Devil’s Night: How Detroit Collapsed


BY PAUL KERSEY2997542702_db0978d61d

I grew up in Detroit, and as far back as I can remember my hometown was in trouble. But if there was a time when people just gave up on the place, it was probably October 30, 1984 — just a couple weeks after the Tigers won the World Series — when fires on “Devil’s Night” became an epidemic. There were 800 houses and businesses set on fire on just that one night. The fires were undeniable proof of something absolutely terrifying: that the city was out of control.

And it happened again the next year, and the year after that — same thing, same date. It went on like that for a decade; it became a regular part of autumn. The leaves would fall, the Lions would lose and Detroit would burn. Everyone knew what was coming, but nobody was able to stop it.

When Devil’s Night became a tradition, what was left of Detroit’s middle class had little choice but to bail, and it became nearly impossible to attract business into the city.

Detroit’s collapse could happen in any city where the right conditions exist. Illinois Policy Institute CEO John Tillman said Chicago city officials should take note of the circumstances that led to Detroit’s demise.

“I lived in Detroit in the early 1980s and return often to see family and Detroit Tigers home openers,” he said. “Those who think Chicago can never go the way of Detroit are making a grave mistake. Too many comparisons are being made between the Detroit of today with Chicago of today. That is wrong. We need to look at the Detroit of 10 to 15 years ago — did it face it problems head on, honestly, and make the very difficult, transformational changes then needed? Or did it kick the can down the road until officials finally kicked it over the bankruptcy cliff? Chicago is on the same path — but eventually, reality can no longer be avoided. We still have a choice — will Illinois continue pushing much-needed reform off into the future, or will our leaders finally face the music?”

So, is Chicago heading down the same path? On Sept. 18, the Illinois Policy Institute will be hosting a panel discussion at the Union League Club of Chicago with experts from Detroit and Chicago to discuss the economic factors and policies that led to Detroit’s current situation, and what policymakers in Chicago and other cities can learn from the Motor City.

Panelists include:

Henry Payne, an editorial cartoonist, editorial writer and weekly columnist for The Detroit News

Jim Iuorio, Managing Director, TJM Institutional Services and CNBC Analyst

Bill Johnson, former Director of Administration & Budget, Wayne County Commission

When it comes to Detroit and Chicago, there are some important differences, but there are a lot of disturbing parallels, too. Here are some of the factors that led to Detroit’s demise:

Growing deficits — Sound financial practices, such as balancing a budget, may not be exciting. But having the discipline to honestly balance a budget and resist the urge to continue overspending means government sets priorities and makes the most of the resources it has. By contrast, large deficits, or reliance on budgetary tricks to hide spending, are clear signs of a city that’s in trouble. The ratings on a city’s bonds are one quick way to assess a community’s budget situation. Detroit’s bond ratings are junk, meaning the city is expected to default on many of its debts. Chicago’s bond ratings are declining – Moody’s Investors Service dropped its rating of Chicago’s bonds last month to A3 from Aa3, and at the time signaled that ratings are likely to go lower.

Chicago is in much better shape than Detroit, but it is getting into a potentially deadly cycle where investors consider Chicago bonds riskier and riskier. As the risk goes up, the city has to pay higher and higher rates of interest, making it harder for the city to balance its budgets.

City forced into massive layoffs — Union bosses hate to make concessions, but sometimes they really are necessary. Just like in the private sector, when an employer needs relief from costly benefits and a union refuses to allow them, the result is workers being laid off. This happened in Detroit in 1978 when the police officers’ union demanded, and eventually got, an expensive cost-of-living allowance. Over the next few years Detroit laid off nearly a quarter of its police force, and crime rates shot up dramatically — 1978 may have been the turning point in Detroit’s collapse.

Chicago is already seeing something similar in its public schools. Last fall’s teacher strike ended with a contract including hefty raises that Chicago Public Schools, or CPS, cannot afford. Facing a billion-dollar deficit, CPS laid off more than 2,400 teachers since it inked the new contract.

Breakdown of basic services — Detroit’s police force is emaciated – it takes an hour on average for police to arrive after a call, and fewer than one out of eight murders were solved in 2012. But the failure of Detroit’s basic services was made obvious during the Devil’s Night fires, which were devastating physically and absolutely crushed the morale of city residents. City officials knew what was coming, but were powerless to stop it.
Paul Kersey
Director of Labor Policy
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