Billionaire's Detroit Buying Spree Starts to Spread. Detroit, and the Bankruptcy of America's Social Contract) One way to view Detroit’s bankruptcy — the largest bankruptcy of any American city — is as a failure of political negotiations over how financial sacrifices should be divided among the city’s creditors, city workers, and municipal retirees — requiring a court to decide instead.
It could also be seen as the inevitable culmination of decades of union agreements offering unaffordable pension and health benefits to city workers. But there’s a more basic story here, and it’s being replicated across America: Americans are segregating by income more than ever before. Forty years ago, most cities (including Detroit) had a mixture of wealthy, middle-class, and poor residents. The geo-political divide has become so palpable that being wealthy in America today means not having to come across anyone who isn’t. Detroit is a devastatingly poor, mostly black, increasingly abandoned island in the midst of a sea of comparative affluence that’s mostly white. How Detroit was laid low. On Friday, when President Obama finally addressed the Trayvon Martin verdict, his remarks were greeted with a chorus of amens, and rightly so.
Still, I couldn't help thinking about the race speech he wasn't making. Detroit, America's largest majority-black city since the 1970s, had declared bankruptcy less than 24 hours earlier. It was apparently easier to address one tragic death than to honestly grapple with the misdeeds that had brought low one of the most important cities of the 20th century. Those misdeeds indisputably include a history of abandonment, neglect, isolation and outright hostility born directly of the racial tensions that have historically divided Detroit from its predominantly white suburbs, and from the rest of the state of Michigan.
Previously, Orr had been one of the lead attorneys working on Chrysler's managed bankruptcy, and the hope was that he'd bring the same skills to fixing the city. Detroit holds approximately $18bn worth of long-term debt. Detroit’s Bankruptcy Reveals Dysfunction Common in Cities. No city was hit as hard by the recession as Detroit, America’s one-time industrial capital whose decades-long decline cut its population in half and left $18 billion in debt it can’t afford to pay.
Even so, the pressures that pushed Detroit into the largest municipal bankruptcy in U.S. history are playing out on a smaller scale around the nation. Diminished tax revenue and rising labor costs have left four cities insolvent since 2007. Service cuts were made by others such as Detroit, where street lights are dark and police are scarce. “None of the other cities are as far along, but there are dozens, if not hundreds of cities that have similar issues,” said Alan Mallach, a senior fellow at the Brookings Institution, a public-policy research organization in Washington.
“Every other industrial city has problems that could send them down the same path.” On July 18, Detroit sought court protection, a step Emergency Manager Kevyn Orr said... Close Open Photographer: Jeff Kowalsky/Bloomberg. NYT: Krugman Detroit, the New Greece. StrikeDebt : Orange County, CA declared... Sets stage for national assault on public-sector pensions.
By Jerry White 22 July 2013 Last week’s bankruptcy filing by the city of Detroit is being used as a test case for a much wider assault on the pensions and health benefits of millions of state and municipal employees around the country.
The city’s emergency manager, Kevyn Orr, Michigan’s Republican governor, Rick Snyder, and Detroit’s Democratic mayor, David Bing, made this clear during appearances on nationally televised news talk shows Sunday. On Fox News, Orr acknowledged that the city’s 31,000 current and retired city workers would see “some adjustments” to their benefits, declaring that federal bankruptcy laws would supersede Michigan’s constitutional protections against pension reductions. Orr is pushing for brutal cuts in pensions and benefits. He wants to pay as little as 10 cents on every dollar of the $3.5 billion in unfunded pension obligations. Mayor Bing, who has cut 20 percent of the municipal workforce since taking office in 2009, appeared on ABC’s “This Week” program. Detroit: The Wet Dream of Wall Street. Get Politics Newsletters: On July 18, Detroit became the largest city to declare bankruptcy in American history.
Given the perpetual decline in its manufacturing jobs, population, and tax revenues, the announcement was hardly shocking. But it was an ominous harbinger for other cash-strapped cities with large unfunded public sector pension and healthcare liabilities, or legacy costs. The euphemism of 'legacy costs' will be heard more and more in the coming weeks, as municipal and state legislators try to shift the conversation from one of human sacrifice to one of sound business judgment.
Many decry the bad governance of Detroit and delight in its demise, but malfeasance and stupidity are not exclusive to the Motor City. The looming time-bombs of unfunded and under-funded pension liabilities threaten to shred the very fabric of American society. It is inconceivable that Republicans and Democrats will magically unite to come to Detroit's rescue.