I’ve written about Detroit and its challenges before. I love the city and wish it the best. The business website 24/7 Wall Street reports that a poll of CFOs taken by Robert Half forecasts big job growth in the Motor City. The author cautions that the poll does not have national statistical validity, but it does indicate optimism in Detroit, Philadelphia, and several other large cities. My take away, as always, is that job growth in itself is not enough. We need good jobs that pay a living wage. Let’s hope good jobs and brighter days are coming to Detroit.
Diane Ravitch reports bad news about education in Detroit. 26 schools will be closed, and teachers’ pay will be cut by 10%. What angers me about this report is that Governor Rick Snyder and his allies preach the school “reform” line. They put the blame for poor education outcomes on teachers. Then they take measures that make good teachers want to leave the profession. The decision to make the cut was made by the city’s Dicta. . . Emergency Manager, who is a puppet of the Governor. Best wishes to the parents and children in Detroit. What is happening in your city is a crime against democracy – and common sense.
Investigative reporter David Sirota has a new home at International Business Times. Today he reports on a trend in city and state government: cut worker pensions while giving aid to billionaires who own sports franchises. Sirota quotes the Emergency Manager [Dictator] Kevyn Orr who calls money put toward the stadium “economic development.” Orr did not address how a reduction in pensions would hurt the economy. Somebody has to sacrifice. It might as well be working people. Their used to doing with less. Billionaires need our help.
Aljazeera America reports that Michigan Governor Rick Snyder is backing a plan that will help Detroit workers save their pensions. That’s great news if it is true. Snyder is the man who brought emergency managers to strip out public wealth from poor cities throughout the state. Now he’s promising $350 million to offset what his own emergency manager in Detroit claims is an $18 billion debt. As Scott Walker in Wisconsin is promising voters big tax cuts, Snyder is trying to show that he really cares about poor people. What is this about? It’s time to run for re-election. If working people are gullible enough to elect leaders that work against their interest, they will get what they deserve.
I frequently blog about income inequality because it is a vital issue that affects all working people, not just those in low wage jobs. Today, President Obama called income inequality, “the defining challenge of our time.” The President referred to specific types of low wage workers in calling for an increase in the minimum wage. More importantly, he addressed the issue of decreased mobility: not only are more Americans being born into poverty, they seem to be stuck there. The President’s words are good and inspiring. However, during his first campaign, he told labor that he would stand with them and put on his walking shoes to be with them in the picket line. Did Obama march in Wisconsin or Ohio? No. Did he push through passage of the Employee Free Choice Act? No. Hopefully, these good words will lead to some positive action. Let’s remember Jesse Jackson motto: “Keep hope alive.”
There is nothing hopeful about the situation in Detroit. Judge Steven W. Rhodes, a federal bankruptcy judge, ruled that all should be for the creditors, nothing for retired workers who paid into pension funds. David Cay Johnston describes the situation as “stealing from the workers.” His reasoning is clear: Pensions are deferred wages. Would anyone think of taking money from an employee’s paycheck? That would clearly be theft. How is a promised pension any different? Johnson lists several examples of how politicians have played this game in the past. Detroit is just the latest, ugliest example of a trend that is also taking place in my state, Illinois, which is run by Democrats.
As Johnston examines the economic impact of Detroit’s bankruptcy, John Nichols considers the political impact. Citing a study by Demos, Nichols argues that Detroit’s serious financial problems should not have led to bankruptcy. Why did the city go bankrupt? So the Governor could appoint an unelected manager to strip assets that range from pension funds to the great collection in the city’s art museum. Nichols quotes Detroit’s new mayor Mike Duggan, who admits that he will only have power to the degree that it is given by the governor and his manager. The elected mayor is powerless. Nichols captures the problem in these words: “There is a lot more at stake in Detroit, and in Michigan, than one city’s balance sheet. Our understanding of democracy, itself, is being subverted.”
If President Obama is serious about addressing income inequality and mobility, he should start in Detroit. Turn the Justice Department loose on Governor Snyder and his “Emergency Managers,” who lord over cities that are populated mostly by poor African Americans. Clearly American citizens in the cities under Governor’s Snyder’s Emergency Manager system are not enjoying the rights promised under the XV Amendment. Detroit is a good starting point, Mr. President. Save democracy and promote opportunity in that great city.
P.S. David Sirota calls out the fraud in Detroit by discussing funds that can be found for a new hockey arena and $6 billion in subsidies, also known as corporate welfare.
Sarah Lazare, a staff writer at Common Dreams, reports that Detroit’s bankruptcy is not the fault of pension funds. A report by Demos has found that bank deals, including “swaps,” have put the city in its current hole. The deals never should have been made given the city’s shaky standing. It’s almost as if the banks wanted Detroit to go bankrupt, so they could sweep in and clean the carcass. Another factor fueling the city’s failure was corporate subsidies, which the weak city gave to corporations that are flush with cash. Given all this, it makes perfect sense to blame pension funds and the workers who will lose all of their pensions. What’s going on in Detroit is criminal, but as we saw in the Banking Crisis of 2008 and its aftermath, bankers cannot be held responsible for their wrong doing. They get a bail out. Detroit gets the shaft.
I’m on a mailing list from the Chicago Teachers Union, which is a great source of information not heard in the corporate media. Today, I received the following analysis by Kenzo Shibata, the union’s New Media Coordinator:
“Why do Mayor Rahm Emanuel, the Chicago Board of Education and Chicago Public Schools officials blame Springfield for the district’s budget woes? Why is the target of their concern being shifted to state legislators? It polls well but makes little sense. Let’s examine why.
FACT: The Illinois General Assembly has provided Chicago Public Schools with every opportunity to make their budget work by giving the district a 13-year break from paying pensions. FACT: The district has failed to lobby for a more equitable funding formula, search for new revenue streams or reform programs like TIF that could work better for school districts and redevelopment.
FACT: The city and the Chicago Board of Education’s answers to the revenue crisis have been to cut, and this year, the cuts will have a devastating impact on classrooms across the city.
FACT: Pensions are NOT the problem.
The problem is a pronounced lack of leadership from the mayor and his handpicked Board of Education.
The state legislature, beginning in 1995, provided CPS with the tools to plug its budget issues and time find new revenue streams and reform the TIF program. The timeline looks like this:
1995—The Illinois State Legislature gave then-Mayor Richard M. Daley the ability to use the once restricted pension levy for operating costs to ensure balanced district budgets. The school district enjoyed a 10-year “holiday” from making any payments into the pension fund. The fund prior to 1995 was funded above 100 percent. It wasn’t until 2005 when the fund dipped slightly below 90 percent that the district resumed payment.
2010—The Illinois State Legislature gave Chicago Public Schools a pension holiday that provided the district with more pension relief so the classrooms in Chicago would not feel any negative financial impact. CPS also was granted additional federal funding from a stimulus appropriation; the district still laid-off more than 1,300 teachers despite pension relief from the state and an infusion of money from the federal government.
2012—The Illinois State Legislature gave CPS an extension on the deadline to publicly announce which schools were slated for closure. CPS stated that schools needed to be closed because of a looming budget crisis and that closing schools would help stymie the deficit.
2013—The Illinois State Legislature did not move on the moratorium on school closings proposed by Chicago legislators, citing that the state wanted to provide newly minted CPS CEO Barbara Byrd-Bennett with the opportunity to govern the district. In short, the consensus was that the state legislature did NOT want to micromanage the school district.”
Shibata’s analysis leads us to ask again: Did teachers cause this problem? No. Why are they being asked to pay for it, to suffer during their retirement? We need to remember that Detroit is the blueprint. Chicago looks like it could be the next stop on the bankers-rip-off-workers express. We need to stop this train – now.
Ellen Brown writes at the blog Web of Debt. She probably understands the American economy and what is wrong with it as well as anyone, including Paul Krugman. Writing in Common Dreams, she turns her critical eye to Detroit and who will win in the bankruptcy. Brown points out that the city’s debt to banks are based on “swap” rates that favor the banks in the case of debt. Further, the rates are based on LIBOR ratings, which were manipulated. So did Detroit go bankrupt, or was it set up to fail by the people who are first in line to liquidate assets?
Brown goes on to examine the possible fall out of a Detroit bankruptcy. Many cities and counties have problems similar to Detroit. The formula seems to be: Burn the workers to pay the bankers. Brown presents an alternative: Why not have a Bank of Detroit, a proposal first made by Virg Benaro in his run for governor in 2010. North Dakota has had a bank for many years, and it does not need to ask for credit, especially time bombs likes the “swaps” used to finance Detroit.
Ellen Brown is great. She understands that the banking system works too often to hurt the economy of main street. In advocating for local governments to run their own banks, she pushes against the momentum to privatize public assets. The problem is that many politicians, especially Republicans, worship what they call a “free” market. They will not listen to any kind of argument for public investment or common good. Voters need to dig deep and see that if we keep giving in to nonsense stories like the Detroit bankruptcy, the only winners will be the people who have been winning big for the last 30 years: Bankers.
P.S. On a positive note, Brown has a blog post that discusses San Francisco’s attempt to launch a city bank.
Detroit is broke. That’s what the media and the politicians like Governor Snyder tell us. It’s an easy story to tell given the way the city looks. It’s also easy to tell when the politicians and their banker allies only give one alternative. What they don’t say is that unions tried to work out a deal that would have prevented the bankruptcy. The governor and his Emergency Manager (Appointed Dictator) would not talk to them. A cynical person might even think that the governor had some reason for wanting the city to declare bankruptcy.
Common Dreams has reprinted an article by the Nation’s John Nichols that examines how democracy is not working in Michigan’s largest city. Michigan and Detroit voters both rejected Snyder’s Emergency Manager program, only to have the governor revive the program during a lame duck session of the legislature. Nichols interviews experts who point out that several American cities have problems similar to Detroit. As the nation’s industrial base broke down, the federal and state governments responded by cutting funds sent to big cities. Rather than blame local officials as the governor does, Nichols suggests that we look at state government as part of a complex problem.
John Cassidy of the New Yorker looks at the story from the perspective how the city came to the bankruptcy “solution.” He asks the often unasked question: Was this move necessary? Were there alternatives? He points to gentrification in parts of the city. The Emergency Manager, Kevyn Orr seems only interested in giving pensioners as little as possible (as little as 20%) while offering bank creditors (as much as 75%). Cassidy ends ominously by quoting a municipal bankruptcy lawyer who calls Detroit, “a test case.”
The same day Detroit declared bankruptcy, Chicago bond rating was hit with a big downgrade. A couple of weeks later, the city’s school system had its bond rating slashed. Do you see a pattern? The same politicians who failed to fund pensions are now using that action to say pensions need to be cut. They robbed Peter (workers) to pay Paul (bankers). And now they’re asking Peter to pay the bill.
What happens in Detroit will be a test case. If working people don’t wake up, they will pay the bill of the bankers while city workers, including those who have already retired, will have to live on a fraction of the pension they should have received as part of their compensation. Pensions are not welfare. Retired workers are not takers. If Americans don’t wake up to this new make-the-rich-richer scheme, we will all lose.
Detroit is a great American, and it is in trouble. Rather than the state or federal government coming to its aid, they do nothing – or less than nothing. The governor of Michigan has assigned an emergency manager whose main job is to pay creditors by selling off public assets.
Today, we have a small bit of good news for Detroit. According to Daily Kos, musician Jack White has saved the city’s Masonic Temple, which was completed in 1926. White’s mother worked in the building when he way young. The story also notes that White has donated in the past to save a baseball field in the city.
So what do we have here? One person trying to save the city while others who should be protecting public assets want to tear them down and sell them off. Welcome to America in 2013.
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