December 25, 2011
As a general rule budget reporting in this country is atrocious. It is standard practice to report numbers for the aggregate budget or specific programs without providing any context that would make these numbers meaningful. Often articles do not even make clear the number of years over which spending or revenue will be spread, as though it makes no difference whether we are talking about spending $200 billion over one year or ten. The NYT carried this a step further in a news article on Detroit’s budget which can only be taken to mean that the NYT wants you to think that Detroit has a serious budget problem.
Let’s start with the basics:
“Within days of Mr. Bing’s [Detroit Mayor Dave Bing] announcement, state officials said they were starting a preliminary review of the city’s finances, which concluded this week with the announcement of a deeper state look at the books and an alarming snapshot of Detroit: more than $12 billion in long-term debt, an estimated general fund deficit of $196 million and no sufficient plan for dealing with the shortfall.”
This is supposed to sound really bad to readers. After all, how many of us will ever see $12 billion? And a deficit of $196 million is also really scary. But what on earth does this mean to Detroit? The article gives us no information whatsoever on the size of the city’s budget or its economy.
If we make the long trek to the City of Detroit’s website, we find that its proposed budget for 2012 is $3.1 billion. This means that the deficit is just under 6.5 percent of its budget. Is that big? Well, the federal deficit is more than 30 percent of the federal budget, so by that metric Detroit is not doing bad. Federal debt (counting money owed to Social Security and other public trust funds) is just under 3 times the size of the budget, not hugely different than Detroit’s ratio of a bit less than 4 to 1.
Of course the federal government is not bound by any balance budget requirements and it has the ability to print its own currency, so it does have far more ability to deal with debt and deficits than a city government. Still, the article really provides no basis for assessing how bad Detroit’s budget problems actually are. If the city’s economy turns around and begins to grow at a healthy pace, these deficits will likely be manageable. On the other hand, if it continues to shrink, as it has been doing for the last five decades, then the deficits will likely be a very serious problem.
The article also includes one other outstanding example of meaningless numbers. It told readers:
“With 11,000 city employees and 139 square miles of increasingly vacant land to tend to, it has struggled, year by year, deficit by deficit, to pay its bills. Once the nation’s fourth-largest city, it has seen its population drop since a high of 1.8 million in 1950 to a low last year of 714,000.”
Imagine that, 11,000 city employees in a city that now has just 714,000 people. Is that a bloated bureaucracy or what?
The answer would have to be the “or what?” in really big letters. The Bureau of Labor Statistics reports that 14.1 million local government employees. With a population of just over 300 million people that translates into 1 employee for roughly every 21 people. By comparison, Detroit’s government looks positively austere with a ratio of just 1 employee for every 65 people.
Of course the article is not entirely clear on who counts as a local employee. In most cities the schools are run by an independent entity. If we pull out local employees in education, we find that there are 6.2 million non-education employees at the local level. This translates into a ratio of 48 people for every city employee. This is closer but still implies a much lower ratio of people to city employees than Detroit’s 65 to 1.
There may be more to this story and Detroit may really have a badly bloated city bureaucracy, but the numbers presented in this article do not support that story and they certainly give readers no ability to assess the issue for themselves.
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