July 19 2013

A Mess so Bad that Even the Obama Administration Doesn't Want a Bailout!

Charlotte Hays

Detroit’s bankruptcy filing—the largest municipal bankruptcy in American history—should strike fear into all our hearts. This is what comes of living beyond your means.

Detroit, once a bustling automobile city, is now $19 billion in the hole. The situation is so bad in Detroit, as Walter Russell Mead notes, that not even the Obama administration wants to give it a bailout! That's bad!

Mead writes:

Buried in the middle of the report [on Detroit’s bankruptcy] is a telling climax to this sorry tragedy:

Any hope of a federal bailout to avert bankruptcy fizzled last week after Mr. Orr spoke with the White House, including Obama confidante Valerie Jarrett, according to city and White House officials.

This is where blue governance has brought Detroit in the end: not even a liberal Democratic administration will step in to save the pensions of thousands of public workers and African Americans, condemning countless innocents to having their pensions and health benefits gutted in bankruptcy court.

Blue model defenders will point to the cruel exodus of General Motors, the unjust outsourcing of American manufacturing, and the general unfairness of life in the big city as the culprits in the slaying of Detroit. But these champions of the marginalized should keep a few facts in mind.

Here are some interersting facts: Detroit has been spending $100 million more than it takes in for the last sixty years. Much of that consists of health benefits and lavish retirement packages for city workers. Because the city was promising more than it could afford, these pensioners will now end up with about ten percent of what they expected.

By the way, Mr. Mead’s term “blue governance” is painfully apt: Detroit is what happens when public officials make unsustainable deals. As for the officials, they must believe that you can always squeeze just a little more money out of taxpayers to buy a little bit more loyalty from the unions or beneficiaries of taxpayer largess. Detroit proves the fallacy of this blue sky reasoning.

Mead writes:

Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long. The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.

The Wall Street Journal has an interesting piece on how some Detroit citizens and businesses are responding with a “dose of optimism.” So optimism is generally a good thing. But I am wondering if, in this case, a dose or pessimism wouldn't be healthier. This optimism may be just more of Detroit’s habitual whistling past reality.

Did you feel a lump in your stomach when you read about pensioners who’ll now get a tenth of what they had been led to expect? I did, too. I felt bad for them and wondered how many more people will face similar situations because of improvident public promises. Note to potential retirees: a realistic, affordable retirement package is better than ten percent of lavish promises made to mollify union bosses.

Detroit's voters didn’t attempt to elect politicians who would stand up to those who brought this tragedy on the city. Douglas McIntyre speaks the truth today in USA Today:

If the residents of the city of Detroit want to blame any person or organization for its Chapter 9 filing, they only need to look as far as the unions that controlled labor there and the politicians who ran it over the past four decades. Detroit earned its bankruptcy the easy way — through greed, the desire for political power and poor planning.

Next time there is a debate on spending, which our president says isn't a problem, on Capitol Hill, this should be our cry: Remember Detroit!

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