hannity)

As Hannity points out, Paul is just “one senator,” but this proposal certainly sounds better than having taxpayers across the nation take care of Detroit. Not everyone is going to be thrilled about their tax dollars going to just one region.

“I think it’s also politically palatable, because I don’t think there is going to be any kind of impetus or a movement to have a bailout from one part of the country to another,” Paul said, indicting the usage of federal dollars taken from taxpayers across the country to help a specific region. “I think the idea of leaving money in Detroit that originates in Detroit could get legs with both parties.” (“Rand Paul Goes To Detroit With A Different Kind Of Bailout Plan“, HuffPost)

According to The Washington Post, ‘Economic Freedom Zones’ also has the potential to help other troubled areas so it goes beyond just Detroit:

“The legislation would apply to all areas of the country with an unemployment rate that is at least 50 percent greater than the national average. As Paul noted, it would include urban areas such as Detroit as well as rural areas like those in the eastern part of his home state, Kentucky. Economically distressed Zip codes in otherwise stable areas would also benefit”.

Could it work? Is this a solution for bankrupt Detroit? There are always pros and cons to every plan, but as Paul points out, quoting Milton Friedman, “nobody spends anybody else’s money as wisely as they spend their own.”

Photograph courtesy of ESwift, via Flickr Creative Commons



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