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Obama's optimism on Detroit meets hard reality

This post originally appeared in National Journal.

President Obama considers himself an excellent judge of his own speeches, something worth remembering in advance of Wednesday's newest economic-policy address at Knox College in Galesburg, Ill.

Here is Obama on Obama at a gathering Monday night of Organizing for America staff and volunteers: "As we've learned, I've given some pretty good speeches before. And then things still get stuck here in Washington, which is why I'm going to need your help."

I don't know if Obama considers his 2011 Labor Day speech in Detroit "pretty good," but it is, at minimum, illustrative of the gap between rhetoric and reality there and in other parts of the nation.


Obama was on the verge of launching a new conversation on the economy then, just as he is now. The refrain then might sound familiar today:

"We're going to lay out a new way forward on jobs to grow the economy and put more Americans back to work right now," Obama said in Detroit in 2011. "I don't want to give everything away right here because I want you all to tune in."

This was in advance of the American Jobs Act that Obama sent to Congress. It followed by one month Obama's efforts to boost employment in rural areas and among post-9/11 veterans. As has been noted, Obama's had no shortage of rhetorical slogans for his economic initiatives, the most recent being "Winning the Future," "We Can't Wait," and the "Middle-Class Jobs and Opportunity Tour."

Obama promises Wednesday's speech will also be "pretty good." But in light of Detroit's tragic bankruptcy filing, it is worth recalling his 2011 Labor Day speech. Its buoyancy and optimism, though well-intended, could make even the most ardent Obama devotee wince. Rereading it now might even provoke pity among his toughest critics.

First, Obama quoted a speech by President Truman in Detroit in 1948, extolling the virtues of higher wages paid to autoworkers due to collective bargaining. "The gains of labor were not accomplished at the expense of the rest of the nation. Labor's gains contributed to the nation's general prosperity." Truman referred to Depression-era reforms such as the Wagner Act that guaranteed collective bargaining as well as laws that shuttered sweatshops, raised the minimum hourly wage from 45 cents to $1.33, slowed home foreclosures, provided jobless benefits, and created Social Security. That was back when Detroit was home to more than 1.8 million residents (there are about 685,000 now) and auto factories paid solid wages and offered health and pension benefits.

By the time Ronald Reagan accepted the GOP nomination in Detroit in 1980 (yes, the last major political party to hold a national convention in Detroit was the GOP), assembly-line jobs were disappearing, and many residents turned to work for the city as cops, firefighters, court reporters, librarians, and clerks. Blacks fought hard for these jobs and with union clout secured health benefits and pensions. This year, public-sector jobs number 40,000, while GM and Fiat-Chrysler, even after the federal bailout, employ about 4,000 each. Detroit's public-sector pensions are not extravagant, averaging about $19,000 per year--though some of the best-compensated pensioners receive more than $90,000.

Detroit leaders defend bankruptcy

But those pensions are part of the bankruptcy equation. An estimated $3.5 billion of the city's $18 billion in debts is tied to pension promises. Those are now on the federal bankruptcy court chopping block. Cuts to city pensions are certain; the only question is the magnitude.

Detroit's fiscal nightmare has traveled in slow motion, like a vise being tightened one turn each year. Motor City's dreadful balance sheet, poverty, high crime rate, and blight of abandoned housing was in full view in 2009, when current Mayor Dave Bing won election. Bing has no say in the bankruptcy matters and will not seek reelection, overwhelmed by his city's intractable woes.

But Obama's 2011 speech described a Detroit that can only be described as a myth wrapped in a wish inside a dream.

"This is a city that's been to heck and back," Obama said. "And while there are still a lot of challenges here, I see a city that's coming back."

Obama referenced "tough choices" made to bail out GM and Fiat-Chrysler and also hailed the birth of a new wave of high-tech employment. "We said American workers could manufacture the best products in the world. So we invested in high-tech manufacturing and we invested in clean energy," he said. "And right now, there's an advanced-battery industry taking root here in Michigan that barely existed before."

The biggest factory in this supposed new trend, Massachusetts-based A123 Systems, had plans to employ 5,900 workers nationwide to build lithium-ion batteries. In Detroit, A123 Systems never employed more than 1,000. The Energy Department awarded A123 Systems a $249 million grant to boost production. It filed for bankruptcy in 2012 and was still receiving DOE largesse. A judge approved the bankruptcy in 2013.

In other words, the Detroit-area advanced-battery industry Obama said "barely existed before" his 2011 speech now ... barely exists.

Obama also saluted the White House decision to make Detroit one of its six pilot cities in the "Strong Cities, Strong Communities" program.

"We're teaming up with everybody--mayors, local officials, you name it--boosting economic development, rebuilding your communities the best way," Obama said. "This is a city where the great American industry has come back to life and the industries of tomorrow are taking root."

The biggest accomplishment of this program in Detroit is the demolition of a public housing project. There are also hopes, diminished by the bankruptcy proceedings, of building a $100 million light-rail line. Other "accomplishments" include a "text my bus" system "to provide more reliable information on transportation schedules"--this in a city that has lost half its bus service since 2005 and where budget cuts have eliminated overnight service. The "Strong Cities, Strong Communities" program also envisions the possible development of a regional transportation authority for Detroit.

With public housing being demolished, a text system for late or nonexistent bus service, and a federally funded lithium-ion battery factory that never met its hyped employment plans and then fell into bankruptcy, does any of this sound like, as Obama said, the foundations of a "city where people, brave and bold, courageous and clever, are dreaming up ways to prove the skeptics wrong and write the next proud chapter in our history"?

Detroit's failings are many and its debts staggering. Obama did not cause them. But his economic remedies and intervention have achieved little. And his unhinged enthusiasm about what was happening in Detroit in 2011, and how it fit into the larger story of American economic life, provides an inconvenient backdrop for Obama's economic address Wednesday and those that follow.

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