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OpEdNews Op Eds    H3'ed 7/23/13

A Federal Bailout For Detroit's Pensions?

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Here's an economic free-association test. Read the following sentence:

"The Federal government should bail out Detroit city worker's pensions so that retirees can be paid in full."

Some people will approve of the idea. But others will be shocked or angry. They'll conjure up images of prosperous retirees making a fortune at everyone else's expense. If you were one of them, you've been exposed to some infectious myths being spread in the media and by politicians.

Think again: Does $1,500 a month after hauling garbage cans your whole adult life really sound like a fortune?

Detroit's pension plans may not need a Federal bailout. The city may have better options, especially if the politically-motivated machinations of its unelected leaders can be set aside. But morally and practically, there's no reason why a rescue of this kind -- or a Federal guarantee behind the city's pension plan -- shouldn't be on the table. Here's why.

"Detroit" isn't declaring bankruptcy

"Detroit" isn't trying to file for bankruptcy (a process currently being challenged in court). An unelected official who was given the power to overrule Detroit's elected government through a right-wing state law is filing for bankruptcy. That's not a democratic process, and it doesn't represent the people of Detroit.

The law which ended Detroit's self-governance was promoted heavily by groups like ALEC and funders like the Koch Brothers. Its purpose is to reconfigure our democracy and our economy so that they serve the wealthy and powerful even more efficiently.

The city's corporate overseer is focusing undue attention on pensions for very political reasons. A nationwide agenda has targeted the retirement security of working Americans -- especially pensions, Social Security, and Medicare. The bankruptcy filing in Detroit, which targets that city's union pensions, is part of this broader agenda.

Pensions aren't the problem

Unelected city overseer Kevyn Orr quickly zeroed in on pensions, which have also been the focus of much of the press coverage and political debate. But Orr's own numbers put the lie to the idea that pensions are a major problem.

Orr claims that Detroit's ultimate debt obligations will amount to between $18 and $22 million. But his own fiscal report says right up front on page 3 that the total unfunded portion of Detroit's pension obligation comes to only $600 million. That's less than 3 percent of Orr's higher figure. Even the most aggressive recalculation can't turn it into a significant portion of Detroit's obligations.

Behind all the talk about unfunded obligations lies the real goal: They want to cut the funded obligations. But even that figure only comes to about one-sixth of Detroit's total obligations. So why all the focus on pensions?

They want to set a precedent

Because Detroit's being used by the austerity economics crowd. We've already seen the needless public spectacle being enacted by Orr and his team as they publicly contemplate selling off the city's property, large and small. (See "The Looting of Detroit.")

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Host of 'The Breakdown,' Writer, and Senior Fellow, Campaign for America's Future

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