### Author:  [@Leaffan](https://boards.straightdope.com/u/Leaffan)
#### Post date: [July 20, 2013, 4:59pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/81 "2013-07-20T16:59:47Z")
> [@adaher](#):
>
> If there’s no money, there’s no money. Canada isn’t immune to financial realities either, which is why Canada switched from being profligate in the 70s and 80s into probably the healthiest country on the planet in terms of fiscal health.
Well, we’re still running budget deficits here but we’re doing OK, I guess. There are plenty of healthier countries out there.
---
### Author:  [@Catamount](https://boards.straightdope.com/u/Catamount)
#### Post date: [July 20, 2013, 5:25pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/82 "2013-07-20T17:25:28Z")
> [@smiling\_bandit](#):
>
> Let me put it this way: While I’m sure there are lots of lily-pure and blameless people who may get the shaft, _there is no longer a non-shafting option_. More than likely, everybody is going to get shafted. And frankly, the level of corruption, inefficiency, and generally-don’t-give-a-damnitude seems to extend to a lot of the people who, year after year, shoved Detroit into the corner. They were content as long as they got (or were going to get) theirs.
> \
I have nothing to add except to say that the way you phrased this whole post is a thing of beauty to be enjoyed forever.
---
### Author:  [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)
#### Post date: [July 20, 2013, 10:21pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/83 "2013-07-20T22:21:22Z")
> [@elbows](#):
>
> I have to say, when I first read about this, I was somewhat taken aback that it was legal to snatch people’s pensions? (I’m pretty sure that won’t fly in Canada, no matter how much hot air you deploy!)
>
> So they have carefully planned a retirement within their means and, BAM!, not any more.
>
> I think they should consider switching elected officials to being unsalaried volunteers. Maybe you’ll get people really interested in fixing the fundamentals?
My understanding of how pensions work is like this (and it’s far from complete, so please, anyone, correct me if I get it wrong) - the money for pensions doesn’t just go into a pension account and sit there waiting for people to turn 65. The money goes into the pension accounts and is used for things like buying stocks and investing in other things. A very interesting case is the [Ontario Teacher’s Pension Plan](http://www.otpp.com/), which owns, among many other things, Cadillac Fairview, a company that owns many malls in Canada.
So if your pension accounts are not properly managed (or the holders of the pension accounts are in financial trouble), the money can evaporate before people turn 65 and start withdrawing from it.
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### Author:  [@adaher](https://boards.straightdope.com/u/adaher)
#### Post date: [July 21, 2013, 1:10am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/84 "2013-07-21T01:10:38Z")
> [@Leaffan](#):
>
> Well, we’re still running budget deficits here but we’re doing OK, I guess. There are plenty of healthier countries out there.
Those many years of surplus brought your debt to GDP ratio down to 30% or so. I don’t think any country is in that good a financial position.
Hey, can we have some money?
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### Author:  [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)
#### Post date: [July 21, 2013, 6:19pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/85 "2013-07-21T18:19:17Z")
> [@adaher](#):
>
> Those many years of surplus brought your debt to GDP ratio down to 30% or so. I don’t think any country is in that good a financial position.
>
> Hey, can we have some money?
We already give you guys all kinds of money - tourist by tourist, snowbird by snowbird. 😃
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### Author:  [@elbows](https://boards.straightdope.com/u/elbows)
#### Post date: [July 21, 2013, 8:18pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/86 "2013-07-21T20:18:15Z")
I thought they were both insured and protected (in the event of a bankruptcy, merger, sale, corporate raiders!) by law.
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### Author:  [@friedo](https://boards.straightdope.com/u/friedo)
#### Post date: [July 21, 2013, 9:35pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/87 "2013-07-21T21:35:57Z")
Private pension plans are insured by the [Pension Benefit Guaranty Corporation](http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation).
Public sector pensions may or may not be insured by the state. Detroit’s pensions were so absurdly underfunded (and over-inflated) that they probably never had a chance.
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### Author:  [@Fir\_na\_tine](https://boards.straightdope.com/u/Fir_na_tine)
#### Post date: [July 21, 2013, 9:54pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/88 "2013-07-21T21:54:37Z")
> [@Cat\_Whisperer](#):
>
> My understanding of how pensions work is like this (and it’s far from complete, so please, anyone, correct me if I get it wrong) - the money for pensions doesn’t just go into a pension account and sit there waiting for people to turn 65. The money goes into the pension accounts and is used for things like buying stocks and investing in other things. .
You’re assuming in this example that the pension account was actually funded each year. From what I’ve read, promises were made to the various unions but no monies (or insufficient monies) were ever actually paid into the pension accounts. Like a lot of big California cities, Detroit is in the position of being required to pay a pension today that was promised 20 years ago and no one set aside the funds.
---
### Author:  [@adaher](https://boards.straightdope.com/u/adaher)
#### Post date: [July 21, 2013, 10:45pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/89 "2013-07-21T22:45:16Z")
And the unions were not ignorant of the fact that the pension promise was an obligation on future residents. That’s one reason unions forego money in the present: it’s politically easier to promise money in the future, when you don’t have to raise taxes right now to fund it. Then when the day of reckoning comes, voters are helpless because they are legally obligated to pay something they had no say in.
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### Author:  [@Diceman](https://boards.straightdope.com/u/Diceman)
#### Post date: [July 22, 2013, 2:13am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/90 "2013-07-22T02:13:39Z")
> [@Terr](#):
>
> Well, the way it was explained on NPR (I think that’s what I was listening to), the bankruptcy application was very hastily submitted yesterday _because_ there was a big hearing today in lawsuits from some pensioners and pension funds where the judge was asked to order the manager not to submit bankruptcy papers. The manager and the governor did an end run and filed it literally hours before the hearing, and the chapter 9 bankruptcy ends any and all litigation against the city. The judge got pissed, and issued the ruling.
>
> Now there is a question whether a state judge can order state officials to withdraw federal bankruptcy papers 🙂
You need to remember that Ingam County\* judges have a loooooong history of basically pulling things out of their asses to aid the unions. They also have a loooooong history of having their decisions thrown out by the state court of appeals. I expect this will amount to little more than a brief delay. Nobody seriously thinks that Detroit _isn’t_ broke. And like someone else already mentioned, the pensioners are already screwed; there literally isn’t any option available that doesn’t screw them. If the bankruptcy court doesn’t slash their pensions, then the city will simply default and the checks will bounce.
- Where the state capitol is located.
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### Author:  [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)
#### Post date: [July 22, 2013, 2:27am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/91 "2013-07-22T02:27:45Z")
Looking at the situation from a distance, I don’t think Detroit can solve its own problems at this point. There just aren’t enough resources left in the city to finance the amount of recovery the city needs.
I don’t think cutting off the relatively prosperous sections of the city from the most desolate areas would work either. Leaving aside the moral issues of abandoning some city residents to their fate, the rest of the city needs to remember that those people aren’t going to quietly disappear. The central core of Detroit isn’t going to be able to survive if it’s surrounded by virtual warzones.
So I think the only solution is intervention from a higher power. God having apparently given up on Detroit, I’d recommend Lansing. The state government needs to step in and take over. The municipal government should be dissolved and the basic functions of governing should be performed by state employees. This will allow the recovery of the city to be funded by the rest of the state. Once the problems have been shrunk down to a manageable size, a new city government can be established.
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### Author:  [@jz78817](https://boards.straightdope.com/u/jz78817)
#### Post date: [July 22, 2013, 2:48am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/92 "2013-07-22T02:48:32Z")
> [@Little\_Nemo](#):
>
> Looking at the situation from a distance, I don’t think Detroit can solve its own problems at this point. There just aren’t enough resources left in the city to finance the amount of recovery the city needs.
>
> I don’t think cutting off the relatively prosperous sections of the city from the most desolate areas would work either. Leaving aside the moral issues of abandoning some city residents to their fate, the rest of the city needs to remember that those people aren’t going to quietly disappear. The central core of Detroit isn’t going to be able to survive if it’s surrounded by virtual warzones.
>
> So I think the only solution is intervention from a higher power. God having apparently given up on Detroit, I’d recommend Lansing. The state government needs to step in and take over. The municipal government should be dissolved and the basic functions of governing should be performed by state employees. This will allow the recovery of the city to be funded by the rest of the state. Once the problems have been shrunk down to a manageable size, a new city government can be established.
Thank you for your input, worthless as it is.
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### Author:  [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)
#### Post date: [July 22, 2013, 7:02am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/93 "2013-07-22T07:02:24Z")
> [@jz78817](#):
>
> Thank you for your input, worthless as it is.
Reading this thread, all you seem to be doing is repeatedly saying Detroit has a problem.
In every bad situation there are some people who say “We have a problem” and some people who say “We have a possible solution to the problem”.
Which people do you think are worth more?
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### Author:  [@bob\_2](https://boards.straightdope.com/u/bob_2)
#### Post date: [July 22, 2013, 8:13am UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/94 "2013-07-22T08:13:24Z")
Some commentators from the right wing press in this country see Detroit as a metaphor for the whole of the USA.
> [@](#):
>
> Mark Steyn in the National Review:
> Like Detroit, America has unfunded liabilities, to the tune of $220 trillion, according to the economist Laurence Kotlikoff. Like Detroit, it’s cosseting the government class and expanding the dependency class, to the point where its bipartisan “immigration reform” actively recruits 50–60 million low-skilled chain migrants. Like Detroit, America’s governing institutions are increasingly the corrupt enforcers of a one-party state — the IRS and Eric Holder’s amusingly misnamed Department of Justice being only the most obvious examples. Like Detroit, America is bifurcating into the class of “community organizers” and the unfortunate denizens of the communities so organized.
>
> Oh dear. No wonder the president would rather talk about Trayvon Martin. If you want to see Obamanomics taken to its conclusion, look at Starnesville. And tremble.
This quote too:
> [@](#):
>
> A few houses still stood within the skeleton of what had once been an industrial town. Everything that could move, had moved away; but some human beings had remained.
>
> The empty structures were vertical rubble; they had been eaten, not by time, but by men: boards torn out at random, missing patches of roofs, holes left in gutted cellars. It looked as if blind hands had seized whatever fitted the need of the moment, with no concept of remaining in existence the next morning.
>
> The inhabited houses were scattered at random among the ruins; the smoke of their chimneys was the only movement visible in town. A shell of concrete, which had been a schoolhouse, stood on the outskirts; it looked like a skull, with the empty sockets of glassless windows, with a few strands of hair still clinging to it, in the shape of broken wires.
The latter quote is not contemporary but from the uncannily prophetic description of Starnesville, a Mid-Western town in Ayn Rand’s dystopian novel, Atlas Shrugged. Starnesville had been home to the great Twentieth Century Motor Company, but declined as a result of socialism: Written in 1957.
---
### Author:  [@jz78817](https://boards.straightdope.com/u/jz78817)
#### Post date: [July 22, 2013, 2:03pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/95 "2013-07-22T14:03:20Z")
> [@Little\_Nemo](#):
>
> Reading this thread, all you seem to be doing is repeatedly saying Detroit has a problem.
>
> In every bad situation there are some people who say “We have a problem” and some people who say “We have a possible solution to the problem”.
>
> Which people do you think are worth more?
sorry for the harshness, but I _don’t see a good solution._ or, as has been posted already, there is no “non-shafting” option. There are strong parallels between where Detroit is now, and where GM and Chrysler were a few years ago. In all cases, what killed them was the fact that 50 years ago, they sold off their futures in order to live large in the present, and kicked the problem down the road. GM and Chrysler are still here, but they’re nothing like the companies they used to be and a lot of entities got shafted in their BK proceedings.
the big problem (in my eye) is that even if Detroit can shuck off a lot of their debt obligations that are crushing them, they still won’t have much money coming in to fix anything. it’s still a city sized for 2 million people, with only a third of that still living there.
---
### Author:  [@Diceman](https://boards.straightdope.com/u/Diceman)
#### Post date: [July 22, 2013, 5:08pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/96 "2013-07-22T17:08:36Z")
> [@Little\_Nemo](#):
>
> So I think the only solution is intervention from a higher power. God having apparently given up on Detroit, I’d recommend Lansing. The state government needs to step in and take over. The municipal government should be dissolved and the basic functions of governing should be performed by state employees. This will allow the recovery of the city to be funded by the rest of the state. Once the problems have been shrunk down to a manageable size, a new city government can be established.
Well, if the circuit court [del]morons[/del] judges succeed in preventing Detroit from filing for bankruptcy, this might well be the only option left. It’s not possible to preserve the status quo, and a bailout will only kick the can down the road a bit farther. If bankruptcy is taken off the table, then the only other scenario is that Detroit just goes completely defunct, and the state has to step in to provide essential services.
---
### Author:  [@wolfman](https://boards.straightdope.com/u/wolfman)
#### Post date: [July 22, 2013, 5:13pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/97 "2013-07-22T17:13:31Z")
> [@Diceman](#):
>
> Well, if the circuit court [del]morons[/del] judges succeed in preventing Detroit from filing for bankruptcy, this might well be the only option left. It’s not possible to preserve the status quo, and a bailout will only kick the can down the road a bit farther. If bankruptcy is taken off the table, then the only other scenario is that Detroit just goes completely defunct, and the state has to step in to provide essential services.
Great, Policing by the Michigan National guard, that sort of things always works out well.
---
### Author:  [@Diceman](https://boards.straightdope.com/u/Diceman)
#### Post date: [July 22, 2013, 5:26pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/98 "2013-07-22T17:26:25Z")
> [@wolfman](#):
>
> Great, Policing by the Michigan National guard, that sort of things always works out well.
Hey, if the city can’t afford to pay the cops, what other choice do you have? Actually, when Pontiac disbanded its police department, most of those same officers were hired by the Michigan State Police to patrol the city. If it came to it, I’d imagine the same thing would happen in Detroit.
Another thing, which I remembered while participating in a GD thread, is that Detroit really needs to dump the city income tax. Nobody, but nobody, wants to pay for the priviledge of working in Detroit, and the city income tax is one of the major reasons why so few businesses are interested in coming to Detroit. I know it would hurt in the short-term, but bankruptcy offers the perfect chance to figure out a new funding model that doesn’t penalize the people you’re depending on to revitalize your city.
---
### Author:  [@YogSothoth](https://boards.straightdope.com/u/YogSothoth)
#### Post date: [July 23, 2013, 8:53pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/99 "2013-07-23T20:53:50Z")
> [@adaher](#):
>
> No, city services to the poor should come first, followed by pay to current workers. Pensioners can collect Social Security.
No. Not all public sector employees could have bought into [Social Security](http://www.usatoday.com/story/news/nation/2013/07/21/detroit-bankruptcy-pension-obligation/2573457/). Due to the guaranteed nature of pensions, many people could not buy into SS. It simply wasn’t an option. So if they don’t get their pensions, they get nothing, no SS, no money, and are basically screwed
> [@](#):
>
> Public-sector pensions, given a municipality’s supposed ability to raise taxes and set its level of services, were expected to be secure all the same. Corporations might seek relief from pension and health care costs in bankruptcy court, but laws in many places are supposed to protect public-sector pensions. Michigan’s constitution, for instance, says they constitute “a contractual obligation … which shall not be diminished or impaired.”
>
> But, barring a settlement now with public-sector unions, it’s hard to see cuts not being part of Orr’s plan in Detroit: relying on a bankruptcy judge to rule that federal law trumps the state constitution.
>
> And such a ruling, once made, could change how public employees across the country see their futures, how their unions negotiate contracts, and how their retirees — some of whom, like police and firefighters in Michigan, don’t contribute to or receive Social Security benefits because their pensions were expected to be guaranteed — pay the bills.
This is why those who need the most need to be taken care of first. Make sure people aren’t tossed out into the streets comes first. Services can come second after shrinking them to account for the smaller population. Any banks and corporations should always come last because they can lose and still be in business.
---
### Author:  [@Diceman](https://boards.straightdope.com/u/Diceman)
#### Post date: [July 24, 2013, 4:33pm UTC](https://boards.straightdope.com/t/detroit-bankrupt/663879/100 "2013-07-24T16:33:02Z")
> [@YogSosoth](#):
>
> No. Not all public sector employees could have bought into [Social Security](http://www.usatoday.com/story/news/nation/2013/07/21/detroit-bankruptcy-pension-obligation/2573457/). Due to the guaranteed nature of pensions, many people could not buy into SS. It simply wasn’t an option. So if they don’t get their pensions, they get nothing, no SS, no money, and are basically screwed
>
> This is why those who need the most need to be taken care of first. Make sure people aren’t tossed out into the streets comes first. Services can come second after shrinking them to account for the smaller population. Any banks and corporations should always come last because they can lose and still be in business.
FWIW, I agree. I’ve known people who live on a fixed income. It’s not pretty, and there were more than a few who, if they took a hit like this, would probably end up having to go to soup kitchens for their meals. I understand that the pensions are going to have to take a hit, but it should be made as small as possible. OTOH, the unsecured creditors should get nothing. Zero cents on the dollar. “Unsecured” means “not backed by any collateral,” and these guys knew the risk of loaning money to an already-hopelessly-in-debt entity. They rolled the dice and lost.
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