The Michigan Constitution Can't Protect Detroit's Retirees

Promises can't create money for a broke city.

Detroit’s public unions have been despondent since last week when a federal judge effectively threw out all their legal arguments. The unions had approached multiple state courts to halt Detroit’s bankruptcy filing on grounds that it violated their constitutionally guaranteed pension benefits. Judge Steven Rhodes stayed these lawsuits. What’s more, he moved them -- along with all future bankruptcy proceedings -- to his court rather than leave them in the hands of state judges, many of whom the unions have helped elect.

Although he still has not ruled whether Detroit’s fiscal situation is dire enough to make it eligible for Chapter 9 protection as Michigan Governor Rick Snyder and Kevyn Orr, the emergency manager Snyder appointed, claim it is, most observers believe that the judge’s actions signal that the bankruptcy, the largest of its kind in American history, can now proceed.

Any way you look at it, at this stage unions have to accept the cold reality that their city is broke. At best they can use their constitutional protections to squeeze a marginally better deal in bankruptcy court -- not keep it out of that court. Nor can preserve all the promises to their retirees.

This is unfortunate given that, despite all the hype about unions negotiating lavish pension benefits, an average city retiree gets only about $20,000 annually -- and police and firefighters about $30,000. Most of these people are on fixed incomes, and police and firefighters don’t receive any Social Security. Retired city managers get six figures, but there are only a few hundred of them among the city’s 20,000 retirees.

Yet thanks to corruption, fiscal mismanagement and the city’s notoriously bloated labor rolls, Detroit’s accumulated debt is more than $18 billion -- about 16 times its current annual revenue. Out of this about $7 billion or so is secured debt -- $6 billion in revenue bonds for the Water and Sewage Department, among other things. Orr plans to refinance this debt and get a better deal from bondholders while handing the management of the department to a regional authority.

But he can’t do what was done in the case of the auto bailout (in which he represented Chrysler): Put unsecured (union) creditors ahead of these secured (private) ones. Doing so would risk a court smack down and raise borrowing costs for the whole state. It would also create havoc in municipal bond markets nationwide given that Detroit’s bankruptcy will set a precedent for many more that are likely to follow.

Orr wants unsecured creditors -- and he has taken the unorthodox step of putting some general obligation bondholders in this category -- to accept a $2 billion payout on $11.5 billion worth of debt. This debt includes an estimated $5.7 billion in retiree health-care benefits, $3.5 billion in pension liabilities and the rest in general-obligation and other debt to private lenders.

Orr has offered private lenders only 10 cents on the dollar -- a considerably worse deal than the unions will get. But even if he gives them nothing and hands over the entire $2 billion to unions, that will still leave unions more than $7 billion short of what’s needed to cover the pension and health-care liabilities of retirees. The latter don’t enjoy any constitutional protections. Unions could try and make up some of the shortfall through city asset sales but that won’t get them very far given that Detroit’s debt-to-asset ratio is 33:1.

Orr is saving about $1.25 billion over the next decade to tackle crime -- Detroit has the highest murder rate among its peer cities -- and improve other services. That’s the only way the city will have a fighting chance of halting its population losses and making a comeback.

Unions could try to convince a court that this money legitimately belongs to them because their pension-related debt is protected by the state constitution.

“But it is hard to see how that argument would prevail,” argues Patrick Wright of the Mackinac Center for Public Policy. “Practically speaking, a judge will be hard pressed to order the city to deprive its residents of essential services for the sake of a constitutional promise to retirees.”

It is no coincidence that Judge Rhodes repeatedly emphasized that his decision to take over the bankruptcy proceedings was necessary to protect the “public interest.”

In the absence of a state or federal bailout, the only other way that the city could possibly live up to its promises is by raising taxes. Detroit’s taxes, however, are at their “current legal limit,” as Snyder noted in his letter approving Orr’s bankruptcy filing. Even if they weren’t, Detroit’s “residents cannot afford to pay additional taxes,” he maintained.

In any case, a judge doesn't have the power to force a city or state to raise taxes, especially if that violates its own laws. At most, if Judge Rhodes felt that Detroit has the ability to do so and pay its debt, he could rule that Detroit is ineligible for bankruptcy protection. “But creditors face an uphill battle in disputing Detroit’s eligibility for Chapter 9 bankruptcy protection,” notes Scott A. Wolfson, a Detroit lawyer who specializes in bankruptcy. 

Like Michigan, many other states including New York, Illinois and California constitutionally protect the pension benefits of government workers. Yet the lesson from Detroit so far is that these protections are not worth a lot when a city, having systematically mismanaged its finances, is flat broke.

A version of this column originally appeared in Bloomberg View.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • R C Dean||

    Most of these people are on fixed incomes,

    Enough already. Anybody being paid a salary is on a fixed income as well.

    This ain't rocket science. A state can't prohibit the enforcement of federal law within the state. Bankruptcy is federal, ergo . . . .

    What the unions did here with their constitutional amendment was effectively prohibit any kind of non-bankruptcy solution to the fiscal problem created by their pensions. They told the state and cities that their only recourse was to federal bankruptcy court. Surprise, surprise, that's where they are headed.

  • Tonio||

    So, how much weight does the bankruptcy court have to give that provision in the Michigan constitution? They decide bankruptcy based soley on the US Bankruptcy code, right?

  • R C Dean||

    I'm not a specialist, but I think they can give it zero weight. The judge has a lot of discretion, and will be aiming for a bankruptcy that can be approved by the maximum number of creditors, so I have no doubt there will be some special treatment here, but the "fuck you, you can't touch us" ain't gonna fly.

  • Bo Cara Esq.||

    I don't pretend to know myself, it just seems more complicated. With such a provision in the federal law I think the more responsible and federalism friendly thing to do would be to certify the question to the Michigan Supreme Court rather than just unilaterally ruling that it doesn't matter.

  • TW||

    The federal courts have exclusive jurisdiction over bankruptcy case. So the “federalism friendly” option is for the State courts to butt out and let them do their job.

  • Henry the Twooth||

    Yep.

  • Tonio||

    I know that Bankruptcy is a very specialized area of practice. Thanks for the insights.

  • Bo Cara Esq.||

    It may not be rocket science but I think it's more complicated than you conclude. This is because the federal law in question says municipalities are only able to come under the federal law if they are 'authorized by state law.'

    As for the 'fixed income' term I imagine what they mean is that the person is not going to get a promotion or 'better job' in the future, which is an option for non-retirees.

  • kinnath||

    Wrong. Anyone can go seek a new job or a better job including retirees.

  • Tonio||

    But realistically, ain't nobody going to hire those older retirees.

  • kinnath||

    Self fucking employment is always an option.

    My father is 78 and still works 30 hours a week.

  • Tonio||

    Well, good for your dad. Srsly.

    But not every retiree is as young or is as in a good a shape as your dad.

    And I'm not saying a free pass for everyone, but one area where many people here fall flat is refusing to acknowledge certain realities, and pretending that a single outlying data point makes the more modal data go away.

  • Sidd Finch||

    one area where many people here fall flat is refusing to acknowledge certain realities, and pretending that a single outlying data point makes the more modal data go away.

    ^^^^ that

  • Zeb||

    But when he is 93 he probably won't (though you never know). It does become an issue at some point.

  • Invisible Finger||

    Let's not pretend that most of the Detroit retirees are over the age of 60.

  • Scruffy Nerfherder||

    I hire retirees, but not retired city workers.

  • Bobarian||

    This^^

    What city union members are and 'workers' are two distinct sets with a null intersection.

  • Bo Cara Esq.||

    Well, they could all become NFL football players too.

    I try not to place my disdain on people who simply don't accomplish the possible but extraordinary.

  • Paul.||

    Yeah, what's stopping a retiree from getting a new job?

    If retirees of the state are considered so by doing 20 years of service, I'd be retired twice over.

  • Paul.||

    That's actually a bit of an exaggeration. I'd be about 1.5 times retired... but you get the idea.

    I remember knowing plenty of "retired" 40 something year old government workers who were on their way to a double-dip pension.

  • Tonio||

    Most of the double-dippers I know are ex-military. They get to retire earlier than other government employees.

  • Bo Cara Esq.||

    I know several ex-military like this. Every time I hear some politician scream that we can't cut a penny from our defense budget without leaving the troops starving and out of ammunition I think of how I get to pay for the retirement of ex-military people who are busy working making a second income.

    And the number of people on disability through the military is pretty high too from what I can gather.

  • Tonio||

    Well, early retirement (compared with other sectors of the economy) is one of the ways to move them out of the service. Do you really want a bunch of fiftysomething and older soldiers (etc)?

  • Bo Cara Esq.||

    I'd cut the military drastically regardless. But yes, I think if I had to pick I'd choose to have them doing something for the money I pay them.

  • wareagle||

    I would rather teh military make that decision based on the individual. We have plenty of 50-something soldiers as it, albeit senior officers and NCOs. They're not forced out at 20; the system just makes it financially beneficial for them to retire then.

  • Wizard4169||

    Only a small percentage of soldiers are humping the boonies with a rifle. The military needs lots of people driving trucks and filling out paperwork, too. So, yeah, I think we could probably find a few spots for fifty-somethings.

  • ||

    Couple points.

    First. The military retirement needs to change (yes, I'm collecting one). Simply cannot afford it. It needs to be some sort of fund matching 401K deal. Medical needs to change as well.

    THAT SAID...

    Do not compare a military retirement with some slob government worker at the DMV sitting on their fat ass for 30 years and collecting a pension of 90% of their salary based on seniority alone.

    The military is an up or out organization. If you do not make rank, you by and large, get booted. That means it's based upon performance as well as seniority.

    Know how many make it to a pension? 17%.

    And I'd bet there are very few People working for the DMV who would put up with (to include getting shot at) what your average military member puts up with for what they get in return. You get rid of that pension, and you'll need to pay people more to be willing to put up with the job.

    My .02

  • wareagle||

    sure but is the 17% based on performance or choice? Not everyone wants to put in their 20.

  • ||

    Most leave because they refuse to put up with it for 20.

    I don't think the average civilian realizes just how much bullshit is involved.

    They are involved in EVErY aspect of your life. They tell you how to dress, how to wear your hair, they even tell you what positions you can fuck your wife in (really).

    You are on call 24/7. They tell you where you can and cannot visit. You get calls at 3 AM telling you you need to be in in 30 minutes, so you can lay underneath a table sucking oxygen through a rubber hose for the next 3 days (to practice bleeding for the next ORI).

    A 12 hour day was the norm.

    And we haven't mentioned the deployments/time away from family. In my 20 years, I spent 7 without my wife.

    And then there's the whole getting shot at thingy.

    It's not a 9 to 5 and when you are in they OWN you.

    No way in hell I'd have stayed if not for the retirement.

  • Invisible Finger||

    I don't think the average civilian realizes just how much bullshit is involved.

    My father was Air Force for 5 years and his attitude was "Anyone that can put up with that much bullshit for 20 years DOESN'T DESERVE a pension."

  • ||

    Probably right.

    And it's only gotten worse. If I had it to do over...NEVER!

  • Ted S.||

    Why do you hate our hero warriors?!?!?

  • ||

    Why do you?

  • Ted S.||

    I'm uncomfortable with what seems to be an increasingly hagiolatrous view in American culture towards military members, combined with a "how dare you criticize them" attitude.

    Hell, I find that even the term "first responders" gives me the creeps.

    My dad had 18 months taken out of his life courtesy of the peacetime draft. Perhaps I should consider him a hero.

  • ||

    Many in the military are uncomfortable with that too. It's not like they asked for it.

    I'd have people in Wal-Mart come up to me and thank me for my service (many times). What do you say? Your welcome? Where were you before 911? It's awkward.

    There is plenty to criticize the military for. It is the most efficient entity on the face of the planet, for starters. But you don't need to hate the military because of how they are being used.

    What I cannot stand is politicians trying to climb on the backs of the military and use it as an excuse for their political agendas.

  • Ted S.||

    I'd have people in Wal-Mart come up to me and thank me for my service (many times). What do you say? Your welcome? Where were you before 911? It's awkward.

    And there's this propagandizing (at least it feels like propaganda to me) that this is the way we're supposed to treat our military, and how dare you not suck up to them?

    There is plenty to criticize the military for. It is the most efficient entity on the face of the planet, for starters. But you don't need to hate the military because of how they are being used.

    How do you hate what the government is doing with the military without being perceived as not liking the individual members?

  • ||

    Same answer to both questions.

    And there's this propagandizing (at least it feels like propaganda to me) that this is the way we're supposed to treat our military, and how dare you not suck up to them?

    So you're claiming because people are giving the military more praise than they deserve, you need to treat the military like shit to make up for it?

    How do you hate what the government is doing with the military without being perceived as not liking the individual members?

    Um..hate the politicians making those decisions.

    As I said above, same answer to both questions...

    ...blame those responsible.

  • PH2050||

    Many in the military are uncomfortable with that too. It's not like they asked for it.

    I'd have people in Wal-Mart come up to me and thank me for my service

    I can't express in words how much I hate this. I just performed a job I signed up for, wtf I thought that was normal? I joined for the college money, fuck this government.

  • Mark22||

    Well, you may not realize it, but by signing up you did take on unusual burdens: a temporary restriction of your liberties and a higher risk of injury and death. Glad it worked out for you, but generally speaking, there is a reason to be grateful to people who do that. And it wasn't your fault that the military has been used in various political adventures than for defense.

  • Bo Cara Esq.||

    -It is the most efficient entity on the face of the planet, for starters.

    I take it from brief readings of your comments in other threads you dislike our bloated federal government and find it inefficient, except, apparently from this comment the biggest, most violent manifestation of it.

    Seems odd.

  • ||

    The military is a legitimate function of government.

    Unfortunately ALL government is inefficient. It must be, as there is no profit motive. So you should limit it to only what is needed to defend against legitimate threats to the nation. You don't use it to impose your will upon sovereign nations and play world police.

  • ||

    It is the most efficient entity on the face of the planet

    It is the most inefficient entity on the face of the planet

    Fucking spell checker!

  • MattJ||

    I'm a 'first responder' - as a cave & high angle rescue volunteer.

    Why does the phrase give you the creeps? It just reflects that I may be the first person on the scene of an accident/injury.

  • Ted S.||

    Because it's generally used for paid government workers, and I get the feeling that when they're trying to change from "police" or "firefighters" to something like "first responders" that there's something Newspeaky going on.

  • Tonio||

    The term "first responder" as you're using it refers to police, fire and emergency medical services (paramedics, etc) collectively. I'm not a fan of this term, either, but it is what it is.

  • MattJ||

    Well, in my case, a cigar is just a cigar.

    My regular job is as an engineer.

    The volunteer work is mostly a bunch of guys finding something beneficial to do for the community with our hobbies (caving, climbing). Some folks on the team are also police/firefighters/EMS personel, but most of us are not.

  • Tonio||

    Technical rescue certification: respect, dude.

  • soflarider||

    I can't speak for other but it gives me the creeps because first responders are lumped in with teachers, old people, police, and firefighters when Progressives seek to vilify those who would rein in government spending.

  • Bo Cara Esq.||

    All things equal retirees returning to the workplace are less likely to get employment that would constitute a raise in income. Hence 'fixed income.'

    I don't mind the use of the term. What everyone should remember of course is that people with fixed incomes can be found on all sides here. Retirees surely are invested in the banks that are due money from Detroit, and retirees are surely found among Detroit's taxpayers.

  • Scruffy Nerfherder||

    But those retirees didn't squander their money and live paycheck to paycheck. They deserve no sympathy.

  • Libertymike||

    For some reason, Bo has a soft spot for public sector retirees, particularly public sector union retirees.

  • Bo Cara Esq.||

    Not at all. I have no more or less sympathy for them than I do any other creditor in this situation. In other situations I'm quite opposed to them.

  • kinnath||

    Since social security does not penalize extra earned income, then by definition extra earned income is extra earned income resulting in a net increase in income.

  • Bo Cara Esq.||

    Perhaps I misunderstand what you are getting at, but I think when they talk about 'fixed incomes' they are talking about their pensions, not social security. The pensioners are likely to lose some of what they expected on the pensions, not social security (well, not until that runs dry sooner than most expect, but that's for another discussion).

  • kinnath||

    First, anyone that is retired can always go back to work to earn additional income.

    Second, anyone that is retired and assumes 0% risk that their retirement program will fail is an idiot.

    Third, anyone that complains they can't get a good enough job to replace the income they mistakenly assumed was absolutely risk free gets no sympathy.

    Clear enough.

  • Tonio||

    First, anyone that is retired can always go back to work attempt to find a job to earn additional income.

    You can't just magic those jobs into existence. You can't force employers to hire older workers (sure, you can try, but it doesn't work).

  • kinnath||

    Anyone that is 55 and doesn't spend at least a few minutes every day figuring out how they are going to survive until they are 95 deserves whatever they get.

    Somehow the concept of collective bargaining became a concept of delegated responsibility where union members put their futures into other peoples hands. I don't have much sympathy for them.

    There are always jobs somewhere. And unless a retiree has reached the point where they are physically not capable of any work, then they should go find those places that have jobs. And for the people that really can't work, that is a question of welfare which is an entirely different subject.

  • ||

    Anyone that is 55 25 and doesn't spend at least a few minutes every day figuring out how they are going to survive until they are 95 deserves whatever they get.

  • Zeb||

    First, anyone that is retired can always go back to work to earn additional income.

    That's not really true. Some people are senile or incapacitated in other ways.

    Your second point is good and the third is up to you, I guess.

    And in the case of government workers, where a lot of them were planning on retiring at 50 and are now whining, I agree with you, they can get fucked.

  • kinnath||

    First, anyone that is retired can always go back to work to earn additional income.

    Second, anyone that is retired and assumes 0% risk that their retirement program will fail is an idiot.

    Third, anyone that complains they can't get a good enough job to replace the income they mistakenly assumed was absolutely risk free gets no sympathy.

    Clear enough.

  • Paul.||

    All things equal retirees returning to the workplace are less likely to get employment that would constitute a raise in income. Hence 'fixed income.'

    In aggregate? Maybe. On a case-by-case basis? No. If I do 20 years in IT and retire from the state, then return with all of my experience and credentials, why wouldn't my previous 20 years count towards my next 20 years?

    I think we have a simplistic picture of a guy who works 20 years in a job, retires, then returns to the work force in a completely unrelated field. Like a guy who's an administrator of logistics department who then returns to the workforce as a Starbucks barrista.

  • Bo Cara Esq.||

    I'll start by saying that I think offering retirement at 20 years is crazy.

    But in your scenario I think you are discounting the value of 'seniority.' Many jobs give periodic raises that accumulate over the years to reach a pay that will be quite higher than they would give the person had the person just walked in the door, so to speak.

  • R C Dean||

    the federal law in question says municipalities are only able to come under the federal law if they are 'authorized by state law.

    And Michigan law authorized municipalities to file for bankruptcy.

    What state law is not allowed to do is specify what happens after the filing, by, for example, trying to supplant federal law on priorities of creditors, etc. Which is pretty much what trying to limit the federal bankruptcy court's authority with a state constitutional provision comes down to.

    Its just really not that complicated.

  • Henry the Twooth||

    This is really a stupid argument about fixed income. All the creditors are getting screwed, including the retirees. No way around that conclusion.

  • MoreFreedom||

    "This is because the federal law in question says municipalities are only able to come under the federal law if they are 'authorized by state law.'"

    I'm OK with Michigan bailing out Detroit, because I don't live in Michigan. In fact that would be a good thing, as less than 10% of Michigan's residents are in Detroit, and state law allowed this to happen by not "regulating" cities. I use quotes, because the right word is "controlling."

    But since Michigan isn't stepping up (no surprise, who wants to be responsible for their irresponsible brother?) then it's up to the federal government to resolve the dispute.

    One thing I can guarantee, is that swing voters won't like anyone who wants to force them to bail out irresponsible people. Even Obama is smart enough that he doesn't support it, even though he's not running for re-election anymore, and even though he acts like he is.

  • kinnath||

    "Living on a Fixed Income" actually means "Being too stupid or too lazy to consider the risk of loss of income in planning one's future".

  • Henry the Twooth||

    Federal law has precedent over state law. In bankruptcy, this is even stronger, as no bankruptcy law would work if creditors could each point to different state laws granting certain creditors better or worse rights. This is an area of law in which Congress has made federal displace all other laws.

    Remember, constitutional rights are just laws with more precedent over statutes imposed by the SAME jurisdiction. So while the state constitution trumps over state statutes, that distinction is irrelevant when comparing it to federal law - if federal law displaces state law, then it is irrelevant whether that state law originates in the constitution, statutes or other sources.

  • Fist of Etiquette||

    This just in: reason hates contracts. And constitutions!

  • Sevo||

    What damaged their 'constitutionally guaranteed' pensions was 30 years of brain-dead lefty governance. Elected by THEM.

  • Tonio||

    But they're never going to hear that, Sevo. The legacy media ain't a gonna tell 'em that, and if they did they wouldn't listen to it.

  • MoreFreedom||

    The legacy media won't have to tell them. Their reduced pension fund checks will hit them like a brick in the head.

    Still, I think the MSM will show the sob stories in an attempt to gin up support for bailing them out.

  • PapayaSF||

    You could argue that it's 50 years: in the early '60s the "JFK-like" Mayor Cavanagh raised taxes and that spurred a bit of an exodus.

  • Lord Humungus||

    where is MNG to defend these scurrilous attacks? Obviously taxes must be raised on everyone in Michigan (or the U.S.) to cover the shortfalls of this city. These promises were in a contract! A contract! /or something like that.

  • Tonio||

    Oh, somebody will bail them out. Hopefully Michigan will do this, but I suspect we'll all pay for it. Ugh.

  • SweatingGin||

    I'm hoping not Michigan:)

  • hotsy totsy||

    I'm hoping not all of us.

  • The Original Jason||

    I'm hoping we can find some surveyors to re-examine the border and find that accidentally Detroit was included in Michigan instead of Ontario.

    Then Ottawa can pay for it!

    :-D

  • MoreFreedom||

    Why not sell Detroit to Canada to pay off their debts? Or maybe a territory of Japan. I bet they'd jump at the opportunity. They'll just print up the money to buy it!

  • ||

    It's Starnesville! Let it fucking rot!

    When are people going to take this as an ultimate lesson in economics? Not until they see the misery that comes from it. Bail them out and there is no incentive to fix the rest of the cities on their way to the same fate.

    Fuck them. They have it coming!

  • Aresen||

    When are people going to take this as an ultimate lesson in economics?

    They won't. Even when it happens to the whole country, they will deny reality and blame the "evil capitalists/banks". You see this in Greece and you see it in Argentina.

    If the price of oil collapses, what is going to happen in Venezuela is going to be ugly - and Sean Penn will blame it all on the right and the fact that Chavez wasn't there to prevent it. (Considering the way Chavez and his heirs are destroying the oil infrastructure in that country, it may happen even if the price of oil doesn't collapse. Venezuela will have no income because it won't be able to produce oil.)

  • Tonio||

    When I wrote "I hope it's Michigan [bailing out Detroit]," I meant Michigan (Michigan taxpayers) as opposed to the federal government (all US taxpayers).

  • Lord Humungus||

    But he can’t do what was done in the case of the auto bailout (in which he represented Chrysler): Put unsecured (union) creditors ahead of these secured (private) ones.

    oh yay.

  • Libertymike||

    Yeah, WHERE is MNG? Does he post under another name?

    The MNG-TAO mutual bitch slaps were among the best.

  • Lord Humungus||

    He never returned after registration. MNG, to his credit, got me more riled up than the current trolls.

  • ||

    He quit with registration.

  • Paul.||

    Any way you look at it, at this stage unions have to accept the cold reality that their city is broke.

    Obama: Paul. still has money in his pocket, so Detroit isn't broke.

    *shakes Paul. upside down while coins bounce on the ground*

  • Invisible Finger||

    Don't forget you can sell blood and organs, too. Well, maybe not the organs legally.

  • Paul.||

    Compare and contrast:

    This is unfortunate given that, despite all the hype about unions negotiating lavish pension benefits, an average city retiree gets only about $20,000 annually -- and police and firefighters about $30,000.

    with:

    Yet thanks to corruption, fiscal mismanagement and the city’s notoriously bloated labor rolls, Detroit’s accumulated debt is more than $18 billion --

    What this means is that Detroit turned government into a jobs program, not an entity which provided service to its taxed residents.

    Had Detroit kept government reigned in to what it should have been, it's arguable that there'd be plenty to go around.

  • Bo Cara Esq.||

    Those figures make me wonder, why do police and firefighter city employees make so much more than the rest? Is it supposed to be because they are skilled position? I don't see that. Because of the danger? Because working at all in Detroit seems fairly dangerous.

    -Had Detroit kept government reigned in to what it should have been, it's arguable that there'd be plenty to go around.

    At the very least they should have cut back services when the costs were higher than revenues. A child knows that.

  • Scruffy Nerfherder||

    At the very least they should have cut back services when the costs were higher than revenues. A child knows that.

    MONSTER! May the Lord Keynes forgive your spirit.

  • kinnath||

    On a per capita basis, way more farmers die every year in farm accidents than cops or firefighters in work related accidents.

  • Paul.||

    Fueling the nation's obesity crisis is dangerous work!

  • ||

    At the very least they should have cut back services when the costs were higher than revenues. A child knows that.

    When times are good:

    We've got extra money. I've got it, let's hire extra cops and firefighters.

    When times turn bad:

    Dear god, we can't lay off cops and firefighters.

    Government grows!

  • SweatingGin||

    Definitely did. City services are falling apart (water system crumbling, big problems with the lighting system, crime out of control, etc.) Schools have a whopping 65% graduation rate (and an emergency manager also. I can tell stories about the problems there). And taxes are huge for that.

    There's been one mayor in the last 40 years or so that wasn't out-and-out corrupt, and he got run out of town (Archer).

    The city council is amazingly corrupt (See Monica Conyers, recently out of prison and halfway house for a $6k bribe on a $1.2 billion deal.)

  • Henry the Twooth||

    And in competent. $6,000 is chump change for this kind of crime. And on a $1.2 billion deal? Rounding error (00.0005%).

  • ||

    A lot of the pension problem could be solved if they didn't let government workers retire at 45 and then help them live to 90.

  • Aresen||

    Like Michigan, many other states including New York, Illinois and California constitutionally protect the pension benefits of government workers.

    So, if you are falling from a thousand feet off the ground, a constitutional amendment will prevent you hitting the pavement?

  • Paul.||

    No, it prevents you from stopping the fall.

  • ||

    Union- I want it! You have to get it for me! *stomps feet , clenches jaw, turns red in the face*

    City-" I'm sorry honey, but we are broke. We just don't have any money"

    Union- "You can't be broke! You still have checks in the checkbook!" *falls to the ground begins holding breath*

  • Bo Cara Esq.||

    As I said on a previous thread on this topic, that seems like an odd position to take. Do you feel that way about the banks that loaned Detroit money that are going to lose out?

  • SweatingGin||

    The banks were foolish to loan money to the city. I have to think they were counting on a bailout.

    Wonder if we'll see banks bailed out on the backend for all the losses they'll take on municipal bonds? That, and the bonds being defaulted on will just help push other pension funds further into underfunding.

  • Scruffy Nerfherder||

    The Fed will backstop their losses with a near zero interest loan specifically for the banks that lost on Detroit. That way, the government gets to say that they didn't bail them out yet the same thing is effectively achieved.

    It will be the same thing as GM and Chrysler but they'll just skip the first part of the bailout process and avoid the nasty political fallout.

  • itsnotmeitsyou||

    I have no pity for the banks either. They loaned money to a corrupt city that has a rampant history of mismanagement and overspending. If my neighbor were in over his head in debt and was constantly spending money on stuff he didn't need, I'd be a fool to lend him money.

  • SweatingGin||

    "No, no! I've got this plan for a train! It'll run in a little loop through part of downtown! During the day, kids from the suburbs will come down to the city on field trips, pay 50 cents to ride it around once. Then at night, it'll move muggers!"


    This seems like a great place to invest.

  • Bo Cara Esq.||

    I am of two minds about this. On one side is your argument and analogy, well argued I must say.

    On the other I've recently read about how unpopular creditors were treated rather poorly in different times in American history, most notably around the Revolution and again in the Great Depression. Many states and localities tried to excuse debt owed to creditors on grounds such as 'well, those mean banks should have known that those poor Okie dirt farmers couldn't pay them back, it would be unfair to push those farmers' or 'those mean banks should have known those poor Continental Congress troops were not in a position to pay them back, it would be unfair to make them.'

    At some point, of course, there is no money and while as a libertarian I'd like to see people held to their promises it just can't be done. But I'm wary of excuses for debtors, and that applies even when the debtor is a public union.

  • PapayaSF||

    They were "predatory loans"! Detroit didn't realize what it was getting into!

  • Bo Cara Esq.||

    You joke, but I've already heard this kind of nonsense in an attempt to excuse Detroit 'welching' on its debt to several banks.

    Detroit was lucky any bank lent it a cent, supporters of Detroit should treat any bank that did like saints, not villains.

  • Aresen||

    More likely, Wall Street Fund managers stuffed the money into union pension funds.

  • ||

    Detroit 'welching' on its debt to several banks.

    I KNEW Detroit was the most libertarian city in America!

  • itsnotmeitsyou||

    I get your point, Bo, and my preference is to see people held to their promises as well. However we're not dealing with people here. A person would never be allowed to borrow 33x their assets. A person can turn around their life and start making more money. A person can be held accountable for their actions.

    We're talking about a city government. When a city government is held accountable, it's not the people that made the decisions that are on the hook, it's the taxpayers. Turning around a city government is like turning around a train, it's not easy and it's a slow delicate process.

  • Henry the Twooth||

    They elected the govt. Just like shareholders elect the officers. Same idea, and same consequences if you vote poorly.

  • Henry the Twooth||

    Sorry, shareholders usually elect the board.

  • Libertymike||

    You know what they say about a fool and his money?

    What you never want said about you.

  • Ted S.||

    One wonders if lending money to the city was a condition of beling allowed to operate within the city.

  • itsnotmeitsyou||

    Even if that were the case, I still find it hard to have any pity for the banks. Comercia bank figured out Detroit was a losing bet years ago and GTFO. I don't know if any other bank is headquartered in Detroit, but a festering shithole like that isn't exactly a promising market to have branches in.

  • Henry the Twooth||

    Yep, and they will suffer a larger % loss than the retirees.

  • ||

    I am not certain what position you are referring to, but if you mean my position that people should suffer the consequences of poor decision making, yes.

    If a bank loans money to an entity that poorly manages money and obviously can't pay it back, then they are SOL, aren't they?

  • Bo Cara Esq.||

    Well, yes. My point is, who is the 'bad guy' in that scenario? I think while the bank is foolish, and of course no third party should be compelled to pay for that foolishness, the 'bad guy' is the entity that poorly managed its money and can't live up to its promises.

  • Redmanfms||

    What does a "bad guy" dynamic have to do with it?

    The city is the "guilty" party in making stupid financial decisions, but how exactly are they going to be punished? A bankruptcy will ruin their municipal credit and make it such that only "on the bleeding edge" high risk investors will ever consider buying their bonds again, that's about as much "punishment" as will be rendered.

    You lend money/buy bonds/whatever from an entity that has shitty policies, you're likely going to lose money, "good guy/bad guy" ain't got nothing to do with it.

  • Redmanfms||

    Or are you suggesting that what remaining tax base exists in Detroit be made to pay off the debt?

    Or the rest of the people in the country in the form of a federal bailout?

  • Bo Cara Esq.||

    -what remaining tax base exists in Detroit be made to pay off the debt?

    Well, they voted for it.

    -Or the rest of the people in the country in the form of a federal bailout?

    Absolutely not, that would be unconscionable.

  • ||

    Yes, and very obviously bad guys, yet the banks loaned them money. That was foolish. Now they should take the hit for making a foolish decision.

  • Raston Bot||

    State stabilization bailouts ended when the dems lost the house. This will have to be done at the state level. Let those idiots in Lansing deal with this labor mess.

  • PapayaSF||

    A new record! Every link in the article (except the "appeared in" one at the end) is SugarFreed.

  • SugarFree||

    WOO!

  • PapayaSF||

    After her boneheaded comment about Limbaugh earlier, clearly Shikha is not having a good day.

  • Sidd Finch||

    One boneheaded comment and a SugarFreed article is pretty good for her.

  • ||

    Couldn't President Obama simply order everyone who left back to Detroit?

    Or better yet. Those mean states like Texas, who stole Detroit's tax base people away should be forced to pay Detroit's debt. After all, they unfairly manipulated those people into moving to where they could have a better life. Those bastards!

  • Bo Cara Esq.||

    Perhaps a small penalty/tax for not residing in Detroit?

  • Scruffy Nerfherder||

    A slight nudge, perhaps?

  • PH2050||

    Damn, perfectly put.

    If we can keep state governments competing with each other for tax-paying residents, maybe they'll have less time to screw us over.

  • PapayaSF||

    Of course Krugman is blaming all this on... urban sprawl. Yeah, that's the ticket! Sprawl.

    I propose at least part of a pension fix: all pensions that are above the average pension amount are hereby reduced to the average pension amount. Fairness! Income equality!

  • Scruffy Nerfherder||

    Krugabe is phoning it in at this point. The man cannot be that stupid.

  • PapayaSF||

    "Some ideas are so stupid that only intellectuals will believe them."

  • Bo Cara Esq.||

    Sprawl? What in the world?

    I can't even imagine an argument based on that.

  • PapayaSF||

    It's the latest (I think) Krugman column in the NY Times. He might have a slight point, but it's obvious straw-grasping because he doesn't want to acknowledge the far more important causes.

  • ||

    Um...

    So this is happening to all cities then?

  • PapayaSF||

    Detroit's a special case for various reasons (esp. the auto industry and a very high black population), but many cities are headed for bankruptcy. In fact, Detroit's may start a wave of them, because borrowing rates for the rest will go up.

  • PapayaSF||

  • R C Dean||

    Apparently, if Detroit had built a wall around itself and prohibited everyone from leaving, it would still have a robust tax base that could support its spending.

  • PapayaSF||

    That seems to be the implication. You see, the freeways made it too easy for people to commute or just leave. (This is an actual point made by the left.)

  • Invisible Finger||

    But it isn't even TRUE. The flight to the suburbs began before the urban interstates were built; the cities used the highways as an excuse to get suburbanites to spend money in the city (and mostly as a way to bulldoze poor neighborhoods and herd the residents into slum highrises).

  • PapayaSF||

    I know, but that's one of the straws at which they grasp.

  • Henry the Twooth||

    Well, the standard statist/socialist line is that either people are too stupid to make the right choice for the state, or too clever to make the wrong choice for themselves.

  • PH2050||

    LOL urban sprawl?! Too funny.

    No wonder he's relegated to writing op-ed garbage.

  • CampingInYourPark||

    Get your own pension estimate from the General Retirement System of the city of Detroit here: http://www.rscd.org/gc_begest2.htm

  • SweatingGin||

    That website is awesome.

  • In Time Of War||

    Holy...FrontPage 5? Well, at least they weren't wasting any money on an IT department...

  • Bobarian||

    -- Detroit has the highest murder rate among its peer cities --

    Hmm, peer cities huh?

    Mogadishu?

    Lebanon in the 80's?

    Gaza strip?

    Chernobyl?

    The mind boggles.

  • Bo Cara Esq.||

    This came up in a recent discussion on this topic prompting me to 'google' US cities by population and crime rates. In consideration of population, Charlotte, NC and El Paso, TX were the two cities listed around Detroit. Their violent crime rates per 100,000 were 606 and 431 respectively. Detroit's violent crime rate? 2137! That's 3 and a half larger than Charlotte's and over five times that of El Paso!

    Those numbers alone say quite a bit towards explaining Detroit's plight.

  • CampingInYourPark||

    The homicide rates of New Orleans, Detroit, St. Louis, and Baltimore are listed among the 50 worst in the world.

    http://en.wikipedia.org/wiki/L.....urder_rate

  • Citizen Nothing||

    No one, in this day and age, should prefer a "defined benefits" pension to a self-owned "defined contributions" retirement account.

  • PapayaSF||

  • PH2050||

    A bureaucrat working miles away in City Hall, not responsible to the transportation department (and, frankly, not responsible to anyone we could identify), decided who got paid and who didn't. That meant vendors supplying noncritical items were often paid even as public buses were sidelined.

    Holy shit.

  • PH2050||

    That article is eye-opening and I would have been feeling depressed as hell trying to perform Nojay's job. How the fuck can anyone claim there was anything remotely libertarian about Detroit? It boggles the mind.

  • bassjoe||

    That the unions even made this argument is kind of shocking. The lowliest of federal laws trumps state constitutions. Also, the bankruptcy petition seems to be treating the union pensions as priority unsecured claims which is... the best they're going to get in this system. Though I guess they had to try...

  • Invisible Finger||

    Are you a DEA agent?

  • PH2050||

    Guess I have to hide my vaporizer if bassjoe comes over to visit.

  • bassjoe||

    Dude. Seriously? It's called the Constitution's Supremacy Clause, supposedly that thing people pray to every night on this website. http://en.wikipedia.org/wiki/Supremacy_clause

  • ||

    MY HUMAN RIGHT TO FREE SHIT IS BEING VIOLATED!!!

    I HAVE A HUMAn RIGHT TO A UNICORN!

    MAKE GOD MAKE ME A UNICORN!

  • ||

    Clearly Detroit has an austerity problem.

  • Raymond Luxury Yach-t||

    Give Great Britain a 100 year lease on Detroit.

  • Arthur45||

    My favorite is the posturing by unions as the victims, when they killed the auto industry in their town and drained the city dry with their phony baloney jobs.

  • LifeStrategies||

    exactly!

  • Squirrel Hill||

    Here are 226 examples of Barack Obama’s lying, lawbreaking, corruption, cronyism, etc. http://danfromsquirrelhill.wor.....obama-226/

  • mdmsac||

    I'm a bankruptcy lawyer, but only Chs 7,11,13, so I'm no expert on municipal bankruptcy, but it is my understanding that the bankruptcy court would also have the power to modify existing contracts with current workers in addition to dealing with creditor claims. This may be the best option for solvency in the long run. Near-arbitrary classes of creditors can also be set up to give a haircut to the high-benefit pensioners without touching the lower-end pensioners.

  • hanekhw||

    All these retirees also had an obligation to Detroit. They should have lived within the city limits and taken an active interest in their communities if, for any other reason, that they had invested in and depended upon Detroit for their livelihoods and retirements. To use Detroit as some kind of cash cow, then bail at the first opportunity didn't work very well did it?

  • staceyshea40||

    my friend's sister-in-law makes $70/hour on the laptop. She has been out of work for 5 months but last month her check was $14048 just working on the laptop for a few hours. Read more on this web site.. www.Rush60.com

  • LifeStrategies||

    Could the fact that the City employees who negotiate generous retirement packages with their unions benefit when they themselves retire be anything to do with the serious City's financial problems?

    Naaw, couldn't be...

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement