Bankrupting cities – the US’s new cut-and-run scheme

$18 billion – that is the cost of Detroit’s debt.

$18 bn – that is the cost of Detroit’s debt, as revealed on Thursday when the city filed for bankruptcy, setting a new record in the US. This figure is a gentle reminder of America’s inequality – consider, not only that 30 of the nation’s billionaires could single-handedly pay off Detroit’s debt, but the news comes amid a gloat of optimism in the US.

US jobs figures – the most scrutinised of monthly data in the world’s largest economy – has beaten all expectations in June, May and April (monthly payroll gains averaging 196,000). Other good-news data has encouraged Ben Bernanke, the US Federal Reserve Chairman, to “taper” quantitative easing and equities are topping unknown heights.

But all this means nothing for the citizens of Detroit, or at least those 78,000 who remain in the city, down from two million in its 1950s heyday. Along with the citizens of America’s other bankrupt cities – Stockton, Mammoth Lakes and San Bernardino – they are the dead weight that America must cut in her struggle to the surface of economic buoyancy.

The message is harsh, yet simple – economic recovery is not universal and struggling cities must pay for their own recovery. How many more American cities, then, will we see go bankrupt as the inequality spits ever further? And what if this US tactic caches on in Europe – could we see a bankrupt Nottingham or Liverpool? (Admittedly, America’s Chapter 9 bankruptcy is not quite as dramatic as "bankruptcy" in the UK).

For Detroit, though, this means many more years representing America’s blue collar bust; the demise of industry and the heartland of sub-prime mortgages, while the rest of the country gets back on its feet.  When asked by CNBC if Detroit’s bankruptcy will affect markets, Steve Brice, Chief Investment Strategist of StanChart replied “markets seem to shrugging it off quite significantly”. 

However, to end on a positive note, this filing completes Detroit’s fall from grace. Here on, things can only get better in America’s industrial heartland.  

Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.