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Detroit bankruptcy: undemocratic, fiscally imprudent

Counting the Cost

Julianne Malveaux | 10/17/2013, midnight
You don’t have to be from Detroit to be angry at what is happening there. And you don’t have to ...

In response to this manufactured disaster, it is not unreasonable for the federal and state governments to provide assistance to rebuild Detroit. Just as the automakers argued that their bankruptcy would eliminate jobs, so might Detroit argue that its bankruptcy will not only disrupt Michigan’s economy, but also the nation’s. The effort to cut pensions, and thus spending, has a negative effect on the overall economy. Restructuring healthcare obligations to the public sector (Obamacare, Medicare) represents a federal subsidy. While it may be unavoidable that future pensioners face a different set restructuring of benefits and healthcare, it breaks a covenant when current retirees find the conditions of their retirement packages altered.

From a distance, many will look askance at Detroit; it’s alleged “mismanagement” and a series of scandals that have tarnished the city’s image. Tarnished image or not, pension cuts hurt the most vulnerable. In Detroit, the average pensioner receives just $1,900 a month, and current pension costs represent just 4 percent of total revenues. No one who retired from service to the city of Detroit is eligible for Social Security, so pensions and savings represent the sole source for their support.

This isn’t just happening in Detroit. As many as 100 cities are looking to see if Detroit’s possible pension-busting is something they can do in their own states.

Gov. Snyder will argue that he appointed an emergency manager because the city wouldn’t manage itself. He won’t disclose that the state of Michigan owes Detroit money, and that his emergency manager, with unlimited power, has spent more than $100 million “studying” the Detroit fiscal situation.

Detroit did not request an emergency manager. The governor imposed it on them. Detroit did not file for bankruptcy, the emergency manager did. The state government takeover of Detroit is not a Detroit issue. If Gov. Snyder gets his way, he will set a precedent for any ailing city to be taken over and to have its voting rights, and fiscal discretion suspended.

The people of Detroit have not been allowed to weigh in on the future of their city, and those they elected have been placed at the periphery of negotiations. The move toward bankruptcy is both undemocratic and fiscally imprudent. And it is part of a trend that may hit your financially strapped city. Lift your voice with the people of Detroit to stop this ill-advised bankruptcy. Go to change.org, and use the search engine to find Detroit bankruptcy. The petition, sponsored by the Rainbow/PUSH Coalition, is a cry for justice. Please sign.

Julianne Malveaux is a D.C.-based economist and writer and president emerita of Bennett College for Women.

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