Detroit Collapsing - Sign of Broader Troubles or an Isolated Problem?

The IHT reports that Detroit is in serious economic trouble. The article starts with an anecdotal account of a man who can't sell his home that creates the false impression of a connection with the subprime mortgage debacle. Subprime mortgage woes are in the news, but this sort of shoddy journalism creates hysteria where it isn't warranted by the facts.

As the article goes on to note, Detroit led the nation in foreclosures last year because the auto industry put more than 350,000 people out of work in the state with the highest unemployment rate in the nation.

Things look bad in Michigan right now. Home prices have fallen more than 5 percent in the last three years, while the rest of the nation's real estate has been on a tear. And it's not just the little guy who is suffering. Ford is axing 30% of its executives as it struggles to compete with Toyota.

But it would be wrong to interpret things as too terrible. The reporter filing her assignment from Detroit plays up the risk of default by even prime mortgages. The facts don't really back her up. The percentage of prime loans overdue by 3 or more months is a tiny 0.67%.

It must be terribly difficult for an entire region of the country to go through such a gut-wrenching decline, but Detroit is managing about as well as could possibly be expected. If 350,000 people lost their jobs in almost any other industry, the impact would be much worse. The very same unions that the Big Three automakers blame for strangling their profit margins are ensuring that most workers are getting extremely generous buyouts. It's not even that uncommon for middle-aged autoworkers with few transferable skills to receive six-figure checks to compensate them for their lost jobs.

The situation in Detroit is tragic, but a system that is allowing frugal blue-collar workers to essentially retire in their early 50s is hardly sticking it to the working man. It must be hard to have to completely start over at such a late stage in life, but at least they aren't being tossed out in the street empty handed.