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Why Elders Need to Pay Attention to Detroit's Bankruptcy

On 18 July, a Chapter 9 bankruptcy petition was filed for the city of Detroit, Michigan – the largest city ever to find itself in such a predicament. (Chapter 9 is a special kind of bankruptcy reserved only for municipalities. You don't need to know more than that for this post – I won't be getting into the legal weeds.)

As Huffington Post and other news organizations reported,

”...pensions and health benefits for the city's 9,500 current employees and 21,000 retired workers account for $9.2 billion of the city's total debt [of] $18 billion. The city also owes money on more $1 billion in bonds it took out to pay into its pension when it could not afford the money.”

This is not the kind of news story I usually pay close attention to. I don't live in Detroit and it's bound to get – well, weedy (see first paragraph). But even a cursory reading raised one, big, fat, red flag for me:

What will happen to the pensions of Detroit's current and future retirees?

Here is how it is being answered:

”Kevyn D. Orr, the city’s emergency manager, has called for 'significant cuts' to the pensions of current retirees...”

But you knew that was coming, didn't you? Even if you have been following the news about Detroit's bankruptcy only vaguely, you know certain people want to fix every fiscal difficulty including Detroit on the backs of the poor and old people. It's always that way.

As to amounts of “significant cuts,” Steve Rattner in The New York Times tells a terrifying story:

“The city has suggested that it cut [pensions and health care] by 90 percent. Although retirees don’t have a lot of legal rights in the bankruptcy process, it is difficult to imagine — on either a human or a political level — an exit from bankruptcy that would include reductions of this magnitude.”

Talk about understatement. And remember, too, these pensions are all the retired police, firefighters and others of Detroit have – they don't get Social Security - and the average annual pension for city workers in Detroit is under $19,000.

So the city is suggesting that people currently living on $19,000 a year, do so in the future on $1900 a year. This is cruelty as extreme as I have ever heard. From another Times story:

“Retired city workers, police officers and 911 operators said in interviews that the promise of reliable retirement income had helped draw them to work for the City of Detroit in the first place, even if they sometimes had to accept smaller salaries or work nights or weekends.

“'Does Detroit have a problem?' asked William Shine, 76, a retired police sergeant. 'Absolutely. Did I create it? I don’t think so. They made me some promises, and I made them some promises. I kept my promises. They’re not going to keep theirs.'”

Cast your mind back to 2008, following the horrendous crash of our entire economy. Recall, if you will, that in the city of Detroit, the federal government bailed out Chrysler and General Motors for billions and billions of dollars and today, sales are solid. The companies are back on the feet.

Yet, yesterday afternoon following the president's speech in Illinois, a White House spokesperson apparently dismissed the idea of a federal bailout for retirees in Detroit. The difficulties there, the man said, are between that city and its creditors.

Really? If it was important to save two car companies, it is vital to help workers whose retired compensation is modest and who had nothing to do with Detroit's failure. It would be morally reprehensible to not bail out the city retirees.

So you don't live in Detroit and you think this has nothing to do with you. Think again. The forces that want to take 90 percent of Detroit retirees income are gunning for your Social Security too.

Richard Eskow of Campaign for America's Future lays it out, saying the suggestion for pension cuts “has all the markings of larger game.”

”The heavy doses of symbolism in the sell-offs and pension cuts serve a number of purposes,” he continues, “and one of the biggest is to reinforce the idea that the United States can no longer afford the financial security of its middle class.

“Next stop, Social Security. The same myths used to push pension fear – changing demographics and worker-to-retiree ratios, 'greedy geezers' – will have been subliminally 'verified' by these pension cuts.

“That opens a door that should remain closed, for sound economic reasons as well as ones of basic fairness.”

Which is why you and I need to pay attention to what is happening with pensions in Detroit and do what we can to resist those unconscionable cuts. We are all at risk.

At The Elder Storytelling Place today, Marcy Belson: The First Camping Trip


You are absolutely stone-cold right on this one, Ronnie. Don't think the vultures aren't watching this one closely. If Detroit gets away with stabbing its pensioners, other cities and states will follow.

Having grown up 100 miles south of Motown the continued woes have always captured my attention.
Major supermarkets abandoned the city limits years ago and from what I make of it the flight of residents will continue.
With few paying property taxes funds in the city till means scattered funding to perform basic services. Each administration was aware pensions would be jeopardized yet took no action.
Now we have this complete meltdown. Should the Feds step in there will be planning by other municipalities to just let things ride and let others come to their rescue. Bad
I feel for them but failure to plan and not spiral into such a mess could have been avoided.

What a crime against our first responders and civil servants!! Yes, I agree it does not augur well for those of us either now retired or (like me) about to retire. My tiny little annuity is entirely dependent upon my late husband's social security for me to live. I have no idea what I would do if the vultures take that away - feeling powerless.

Stay informed and VOTE! That is what can be done by "We The People" at every opportunity.

Also be frugal and SAVE! Stay healthy, active, and stay home!

Stay informed and VOTE!

I am sure that many will say that government employees don't do any work anyway, so it is okay that those employees could lose their retirement. And that may be true of some government employees, but certainly not all. Many of those folks could earn more in private industry, but stay because they love their work and have a desire to help the community.
Remember, those jobs are there because we the voters decided we needed or wanted some government service. They have earned their retirement and we will certainly discourage good employees if they feel that they might not get their earned retirement. But maybe that is the plan - less government like Detroit.

Sometimes I feel like Chicken Little and the sky is really falling on our great nation. The power mad 1% are now in charge and we are falling into a Plutocracy. The little people really don't matter any more and the more vulnerable you are the more they stab you in the back.

I am still fighting with letters and petitions to my representatives, but it is getting harder.

I don’t think, as courier suggested that all of this can be laid at the feet of the city fathers for their “failure to plan”. The auto industry that made Detroit what it was failed to plan properly themselves by ignoring the foreign competition. They went belly up pretty much because they created a demand for gas guzzlers and ignored smaller, gas saving vehicles. When the oil prices skyrocketed Americans rightfully bailed on the gas guzzlers and bought the smaller, more economic vehicles which Toyota, Honda and others had a ready market for.

So yes, because we bailed out the auto makers who ignored the writing on the wall, we should be willing to bail out those pension plans at some level so that greater poverty doesn’t totally destroy Motown. Some of that bail out money should come out of the profits of the industry that caused this economic collapse not only for Detroit but other markets around the country that supply and service the auto makers.

The Michigan State Constitution says that benefits are to be preserved. So we have a contract basically saying retirees, pensioners, will keep their benefits while banks and bond holders will get pennies on the dollar. Do you think that contract will be honored? Who's been winning so far in the class wars?

I am afraid that constitutions (state and federal) and most contracts are so much toilet paper in today's economy/society. They are enforceable only if the powerful want them to be. Hence, executives of bankrupt companies are happy to scrap all labor contracts but insist that their own contracts be honored. Our financiers would love to honor Social Security so long as it is privatized and they can skim the better part of it into their own pockets. Sometimes paranoia and cynicism are thoroughly justified.

I keep saying--and will say again--it's all about GREED! Somehow We the People were asleep at the wheel and allowed a vicious, vocal right wing minority co-opt our government. The Mitt Romneys and Paul Ryans of the world have gotten (or inherited) theirs and regard the rest of us as entirely disposable--cruel, inhumane and short-sighted as that is.

Morality aside, who will be left to buy goods and services when here is no middle or working class left in this country? Unfortunately, our kids and grandkids may find out first-hand.

This isn't the country I grew up in. We used to look out for each other, and for the most part we elected politicians who (more or less) did, too. No more. . .

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