Detroit's financial review team listened to impassioned arguments during public comment at yesterday's meeting. Credit: screen shot of streaming coverage from wdiv.com.

We told you yesterday would probably be a historic day for the city of Detroit. Well, not so much.

The state-appointed financial review team for the city did hold a meeting, as expected. It was a pretty raucous meeting, as our partner station Michigan Radio reported. The reviewteam was required by law to make a recommendation to the governor about how to handle Detroit’s “fiscal crisis.”

There were basically two options: Recommend a consent agreement with the city, or recommend appointing an emergency manager who has the power to toss out union contracts, sell assets and balance the books. At the time of the meeting, no consent agreement had been reached with the city, so the emergency manager option – an option no one really wants – was starting to look more likely. But instead of taking option 1 or 2, the review team took option 3: Restate that there is a fiscal crisis in the city, restate that the team prefers a consent agreement and restate the obvious fact that there is currently no consent agreement. Not exactly a historic decree.

Essentially, the team kicked the can.

Now, according to state law, the governor has 10 days to make a decision. For those keeping track at home, that means the new deadline for a decision on Detroit’s future is at 11:59 p.m. on April 5th.
But there’s another wrinkle to all of this. The Michigan Supreme Court is set to decide whether a consent agreement will even be allowed in the city of Detroit. Opponents of the process say the financial review team violated open meetings laws when it drafted the agreement. If the agreement is struck down, it’s unclear what will happen.

But it will probably happen fast. So stay tuned.

Downtown Detroit. Credit: David Tansey.

One way or the other, today is likely to go down as a historic – and possibly transformative – day for the city of Detroit. The city is burning through its cash, and fast approaching bankruptcy. By the end of the day, we could know more about what approach the state will take to help avoid that bankrupcty.

But the negotiations over Detroit’s future have taken a lot of confusing turns in the past couple of weeks, so we’ve tried to put together some answers to the city’s most pressing questions.

What’s happening today? Today is the deadline for the city to sign off on a proposed consent agreement with the state. The agreement would lead to the creation of a new panel to restructure Detroit’s finances.

What’s actually in the consent agreement? A lot. Sarah Cwiek at partner station Michigan Radio has an explainer.

What happens if the consent agreement isn’t signed today? Some say the state’s financial review team will be forced to recommend that Gov. Snyder appoint an emergency manager. Then, the governor will have 10 days to do so. But the Detroit Free Press says some of the details are still up for debate.

Why isn’t Detroit’s mayor leading today’s negotiations? Mayor Dave Bing went in for emergency surgery on Saturday to repair a perforated intestine. Reports say he’s getting updates on the negotiations from his hospital bed.

Is anything being done to actually cut the city’s costs right now? Over the weekend, 30 of the city’s unions ratified new agreements to cut costs. Michigan Radio reports it’s unclear whether those deals are really enough to fix Detroit’s problems.

What is Michigan’s emergency manager law? In short, Michigan’s Public Act 4 is meant to be an alternative to bankruptcy for cities that are running out of money. Michigan has long had a law that allows the governor to appoint emergency financial managers, but in 2010, the law was expanded. Now, emergency managers have the power to sell city assets, toss out union contracts and override any decision made by the city council or mayor. Our partner station, Michigan Radio, has had extensive, ongoing coverage of the emergency manager law. Here’s a nice summary: “7 things to know about Michigan’s emergency manager law.”

What happens if the consent agreement fails, and an emergency manager is appointed in Detroit? Detroit will go through what’s happening in Flint, Pontiac, Benton Harbor and Ecorse. The trash will still get picked up, water service will continue. But elected leaders in Detroit will lose pretty much all of their power. The Detroit Free Press runs through some of the specifics.

What’s going on in court? Michigan’s Public Act 4 is facing a number of court challenges. Last week, a judge in Ingham County ruled that the state could not go forward with the consent agreement until he determined whether the state had followed open meetings laws. Over the weekend, the Michigan Court of Appeals overturned that ruling, which opened the door for the consent agreement. But Michigan’s emergency manager law still faces broader challenges in the court, so the issue is far from settled.

How did Detroit get to this point? You could write a book on that question, and still not come up with a sufficient answer. But the shortest, simplest thing to say is that Detroit is running out of money. Some say the city will run out of money next month. Pretty much everyone agrees that it will happen before the end of June.

What other questions do you have about the situation in Detroit?


 



 

 

“I don’t even know what street Canada is on,” Al Capone once said. But Canada’s prime minister, Stephen Harper, is determined to make sure he puts Canada on the map with one key global power: Japan.

Map courtesy of About.com

If he accomplishes his goal, it could have ramifications for the automobile industry, agriculture and the Midwest in general.

Harper opened negotiations this weekend with Japan on a free trade agreement. Negotiators were careful to caution against any quick resolution, because it can take years to negotiate such deals, and Japan isn’t known for speedy decision making.

But, a Canada-Japan trade agreement would join one between Japan and Mexico — and leave the United States as the only North American country without one. 

There are some big trade numbers involved. Canada ships $4.6 billion in goods each year to Japan, and imports $12.8 billion, largely in automobiles and auto parts.

“Canadian businesses have much at stake in these negotiations,” said Jayson Myers, president of the Canadian Manufacturers and Exporters association. “Japan is a strategic commercial partner; however it is also a country with whom we’ve had a persistent trade deficit when it comes to manufacturing.”

There’s no guarantee that a trade agreement would change the trade deficit, but there could be some significant changes as a result. For example, Canada charges a 6.1 percent tariff on imports of Japanese autos and auto parts.

The United States charges a 25 percent tariff  on imports of small trucks, and it’s imposed various penalties in the past.

A free-trade agreement could help sway Japanese automakers, who recently have been on an expansion drive at their American factories and could send more production overseas due to the strong yen.

Toyota recently indicated that it might expand at its Cambridge, Ontario, plant, and friendly relations between the two countries might influence Toyota, or another Japanese automaker when it’s time to choose a plant site.

And the pact could mean more opportunities for Canadian farmers, who have always faced obstacles in shipping products to Japan.

As you’re thinking about Canada, here’s list of 10 songs by Canadian artists about our neighbor, with some familiar songs and others you may never have heard of. And no, the list does not include Blame Canada.

Job losses in manufacturing from 2000 - 2010 were devastating in almost every state. And a new report claims that productivity gains in manufacturing were not as strong as advertised. Credit: The Information Technology & Innovation Foundation

Economic reports are not usually the kind of thing that gets the heart racing. But earlier this week, a non-profit think-tank called The Information Technology & Innovation Foundation put out a report that amounts to a bombshell.

The report is titled ”Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline.”

We first read about the report in the Washington Post. The basic claim is that manufacturing in this country is not doing nearly as well as advertised. At Changing Gears, we’ve made a lot out of the productivity gains in manufacturing over the past couple of years. According to everything we’ve heard, manufacturing productivity has led the way out of the recession, and Midwest manufacturing has been a major driver of growth.

But the ITIF report provides a blunt challenge to that story line. Some of the claims in the report are controversial, and not widely accepted. But even the federal government now says there could be problems with how it measures manufacturing productivity.

And that could have big implications for the policies our leaders consider in the future.

In one sense, the report tells us what we already know – that manufacturing jobs in the U.S. dropped significantly during the last decade. But it says those job losses were more severe than most economists acknowledge – worse even than during the Great Depression. And the recovery hasn’t been nearly as strong as advertised:

“In short, the United States lost two million manufacturing jobs during the Great Recession, and after the recession just 166,000, or 8.2 percent, returned. That leaves 91.8 percent of jobs to be recovered. At the rate of growth in manufacturing jobs in 2011, it would take until at least 2020 for employment to return to where the economy was in terms of manufacturing jobs at the end of 2007.”

Most economists look at this job loss, and see a silver lining. Even though the U.S. has lost manufacturing jobs, output has been pretty steady, according to federal statistics. That means the manufacturing sector is more efficient, and more productive.

But the researchers at ITIF say that’s not true. They say the federal government makes mistakes in how it measures manufacturing output, and grossly overestimates productivity. From the report:

“Correcting for biases in the official data, ITIF finds that from 2000 to 2010, U.S. manufacturing labor productivity growth was overstated by a remarkable 122 percent. Moreover, manufacturing output, instead of increasing at the reported 16 percent rate, in fact fell by 11 percent over the period.”

This is where disagreements over the report begin. The debate gets a bit technical, but it the core disagreement is about the best way to measure output.

Most of the statistics on our economy come, in one way or another, from the federal government. Our stats on output come from an agency called the Bureau of Economic Analysis.

To understand the debate over how the BEA measures output, it helps to think of your computer. The BEA looks at that computer and says it’s twice as powerful as a computer you would have bought five years ago. So it counts as twice as valuable to the economy – in effect, it counts as two computers being produced.

But the ITIF researchers look at the data and say it’s still just one computer.

The example of the computer is an important one, because it turns out the computer industry has been by far the leading source of manufacturing growth in the U.S.

To understand these numbers better, I called Brent Moulton at the Bureau of Economic Analysis.

He takes issue with the way the ITIF report looks at productivity in the computer industry.

“There’s just a lot more computing technology, so I think counting the number of boxes doesn’t measure the output of computers in a sort of meaningful way,” Moulton told me.

He says these computers do add more value to the economy. And most economists would agree that this value has to be measured in the statistics somehow.

But Moulton agrees that the BEA numbers do have some problems.

For example, the BEA helped fund a recent report that found another problem with its measurements. In this case, the error is in how the BEA accounts for imports. Basically, this report claims the agency is underestimating how much of a role foreign trade plays in the economy.

The report says the government could be overestimating manufacturing growth in non-computer industries by as much as 49 percent.

This report was co-authored by Susan Houseman at the Upjohn Institute, based in Kalamazoo, Mich.

“Our statisital agencies were never set up to measure the kinds of economic activities that are happening now, in a rapidly globalizing economy,” Houseman told me over the phone.

She says the bias in federal output statistics are a real issue. But she also says you don’t even need to take the biases into account to realize that manufacturing is struggling pretty badly. You just need to look at the individual sectors within manufacturing.

“If you back computers out, the remaining 90 percent doesn’t look very good,” Houseman says. “And that’s in the BEA statistics. That’s just facts.”

So why does it matter that the productivity of manufacturing in this country has been oversold?

These numbers help determine policy. And when presidential advisors in the past have looked at rising productivity, and falling jobs numbers, they’ve claimed that our economy is becoming more efficient. They’ve claimed that manufacturing is going through the same transformation that agriculture went through: fewer workers, more value to the economy.

But Houseman doesn’t buy that argument. And neither do the researchers at ITIF.

What they see is an economic sector that is struggling to compete with increasing international trade. And they say it’s time for new policies to address the problem.

Ever since the federal government put General Motors through bankruptcy in 2009, investors, politicians and employees have wondered when the Treasury Department  would sell its GM stake.

Some experts been predicting a final sale would come before the 2012 general election, giving President Obama a political tool. But with GM shares trading below their price when GM went public in 2010, any sale would mean a loss for the government.

GM is once again the world's biggest carmaker. Photo by Chris via Flickr.

The reality, GM said Wednesday, is that nobody knows, not even GM. “The day will eventually come when the Treasury sells its GM stake,” company spokesman Selim Bingol said in a blog post. “When is anybody’s guess (we have no say in the matter).”

In return for assistance totaling about $50 billion, the U.S. government received about 61 percent of GM when it emerged from bankruptcy. The stake was significantly reduced when GM went public in fall, 2010.

The Treasury Department currently owns 32 percent, or 500,000 shares of GM stock. At the current price, the Treasury would lose $16 billion compared with where the stock was when GM went public, according to the Detroit News.

You can see a chart of what GM borrowed and received from the government, and what it’s repaid here.

In the past week, Chicago has been awash with members of the national political press corps, who waxed enthusiastically about its lakefront, deep dish pizza and friendliness.

Chicago Skyline/photo by Micki Maynard

Now, with the Illinois primary over (Mitt Romney won, by the way), all those journalists are on planes out of town.

And that might be the last time they think about Chicago until this fall’s general election – unless they’re back to cover the NATO summit in May.

The situation sums up Chicago’s challenge in being considered a world class city, writes Phil Rosenthal of the Chicago Tribune.

“We want the world to think well of us all,” he says in his column today. “A greater problem, perhaps, is that too many people don’t think of us, well, at all.”

Rosenthal talked to Rowan Bridge, a BBC Radio producer who has also lived in Washington, D.C. “I don’t think most people in the U.K.have any idea where Chicago is,” Bridge told Rosenthal.

“Most people in England think the United States consists of three cities — New York, Washington D.C., and Los Angeles — because they’re the ones that run the media, they’re the ones where the celebrities hang out, they’re the ones where the politicians are.”

This week, a delegation led by Gov. Pat Quinn and Amy Rule, the wife of Chicago Mayor Rahm, is in Brussels, drumming up excitement at NATO about all the things Chicago has to offer. They’re bound to mention parks and performances and Garrett’s Popcorn and its great chefs.

But all this sparked a discussion on the Changing Gears team: what makes a city a world class city? Here are a few criteria that we came up with.

International activity. To be world-class, a city has to be the international center of something — the place you have to go in your field, where all things stem from. Think of global financial capitals such as New York, London and Hong Kong, or political capitals such as Washington and Beijing.

Chicago is a player in many fields, from airlines to the legal world to food, but it does not seem to be the go-to place in any one area. (If you disagree, tell us in comments).

Culture. Los Angeles is clearly an global entertainment capital. So is London. Paris is the center of the art and fashion worlds. Milan matters when it comes to music, Rome and Shanghai for all those things put together.

Chicago has a theater scene, and a food scene, and a music scene, and plenty of movies are made there. And when Oprah did her show there, Chicago drew people from all strata of global society. All those things are elements of a global city, but again, Chicago doesn’t inarguably lead in any of them (although I know I’ll get an argument from some foodies).

Location. The Tribune’s Rosenthal hits on this in his column this morning and our Changing Gears team agrees. Chicago’s location between the two coasts simply hurts its world class candidacy.

When people come to the U.S. from overseas, they can work in visits to a variety of places just by sticking to the east and west coasts. Getting to Chicago takes effort. Visitors from anywhere outside the Midwest have to fly there, where it’s possible to drive from Los Angeles to San Francisco or Las Vegas, or take a train from New York to Washington.

There’s one thing that Chicago has in spades when it comes to a world class city: pride of place. Almost everyone who’s from Chicago or lived there has warm feelings about it, especially NPR’s Scott Simon, a faithful cheerleader who even named one of his books, “Windy City.”

But when it comes to world class status, as Rosenthal puts it in his column this morning, “that’s not enough.”

What are your views about Chicago? Does it deserve to be considered a world class city? What does it need to do to get there?

A rendering of what Cleveland's waterfront could look like, if the plan approved yesterday is successful. Credit: City of Cleveland

Yesterday, the Cleveland city council approved three new ordinances that should clear the way for an ambitious new downtown waterfront plan.

The plan was initiated by mayor Frank Jackson, and it covers 90 acres, including the existing Cleveland Browns football stadium and the Rock and Roll Hall of Fame and Museum. It calls for new pedestrian walkways, a marina, tree-lined boulevards and up to two million square feet for retail, restaurant and hotel development. And it opens up more of the lakefront to the public.

The mayor’s chief of regional development told the Cleveland Plain Dealer last year that total private investment in the project could reach $2 billion by the time it’s done.

If you’re waiting for the catch, here it comes: None of that $2 billion in investment has been locked-in yet. One port official told the Plain Dealer, “There’s significant interest” among developers. But he didn’t offer anything specific. Some officials say it could take 25 years for the plan to be complete. But if the project manages to succeed, it will be a win of historic proportions for Cleveland. Grand plans for remaking the city’s waterfront have come and gone, dating back as far as 1959. Let’s hope this one works out.

Michigan’s governor, Rick Snyder, is following a well-worn path this week, making a trade mission to Europe.

Michigan Gov. Rick Snyder with Fiat CEO Sergio Marchionne/photo via @onetoughnerd

Snyder’s tweeting photos of his trip via his @onetoughnerd account. Here’s one he sent home from Turin, Italy,  of himself with Fiat CEO Sergio Marchionne (we’re pretty sure that’s not a hockey beard).

Snyder is also answering tweets from his followers about the trip, pointing out several times that the trade mission is paid for with private funds and isn’t costing the state’s taxpayers anything.

The governor’s goal is to promote the state to foreign investors as a good place to invest.Thus far, his itinerary has taken him to Turin, where he’s met with Fiat officials and company suppliers, and to Stuttgart, Germany, home base for Daimler. (Remember that Daimler used to own Chrysler, now under the wing of Fiat.)

Snyder is also taking some time out to be, well, nerdy. In a tweet this morning, he wrote, “Whoever is the next person to follow me on Twitter becomes my 8,297th follower, which is exciting because that’s a prime number.”

Illinoisans are casting their votes today in the state’s Republican primary. If polls are correct, former Massachusetts Gov. Mitt Romney is heading for his first blow out victory in a Midwestern state. 

He had unexpectedly close contests with former Sen. Rick Santorum in Michigan and Ohio, which made the Illinois primary more important than most political watchers thought it would be.

Illinois has 54 delegates up for grabs, fewer than Ohio, but more than Michigan. Romney has a strong organization in the state, while Santorum failed to file full slates of delegate candidates in four Congressional districts. If he were to upset Romney, he could win no more than 44 delegates, the Chicago Tribune said. 

During Monday’s campaigning, Santorum and Romney exchanged barbs about the economy. Santorum, who made appearances in northwest Illinois, said he “didn’t care about the unemployment rate” and said the race was about smaller government, individual and social freedom.

At his own campaign stop in Peoria, Romney said, “I do care about the unemployment rate. It does bother me. I want to get people back to work.”

Tuesday’s primary also will see some contested Congressional races. Check our partner station WBEZ for full election results on the air and on line.

Our friends at PBS NewsHour had this analysis of the Illinois race. Here are anchor Judy Woodruff and political editor Christina Bellantoni.

Republican presidential candidates are making their final push in Illinois before tomorrow’s primary. They’ve flooded the airwaves with advertisements. Former Massachusetts Gov. Mitt Romney alone has spent nearly $4 million in the state, according to the Chicago Tribune.

But Illinois firefighters have countered with their own anti-Romney ad, paid for by their union, the International Association of Firefighters.

The ad focuses in part on SAFER, a government program that provided $10.2 million in grants to Illinois communities last year to hire or retrain firefighters.

The IAFF endorsed Barack Obama in the 2008 presidential election, and ran commercials in that campaign criticizing Republican nominee John McCain.

The firefighters’ effort may not make much difference. Romney appears to have a wide lead over former Pennsylvania Sen. Rick Santorum in Illinois.  Public Policy Polling says Romney is ahead by 45 percent to 30 percent for Santorum, with former House Speaker Newt Gingrich pulling in 12 percent and Texas congressman Ron Paul receiving support from 10 percent of likely voters.

Take a look at the ad and tell us what you think. And tomorrow, be sure to check our partner station WBEZ in Chicago for extensive coverage of the Illinois primary.