There was a time, in the first half of the 20th century, when Detroit was considered one of urban America’s brightest lights: a growing, vibrant metropolis of more than 2 million, the Paris of the Midwest, the epicenter of one of history’s great transformational industries.

These days Detroit is now the nation’s leading symbol of urban decay, a city with a population of less than 900,000. Most other cities, even those said to be experiencing a renaissance, continue to lose population as well, but nowhere has the urban flight been as severe as in the so-called Motor City – 1,000 residents a month, according to recent Census estimates. Moreover, Detroit faces virtual bankruptcy: a $300 million deficit in a budget of about $1.5 billion in the coming year.

These shocking trends may finally be inspiring the city – like the automotive industry on which it is dependent – to take serious action. Mayor Kwame Kilpatrick last week outlined a sweeping package of budget cuts, layoffs, furloughs, and departmental reorganizations aimed at plugging the gap – including a $177 million hole in the city’s pension funds.

But like the auto industry, it may be a question of too little, too late.

For one thing, it remains to be seen whether Detroit’s notoriously retrograde City Council and public employee unions will go along. The budget essentially would cut pay 10% and require $47 million in health-care co-payments and benefit cuts, which union leaders have already declared a nonstarter. And it’s far from clear that the 34-year-old mayor, who spent much of his first term projecting the image of a hip-hop star, yet grasps the enormity of the longer-range problem.

Kilpatrick’s budget calls for suburbanites to step in and help fund city cultural institutions, as well as the bus system – which requires $80 million of subsidies from the city’s general fund just to keep operating – and the city’s convention center. We are often told that without a healthy center city, a metropolitan area can’t expect to thrive.

Certainly it would help if the cities were healthier and wealthier. Yet the metro area that surrounds Detroit and most other American cities have been doing relatively well. That’s because the relevant geography in the age of the automobile is the metropolitan area, not the individual city. This decentralized structure is only going to be reinforced by new technologies such as the Internet.

There may be demand for so-called Edge Cities that mimic a downtown, and even for the revival of real downtowns. There may also be lots of ad hoc regional cooperation among willing entities to ameliorate specific problems.

But voters and taxpayers have been quite clear that they will insist on a maximum of competition among municipalities in order to insulate themselves from the kind of social disaster that befell the central cities – high taxes, thoughtless social spending, masses of unionized bureaucracy – in the name of progressivism. They have learned from experience that bigger is not always better or even more efficient.

The old city centers can still be successes of a sort. Detroit, like most American cities, still has advantages: a potentially lovely riverfront, which is in the process of being reclaimed from its industrial uses, and the road grid itself, which was built originally to service the downtown. But cities like Detroit will have to learn to compete, just as Detroit’s auto companies (which have only recently begun to demand co-payments on their gold plated health-care benefit packages) have been forced to do.

That means a strategy that counteracts the monopoly power municipal labor unions, provides better service at a lower cost, and respects property rights. Perhaps even more important, it means abandoning the old, so-called progressive coalition in Washington and the state capitals that have insisted on the high tax rates and expensive regulations that have proved so damaging to the people at the bottom of the economic ladder.

Detroit’s Kilpatrick has been congratulating himself in recent days for making the “tough decisions.” If he and other mayors are serious about restoring their cities, as opposed to just getting through each dismal budget cycle, their decisions will only get tougher.

Mr. Bray is a Detroit News columnist.