Senator Rand Paul has a new plan to save Detroit or, more likely, to attract Republican voters to the good Senator. On the surface the plan sounds good; don’t take money from Houston and Atlanta to pay for the failure of Detroit. Instead create a flat tax zone in Detroit and let the free market save the city. He projects that this plan will generate $1billion in economic activity. Ironically he maintains that salvation for this impoverished testament to failed economic policies will come in the form of another big Washington program!
Senator Paul’s plan, at least from what he has described on television, does exactly what he accuses the Obama administration of doing. Senator Paul should know that it is basic economics that if you cut taxes in one city and you don’t reduce spending in general, then the rest of the Nation picks up the tab! The Senator is proposing exactly what he has long claimed to oppose. His plan would take from Houston, New Orleans and Atlanta to pay for Detroit. Here we go again! Big Washington schemes intended to overcome basic economic principles. It just won’t work.
The problem with Detroit is the same problem that has doomed other cities, countries, and even empires throughout history. A city exists because there is an economic reason for it to exist. When that reason becomes obsolete, if that city doesn’t make major changes in the way it operates, it simply ceases to exist as a viable entity.
Detroit is a classic example of the failure of the policies that have been promoted by the Democratic Party for about 100 years. Big centralized government, financed by squeezing private industry for government’s endless demands for resources, is perhaps the most striking example. Democrat city leaders maintain the incredible belief that business has a need to be in a city and therefore that business surely must realize that being soaked for taxes is good for them. These leaders who accept such logic will never understand that business is really quite mobile and adherent to a simple economic truism; business moves to or grows in a city where it has a reasonable expectation that it can make a profit and, just as importantly, keep that profit.
No government policy will ever overcome this basic driving force of American capitalism. Incredibly, it is this factor that originally made Detroit the great pinnacle of early 20th century free market capitalism and it was the violation of this principle by generations of Detroit’s city leaders that has caused the fall of Detroit.
If sincere, Senator Paul is noble in that he wants to help Detroit. Unfortunately, extending more big government ideas that violate fundamental economic laws will just exasperate the problem and cost all Americans ever more in taxes.
There is only one way to solve Detroit’s problems, if it isn’t already too late. Detroit must return to the fundamentals that made it the wealth creating engine that it once was. Cut the ties to big labor, reduce the size of government, eliminate the social giveaway programs, and create a safe environment to have a business and raise a family. If they can work through these issues and if they open their doors to business by eliminating unreasonable government demands on business, then maybe, just maybe, they can turn it around. Big government programs, even those guised as free market programs, will never return Detroit, or any other city, to prosperity.