The people of Detroit, including its retirees and bondholders, are justifiably nervous about how the city's bankruptcy will disturb their bottom lines.

Kevyn Orr, Detroit's emergency manager, has taken sound steps to fix Detroit's financial fundamentals through spending cuts, management fixes and asset sales, but bolder action is required to protect citizens and improve public services.

To do so, Detroit should look to the city of Pontiac, whose revolutionized government has recovered decades of lost fiscal ground through sound economic reform.

In the last four years, two governors appointed three emergency managers for the city of Pontiac. Lou Schimmel, the third EM appointed in the city, completed his tenure in August. Schimmel worked under laws that gave him far more power far longer than previous EMs, which made it easier to make important fiscal changes and improve services, too.

When the state began appointing EMs in 2009, Pontiac's 2008 audited General Fund budget was $54.2 million. By the time Schimmel took over in 2011, it had dropped to $42 million. His efforts lowered that figure again for fiscal 2013 to an audited budget projected to be just $30.6 million; a total decline of 43.5 percent.

Schimmel sold off and monetized other assets to reduce debt and avoid a court imposed property tax increase. Some of the sales included ($55 million) for unused water and sewer capacity; a city-owned theatre ($135,000); a golf course ($700,000); old public works equipment ($1.5 million) and assorted vacant lots. Most of the sold property now produce tax revenue for the city. Schimmel previously was director of municipal finance at the Mackinac Center.

Public safety was improved through competitive contracting of police, fire, 911-dispatch and ambulance services. The contract for policing with Oakland County and fire with Waterford Twp. is saving $5.8 million each year while improving response times.

According to Undersheriff McCabe of the Oakland County Sheriff's office, police response times in Pontiac plummeted from longer than 76 minutes in 2010 to 6 minutes, 22 seconds in 2013. There are 25 more police officers patrolling Pontiac now, too. Waterford has also invested $548,000 from its own resources improving Pontiac fire stations, according to Fire Chief Ron Spears.

The city of Pontiac now also is contracting out for trash collection, cemetery management, insurance administration, animal control, street light maintenance and more. In effect, Schimmel has turned Pontiac into a contract city, where most services are provided under contract instead of through city staff. Since fiscal year 2009, official city employment dropped from 495 to a proposed 20, excluding district court employees.

Detroit presents unique challenges and implementing all of Pontiac's reforms may not be possible, but it is worth exploring. After all, Detroit has unique opportunities, too, such as its great location, access to engineering talent, history, generous foundations and saleable assets.

So what would the savings look like in Detroit if they shaved the budget like in Pontiac? If Kevyn Orr, through aggressive asset sales, competitive contracting and ending unnecessary services, could reduce the city's $1.1 billion general fund spending by
43.5 percent, the city would save $478.5 million.

The city dedicated $461.6 million to debt service and pension contributions in 2012, according to Orr's 2013 Proposal to Creditors. In other words, the savings listed above would cover recent costs, at least theoretically. The total costs for pensions and creditors are scheduled to grow, but that increase could be offset with proceeds from asset sales, especially over time.

Pontiac's reforms cannot simply be superimposed on Detroit, and Orr may well be prepared to sell assets and contract out. But by adopting Pontiac's strategy to analyze the city's unique opportunities for privatizing potential tax revenue, as well as dousing waste and neglect, Orr can help leave no stone unturned in revitalizing the city.

Orr's report to creditors listed the possibility of selling some city assets such as parking garages, but more could be done. The sale of Belle Isle alone could have generated hundreds of millions to the city if only the idea had been taken up. Competitive contracting needs to be done more aggressively, too.

To Orr's credit, his team has negotiated a new collective bargaining agreement with Detroit's emergency medical (ambulance) services. Why not just contract out with a private vendor as is now done in Pontiac? There does not seem to be an interest in intergovernmental contracting for police or fire services, either, but these could represent tremendous areas for saving.

Pontiac isn't far away from Detroit geographically. It shouldn't be so distant on Detroit's reform idea agenda either.

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Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

A few years ago, a major worldwide poll found that a majority or plurality of people in most countries surveyed believe that the world is getting worse. Indeed, there seems to be a tendency for those concerned about the size and scope of government to feel like everything is getting perpetually worse. But a full look at the evidence worldwide shows this just isn’t so.

While many critics claim that free trade and globalization are merely a “race to the bottom,” the world as a whole has been quietly reducing poverty, disease, famines and war by embracing the free market.

New wealth and mosquito control has meant the plummeting of malaria deaths. The spread of vaccines has reduced or eliminated other health issues like smallpox, diphtheria, rubella and typhoid fever. At the rate the continent of Africa has been improving crop production, the UN predicts an end to famine in Africa by 2025. War and battle deaths are near an all-time low as countries that trade and interact commercially tend to not attack each other.

All of the above positive trends are happening because of an increase in prosperity. The rise in wealth globally, leading to a remarkable decrease in the world poverty rate, is key to understanding much of this progress. University of Michigan-Flint economist Mark Perry has a chart showing this drop in poverty from 26.8 percent in 1970 to 5.4 percent in 2006.

Much of this is the result of formerly Communist and Socialist economies becoming more market-based. China, India and most of South America have been embracing capitalism for decades, while Africa also is moving towards freer markets in more recent years, according to the “Economic Freedom of the World” reports.

The most noteworthy country is China: In the late 1970s, the country began shifting away from its strict model of economic central planning and began freeing up its markets. From 1981 until 2010, over 600 million people climbed out of extreme poverty, at a time when the population increased by 330 million citizens. That’s an average of 1.7 million people every month, or, as a comparison, like a population the size of Idahos’ moving up into the middle-class every month.

In Africa, led by some of the countries in the southern part of the continent, taxes and regulations are being rolled back, private property is being respected, and state-dominated industries are being privatized, shifting to the private sector. Botswana, Zambia and even Uganda (one of the “very least-free” countries 20 years ago) have all become freer in the past few decades — and been rewarded with a steadily growing middle-class.

There are concerns, both domestically and abroad. Several South American countries have elected former or current Socialist leaders in recent years. The latest recessions, which hit most of the world hard, have meant some previous reforms in nations are now being rolled back. And the United States has fallen behind many countries in economic freedom as the regulatory state has greatly expanded.

By their nature, think tanks are supposed to see beyond the momentary political battles which dominate the news headlines every day and focus on the big picture. That’s why the Mackinac Center has been advocating for a right-to-work law for over 20 years — at a time when the idea was ridiculed across the political spectrum. The dynamism of the world economy is evidence enough of the importance of long-term thinking — countries once written off as lost causes are embracing good ideas and helping their people.

While we should cheer this progress, it is important for those of us wishing for a more limited state to be ever-vigilant, because more freedom leads to a better world. The opening up of markets has resulted in an amazing 80 percent reduction in extreme poverty — undoubtedly one of the greatest achievements in human history.

As Arthur Brooks, president of the American Enterprise Institute, recently said, “I will state, assert and defend the statement that if you love the poor, if you are a good Samaritan, you must stand for the free enterprise system, and you must defend it, not just for ourselves but for people around the world. It is the best anti-poverty measure ever invented.”

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Jarrett Skorup is a research associate for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.