Well, we’re still running budget deficits here but we’re doing OK, I guess. There are plenty of healthier countries out there.
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.
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, 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.
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. 
I thought they were both insured and protected (in the event of a bankruptcy, merger, sale, corporate raiders!) by law.
Private pension plans are insured by the 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.
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.
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.
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.
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.
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?
Some commentators from the right wing press in this country see Detroit as a metaphor for the whole of the USA.
This quote too:
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.
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.
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.
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.
No. Not all public sector employees could have bought into Social Security. 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.