It would be more accurate to say that Detroit is the victim dishonest politicians colluding with banks and other corporate predators, and we are now witnessing the late stages of an extended municipal lynching that is the natural expression of contemporary American capitalism. That this is essentially true as an overview, and in most of its details, is supported in the question and answer format that follows.
But first, here's the sanitized frame for the consensus narrative reliably delivered by American pack journalism -- in this instance, the New York Times of December 4, under the headline "Detroit Ruling Lifts A Shield on Pensions" (duplicated verbatim in the Boston Globe and Houston Chronicle):
"In a ruling that could reverberate far beyond Detroit, a federal judge held on Tuesday that this battered city could formally enter bankruptcy and asserted that Detroit's obligation to pay pensions in full was not inviolable."
You would not know from coverage by the Times and most other outlets that this and other issues involving Detroit are under widespread court challenge, or that the current situation has been created by officials taking actions that would, in ordinary circumstances, be considered contempt of court.
So what's wrong with the Times' summary here?
Speculation is hard to criticize, since any ruling "could reverberate far beyond Detroit," but most probably won't. Another, equally valid speculation here would be that the judge's ruling raises the stakes in an already bitter power struggle over pensions, ignores state litigation that would bar the bankruptcy filing, and supports the one-man rule in Detroit, all of which portend a long legal battle unlikely to be resolved until it reaches the United States Supreme Court.
The Times' framing implies a false dichotomy, a polarized fight between the city and the pension funds. That is only one axis in a much more complicated struggle in which other powerful players include the Republican governor, a Republican-dominated state legislature, an unelected city czar with near-dictatorial power, and major banks (at least one of which was a client of the czar's law firm). The city (insofar as that means the elected mayor and city council), can only watch from the sidelines as others compete to pick it clean. Under state law, the Mayor and City Council lost their salaries upon appointment of the city czar (he later reinstates their pay in full in his first official act).
Detroit's problems have evolved downward for more than half a century, as it went from America's wealthiest city to perhaps its poorest. The city's decline was accelerated by events way beyond its control, such as the collapse of the auto industry or the banking-induced financial collapse of 2008. The automakers and the banks benefitted from federal bailouts that have been unavailable to the city. In July, as Detroit headed toward bankruptcy, the Obama White House openly opposed any bailout (or much other help) for the city with a roughly 80% African-American population. The rest of Michigan is about 80% white.
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