PERILOUS MOVES: Detroit Bankruptcy May Cost All Citizens More in Long Run
August 2, 2013
By: Dave Rogers
Financial gurus already are projecting about $50 million in extra costs for bond financing across the state in the next year because of the Detroit bankruptcy.
The Detroit bankruptcy so desired by Mitt Romney has come to pass and we all may have to pay for it.
It wasn't the auto industry targeted by the lamented Mr. Romney, but the city of Detroit, the bankruptcy of which will have much greater effect than that of the auto industry had GM and Chrysler failed.
Financial gurus already are projecting about $50 million in extra costs for bond financing across the state in the next year because of the Detroit bankruptcy.
But the most perilous aspect, like the unseen iceberg lurking to slash open the hull of the Titanic, is the precedent that would be set if the state is allowed to create default on obligations to Detroit city workers' pensions.
The war now being fought is whether any government must honor its obligations to any of its workers -- pensions, health care, wage contracts.
If Detroit sets the standard, no one is safe and the movement may spread, threatening the entire economy of the nation.
What investor in their right mind will buy a bond for, say a Bay County Water System, if there is no guarantee they will be repaid; if any government in distress can wipe out its debt capriciously?
The theory is being forwarded in Detroit that elected city officials were pawns of the unions, fearful of negotiating contracts favorable to the city or losing their jobs through union opposition in elections.
That is the contention of Mr. John Axe (appropriately named) a Grosse Pointe Farms lawyer insisting that the Detroit Emergency Manager, Kevyn Orr, negotiated in good faith before giving up the ghost on that troubled city.
The folly of Detroit's bankruptcy will certainly come home to roost quickly on Michigan state leaders who let it happen.
Slashing union power is one thing, but throwing the entire state's finances out on thin ice, raising the costs of issuing bonds and setting a precedent that government can't be trusted to honor financial obligations is another.
Schools, universities, hospitals, courts, public safety, all depend on solid governmental structures to continue to provide services to citizens -- US!
If the interest costs on any financing rise 2-3-5 percent, who pays the extra? We do, the taxpayers, the water, sewer, road users, parents of school children, employees of governments large and small.
Yes, the unions had their own selfish interests in mind when they drove up wages and benefits -- but the idea that governmental officials were so fearful of election time retribution does not hold water.
In the first place, Mr. Axe, haven't we been told that the unionized workforce is only about 7 percent of the electorate?
How could a 7 percent tail wag a 93 percent dog?
Judge Rosemarie Aquilina of the Ingham County bench, who issued a ruling stopping the bankruptcy, is being savaged for being -- OMG -- a Democrat!
This courageous woman may be the only one preaching sanity in the whole mess.
Please, Mr. Snyder, Mr. Schuette, Mr. Orr, Mr. Axe, and all your little Axes, think of the greater good not just temporary political gain.
We all live in this state and without a solid structure everything is at risk.
It's not who wins the political fight that is important, it's whether common sense and public integrity survive the political fight. Otherwise, the way of life we all have enjoyed will never be the same.