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Policy: Entitlements

Examiner Editorial: Detroit bankruptcy could be a dark look at America's future

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Editorial,Detroit,Medicare and Medicaid,Entitlements,Detroit Bankruptcy

Detroit is America's Ghost of Christmas Future - a dark portent of what will happen to the whole country eventually if the free-spending ways of American government at every level don't change dramatically and soon. One would have thought that this would have become evident enough when Detroit filed for bankruptcy in July. The city staggers under $18.5 billion of debt. Just keeping the street lights on is a struggle.

And yet denial remains the inexhaustible resource of the American professional political class. In court hearings to determine the legality of the Detroit bankruptcy filing, opponents have resorted to arguing that the city had no reason to go bankrupt. The whole thing was nothing more than a scheme from the start to rob city employees, said United Auto Workers lawyer Babette Ceccotti: “We think that by connecting all the dots here, the plan [all along] was to use Chapter 9.”

The American Federation of State, County and Municipal Employees union has put up a website, Stand With Detroit, that huffs about “a $66 million cut in state funding last year and a loss of $700 million over the past decade.” As if $66 million was anything more than a drop in the bucket compared to the city's debt. An AFSCME lawyer even argued in court Thursday that the city didn't sell off the Detroit Institute of Arts collection because that could have made the city ineligible for Chapter 9 status.

Never mind that the collection has been valued at no more than $2.5 billion – assuming they could find a buyer at that price – or that selling it would rob the city of all future tourism revenue from art lovers. None of these things would have solved the city’s $10 billion in unfunded health care and pension liabilities. That debt is not some right-wing scheme. The city’s elected officials – working hand-in-glove with the unions – created it by making lofty promises to their workers. Those obligations were then never funded because the officials never had the revenue to do that, plus everything else they wanted or had to do.

The unions are now trying to rally those workers against the city bankruptcy. True, it is a rotten deal for those workers, who are likely to see their pensions trimmed. Those workers might be better served by asking their city officials and union leaders why they weren't raising alarms a lot earlier. It is a situation America may yet face with the federal government's entitlement programs. Social Security and Medicaid have a combined long-term $66 trillion unfunded liability and the former is already running annual deficits -- $55 billion in 2012. Eventually, the can no longer be kicked further down the road because the end of it has been reached.

Yet the usual liberal groups, including unions, are attacking the current calls by some in Congress like House Budget Committee Chairman Paul Ryan for modest, bipartisan entitlement reforms. The short-term political gain from riling up present and prospective beneficiaries is what the political activists care about. Hang in there Detroit residents, you'll have plenty of company soon enough.

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