Sen. Rand Paul has come forward with a plan for Detroit that differs from other plans we’re hearing, in one key way — it could work. It doesn’t give the Motor City a bailout. Instead, if offers the city a break.
“Paul proposed a wide-ranging plan to revitalize the nation’s cities through the creation of ‘economic freedom zones,’” the Detroit Free Press reports. “His plan would cut federal taxes in communities that have an unemployment rate of 12 percent or more. Federal personal and corporate taxes would be lowered to 5 percent, and the federal payroll tax would be cut to 2 percent each for employees and employers.”
The plan could save Detroit an estimated $1.3 billion during the next 10 years. But its real impact would be in attracting businesses and investment back to the city.
In a conference call with reporters, the Kentucky senator explain his plan.
“Where we truly think this is different than government stimulus, is that a government stimulus takes money from one area of the country, brings it to Washington, then somebody — a central planner — has to decide who to give it to,” Paul said. “The problem is, central planners never are smart enough to know which entrepreneurs will succeed ... so they typically give it to the wrong people. In ours, basically the money will go back to people who the customers have already voted for, businesses that are making a profit, a welding business in Detroit that has 10 employees.”
The rest of the country is pretty much in agreement on why Detroit failed. Higher and higher taxes, more and more regulation, a declining industrial base and increasing crime sent businesses fleeing the city over the last 30 years.
Pension obligations and high union salaries mean that despite levying sky-high taxes, the city can no longer provide even basic services. Detroit is now $18 billion in debt.
No federal bailout will change those dynamics. Any one-time cash infusion, no matter how large, will eventually be spent — and if history is any indicator, not wisely.
Detroit needs life, not a lifeline.
Of course, not everyone agrees. The Michigan Democratic Party responded to Paul’s pitch in a news release.
“Sen. Paul was a vocal opponent of the auto rescue, which saved over a million jobs, and led the Republican effort to shut down the government, costing Michigan’s economy hundreds of millions,” the release states. “His special interest tax handout plan is nothing new. Here in Michigan, Rick Snyder gave $1.8 billion to wealthy special interests, and paid for it with billions in devastating cuts to our local communities and public schools. It’s time for our elected leaders to stop the tax giveaways, invest in communities and improve education.”
Wait a moment — tax breaks (not handouts) for businesses and workers trying to make a go of it in Detroit are “special interests”?
You’ll note that nothing in the Democrats’ demands for a bailout will address the real causes of Detroit’s miseries.
Sen. Paul’s plan does.
Isn’t that worthy of serious consideration?