Major US City Detroit Files for Bankruptcy

    01 August, 2013


    From VOA Learning English, this is the Economics Report.

    Detroit Mayor Dave Bing had to report some bad news last month. He said Detroit was seeking bankruptcy protection. The move would give the city court protection from creditors.

    "This is very difficult for all of us but if it's going to make the citizens better off, then this is a new start for us."

    The decision to declare bankruptcy is an effort to restruction and reduce debt. It comes at a difficult time for Detroit.

    In March, Michigan Governor Rick Snyder named Kevyn Orr, a bankruptcy expert to oversee the city's financial problems. Detroit has been struggling to reduce a budget deficit of more than $300 million. In addtion, the city's long-term debt has increased to at least $18 billion.

    Detroit's problems have grown over many years. Michigan State University professor Eric Scorsone says the city depended to much on one-industry.

    "You know, Unlike Chicago, New York and other cities where had economic diversity, Detroit really didn't. It had the auto industry, it had suppliers to the auto industry, and so as those went away, the city began a very long decline that's really occurred over 50 years essentially."

    Jobs with car manufactures were a big reason why Detroit was one of the country's largest cities half a century ago. In the 1950s, it had a population of about 1.8 million people. Today, the number is down to less than 800,000.

    Robin Boyle is a professor of urban planning at Wayne State University. He says over the years, many Detroit residents moved to areas outside the city, or even left the state. That hurt Detroit's ability to invest in the city.

    "They have so little disposable income to reinvest in their communities, that if they have money they leave, they go to the suburbs or they go to find work elsewhere, further putting us into this vicious cycle that drives us further and further down. How you break that is the challenge in Detroit."

    It is rare for a large city to seek bankruptcy protection. In 1975, New York City came close before the federal government agree to provide money.

    Detroit, however, is the largest city to seek bankruptcy. A federal judge will consider Detroit's request. The judge's decision is expected in one to three month.

    One of the main issues is what to do about the retirement pay of city workers. Currently, there are many more retired workers than those pay into the pension system.

    And that's the Economics Report in VOA Learning English. For more of our reports and learning activities, go to I'm Mario Ritter.