Stuck In A Fiscal Hole? Just Borrow Against The Future, Says Detroit’s Mayor
Normally I am loath to recycle content. But in this case, it may be warranted– because history is repeating itself. Mayor Mike Duggan has decided that amid fiscal freefall and a global pandemic, he wants to revive his blight bond issue for the November ballot. If you missed this long article characterizing the issue, Duggan has run out of money for demolitions. The HUD HHF funding intended to be used to stabilize housing was instead used for demolitions. The program was mired in controversy and corruption or, at the very least, corruption-adjacent practices. My point previously was that it’d be far more useful to borrow money to finance things that create value. Borrowing for demolition does little to create value.
A Mayor Should Create Value, Not Refinance The Lack Of It
IF DEBT IS CHEAP…
There is one silver lining right now, and that’s that debt is very cheap. It will be cheap for the near future, unfortunately. The Federal Reserve has made it abundantly clear that it values the stock market and corporate profits over American consumers and household wealth. Why else would they lower rates to zero during a supposedly booming economy? Call it what you will– the TINA mentality serves no one but corporate profiteers. But who can blame them when T-bills are delivering pocket change in returns? Damned if you do, damned if you don’t, right?
Still, going back to the blight bond issue question: Why not use that debt to finance the construction of a new future, rather than the demolition of the past? Leverage works in magical ways. If the city raised $250 million to invest debt into projects, that could leverage hundreds of millions more in equity. $250 million in demolition is just a lot of money to suburbanites to knock down walls. That doesn’t create tax revenue.
