What Judge Rhodes has done is not the end of the bankruptcy process. It is merely the beginning. But the process has been framed in a manner that runs the risk of undermining the city's long-term recovery by taking money away from the most vulnerable residents of Detroit. As Jordan Marks, executive director of the National Public Pension Coalition notes, "In the bankruptcy, the modest pensions of Detroit's firefighters, police officers, and other city employees could be all but wiped out, even as Wall Street banks continue to extract hundreds millions of dollars from the city's economy. This is a dark day for people of Detroit who worked hard, played by the rules, and are now at risk of losing everything."
By Tuesday afternoon, according to Reuters, the emergency manager, Kevin Orr, had "called on unions to help bridge gaps with the city on planned pension cuts."
There is no question that Detroit, like many American cities, faces fiscal challenges. But instead of assuring that those challenges are met in the most humane and functional manner, the city is being steered into a wrenching process of restructuring that -- by all appearances -- will be based on flawed math, flawed priorities and an exceptionally flawed understanding of how democracy is supposed to work.
In a groundbreaking new study of Detroit's finances, the think tank Demos explains that claims regarding Detroit's debts have been dramatically inflated to make a case that the city must go bankrupt. According to Demos, proponents of the bankruptcy move have manipulated the numbers by combining statewide and city debts. "Detroit's emergency manager, Kevyn Orr, asserts that the city is bankrupt because it has $18 billion in long-term debt. However, that figure is irrelevant to analysis of Detroit's insolvency and bankruptcy filing, highly inflated and, in large part, simply inaccurate," argues the Demos analysis, which was prepared former investment banker Wallace C. Turbeville. "In reality, the city needs to address its cash flow shortfall, which the emergency manager pegs at only $198 million, although that number too may be inflated because it is based on extraordinarily aggressive assumptions of the contributions the city needs to make to its pension funds."
By relying on what the Demos study identifies as "extraordinarily aggressive assumptions" -- and by accepting premises advanced by the same financial institutions that urged Detroit officials to make unwise financial choices -- the judge has shaped a bankruptcy process that errs on the side of helping Wall Street rather than the citizens of Detroit.
At the same time, the judge has empowered an emergency manager who has a track record of acting on those "simply inaccurate" premises, rather than the officials just chosen by Detroit voters to guide their city toward fiscal and social stability.
The judge's decision gives the essential authority to guide the city's affairs to Orr, the "emergency manager" selected by Republican Governor Rick Snyder, who in 2010 lost the city of Detroit by a 20-1 margin. Though barely 5 percent of Detroit voters thought Snyder should be calling any of the shots regarding their state and city, he is now -- via his emergency manager, with the approval of the bankruptcy judge he asked to intervene -- calling the shots.
And what of the new mayor, Mike Duggan, a veteran county official and highly regarded manager who won 55 percent of the vote in last month's election?
"The only authority I'm going to have is the authority I can convince the governor and emergency manager to assign me," Duggan, a Democrat, told reporters in November. "I'm attempting to persuade them. We'll see."
Duggan says he's "going to do everything I can to advocate on behalf of Detroit's future in this process. We need to make sure the retirees are treated fairly on the pensions they earned." But, despite the fact that he will be the city's mayor, he does not have the final say even on questions of whether the city will keep commitments to retired firefighters and police officers.
This is not what democracy looks like.
This is not the will of the people of Detroit.
We know that because the emergency manager power that Snyder has used to steer the city into bankruptcy, and that the governor and his appointee will now use to guide the city's affairs, was rejected by the city's voters in 2012.
Snyder had to develop the new emergency manager law after a previous version of the legislation -- which he had used to take over smaller cities -- was overturned by Michigan voters in a statewide referendum. In Detroit, 82 percent of voters said they did not want the emergency manager law. But they got it anyway. So it is that, while Mayor Duggan may be assigned some responsibilities, he will not have the clearly defined authority that an elected mayor should have to protect pensions, preserve labor agreements and set priorities when it comes to the delivery of basic services.