The Real Story Behind the Detroit Pension Fight and What it Means to America's Future
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When the city of Detroit filed for Chapter 9 bankruptcy in July 2013, America sucked in a collective gasp. This was the largest municipal bankruptcy filing in U.S. history by the amount of debt ($18–20 billion), and Detroit was the largest city ever to officially go bust.
A few months before the bankruptcy, the state of Michigan appointed an emergency manager, Kevyn Orr, to sort things out in Motor City. Orr was given extraordinary powers to rewrite contracts and liquidate some of the city’s most valuable assets. The burning question: Who would be responsible for the enormous debt? Soon enough it became clear that the folks who would be asked to take the hit were not those who created the problems. Just as in so many other parts of the world in the wake of the 2007-'08 financial meltdown, innocent people who did nothing but get up every day and go to work would be asked to pay the bill.
Last week, Orr blasted retirees for resisting his plan to drastically cut their pensions — 26 percent for general retirees and 6 percent for police and fire, and even more, 34 percent and 10 percent, respectively, if they do not agree quickly.
The fight is on. Other cities and states are paying close attention to what goes down in Detroit. But there’s something much bigger than bankruptcy going on, and it concerns the future of American society. The answer to the question of who we defend and who we punish when the going gets tough is being written into our future.
If you think of Detroit as far away and unrelated to life in your hometown, think again. The next victim could be your town, your community, your retirement.
We Are All Detroit
More than 50 percent of the children in Detroit live in poverty. Property crime is twice the American average, violent crime three times greater. The statistics are shocking, but they only whisper the misery endured by the people who call this city — once among America’s crown jewels, and believe it or not, known as the “ City of Champions” — their home.
Robert Johnson, executive director of the Institute of New Economic Thinking, is an economist who has worked closely with the likes of Joseph Stiglitz and has served in Washington as chief economist of the U.S. Senate Banking Committee under William Proxmire.
Johnson, who was my colleague when I served as Media Fellow at the Roosevelt Institute from 2009-2011, is an economist who believes that his work is about more than abstract mathematical models. It’s about human experience — the vivid hopes and challenges of ordinary people. When I asked Johnson how he came to think that way, a wistful smile crosses his lips: “I grew up in Detroit.”
I sat down with Johnson in his New York City home, where his voice thickened with sorrow as he described the pain of looking on as the thriving city of his boyhood sank into an apocalyptic wasteland of crumbling buildings and bewildered people who mostly played by the rules but saw their lives "compressed and crushed."
He recalled for me the Detroit of the 1960s, a great engine of the American economy and the cradle of many of the country’s most illustrious political figures, like Representative John Dingell (whose district started out in Detroit and gradually moved to the western suburbs through redistricting). It was also a cauldron in which the great currents of America’s deepest conflict swirled: the deadly race riots of 1967, the labor wrangling of the UAW and the Teamsters, the turmoil of the Vietnam War, and the drugs that flooded the city in the wake of deindustrialization.