DETROIT

Detroit Is Bankrupt, But Receives Less Federal Government Aid Than Colombia

07/31/2013 04:17 pm 16:17:57 | Updated Aug 01, 2013

Detroit may be bankrupt, but more federal aid dollars are set to go to the country of Colombia than to America's 18th-largest city next year, according to a report from Bloomberg News.

Bloomberg reports that the South American nation will receive almost $323 million through President Barack Obama's new proposal to fight drug trafficking and violence. A State Department memo cited by the report says three-quarters of the money will be used to maintain "peace and security" in Colombia.

Conversely, Detroit, which filed for bankruptcy almost two weeks ago with at least $18 billion in long-term debt, will receive just $108.2 million in funds from the U.S. government in 2014, according to Bloomberg. Some $33 million of that total award is funded by a Community Block Grant distributed each year to urban cities and counties.

Detroit's murder rate is nearly twice as high as Colombia's, increasing 10 percent in 2012 to 53 murders for every 100,000 residents -- second only to New Orleans among U.S. cities. Despite that sobering fact, the Detroit Police Department is currently eligible to receive just $2 million in funds next year from the feds.

Colombia isn't the only country set to receive more aid under Obama's 2014 foreign assistance budget than Detroit, according to ForeignAssistance.gov, a website created by the U.S. Department of State. Leading the way in aid received is Afghanistan, which will get almost $2.2 billion in foreign aid. Other countries receiving more federal assistance than Detroit in 2014 include Egypt ($1.5 billion), South Africa ($445 million), the Democratic Republic of Congo ($235 million), Mexico ($205 million), the Philippines ($187 million) and Indonesia ($182 million).

The Obama Administration has made no moves suggesting a federal bailout of Detroit is a possibility. Left in the hands of a bankruptcy judge, pensions promised to more than 21,000 city government retirees face cuts, along with health care for current and retired workers, active worker pensions and payments owed to bondholders.

Robert Johnson, president of the Institute for New Economic Thinking and a former chief economist of the U.S. Senate Banking Committee, cited the gap between aid for Colombia and Detroit on a call with reporters Wednesday to argue that Washington must change the way it funds and helps urban areas like Detroit.

"Obviously many people are demoralized in the United States now because they see that we don't help our cities, because that's not a systemic risk," he said.

Also on the call Wednesday was Nobel Prize-winning Economist Joseph Stiglitz, a professor at Columbia University in New York, who pointed to suburbanization and instability as destroyers of Detroit's finances. He said the lowered quality of services, public safety and education available to Americans in cities creates a fragmentation that wields "a gross effect on our society."

"Our approach has been: let everybody fend for themselves," Stiglitz said of the federal government's unwillingness to fix urban problems. "The consequence of that is just a huge waste of human and fiscal resources that would have been far better [used] to try to preserve the assets that are in Detroit ... better than basically [letting] the city decay as jobs decrease by more than 50 percent."

A federal bailout of Detroit would be unusual, but by no means the first -- New York City was bailed out under President Gerald Ford in 1975 to the tune of $2.3 billion (or $9.9 billion in today's dollars). Of course, more recently, federal bailouts have become more common for corporations than for cities. Domestic automakers General Motors and Chrysler received $80 billion in loans from the federal government beginning in 2008.

"We do help our auto companies -- some of which are headquartered in Detroit -- which have plants in Mexico and China and all around the world," Johnson said. But while some analysts credit the bailout of Chrysler and GM for saving 1 million jobs, many of those benefits didn't trickle down to Detroiters. "What works out to the benefit of General Motors or Chrysler does not work out to the benefit of these communities," Johnson said.

Facing down a recession, the federal government also invested over $700 billion in troubled banks and financial companies through The Troubled Asset Relief Program (TARP), more commonly known as the Wall Street bailout.

Johnson said the sort of financial protection and help that has been extended to Wall Street, foreign nations like Colombia, and other multinational companies should also be available to ordinary Americans.

"The real question is, once again," he said, "who is in and who is out of the kind of guarantees and assurance that our society provides."

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