Detroit City Bankruptcy Blues

The financial woes of Detroit were a long time coming. Even fume breathing onlookers cannot be shocked that Motown ran out of fuel. So why should anyone cry the blues for a community that prides itself on the Dream Girl mentality. With apologies to Fats Domino, the beat no longer plays.
Detroit City
It was the finest city it was
Yes, Detroit City
It was the finest city it was
You don’t need a lot of money
To have a real good time
The culture of municipal entitlement is a formula for inevitable bankruptcy. Especially in a dysfunctional economy like Motor City, the USA Today reports that in 1950 Detroit had the fifth largest population in the U.S. at 1,849,568 – now as of 2012, it stands at 701,475 in a startling decline.
The battle over filing a Chapter 9 has the financial community scouring over Here’s how Detroit’s bankruptcy will actually work.
“Detroit is about $18 billion in debt, and will only be able to pay out a fraction of that in the short term. The two main groups of creditors arguing they’re entitled to that money are public employees and retirees, and bond holders. The investors are likely to make out better, since more of that debt is secured; the city will continue to pay water and sewer bondholders. Most of the pension debt has no similar backstop.”
In the article, Legal battle brews over Detroit bankruptcy filing, Detroit emergency manager Kevyn Orr has not yet specified the cuts to pensions he will seek through the bankruptcy process. He has proposed freezing pensions and moving workers to a 401(k)-style plan to help alleviate the pension systems’ unfunded liabilities of $3.5 billion. He also wants to move retirees to Medicare or health care exchanges being set up through the Affordable Care Act.
CBS Detroit reports in Union Attorney: Pensions In Jeopardy After Detroit Bankruptcy Filing, that Richard Mack, Jr., an attorney for AFSCME Council 25 said the city shouldn’t be factoring in money owed to the pensions as part of their overwhelming debt, which Emergency Manager Kevyn Orr estimates is at a staggering $20 billion.
Whether the actual debt is 18 or 20 billion, the certainty is that an aching headache is coming. By what strange distortion of logic could a bankruptcy proceeding exempt “promises to pay” for outlandish pension costs, from a revenue stream that no longer flows?
CNN Money quotes this insane disconnect from reality. “This is money they’ve earned, they counted on,” said Karen Ferguson, director of the Pension Rights Center, a nonprofit that advocates for retirees. “They need these checks to pay their bills.”
Mainstream officials are denying the prospects that the screams for a federal government bailout from the vestige collectivist interests, will materialize. Well, in the video Detroit Mayor: No Federal Bailout ‘Yet’, is closer to the truth. At least Rand Paul Obama will bail out Detroit, states the obvious. “He is bailing them out over my dead body, because we don’t have any money in Washington,” Paul said in a phone interview with Breitbart.com on Friday.
Singing the blues in the Obama world of political correct economics produces the most outrageous thefts, guised in the cloak of a public investment. In case you forget, Thanks For The Bailout, Suckers! GM Builds A New Plant In China reminds that, “Taxpayers lost more than 10 billion bailing out GM because Obama thinks it’s fine for his corporate allies to embrace capitalism on the way up and socialism on the way down. Now, GM’s taking some of that money that it pilfered from us and it’s building a plant in China with it.”
Can’t you just hear the rally exhibitionists all dolled up in the finest party garb that taxpayer redistributed cash can buy , what was good for GM is more worthy for the public servants, that need to be paid. If the GM bondholders can be intentionally defrauded with an illegal sleight of hand, what chance do investors have in municipal tax- exempt instruments?
Detroit is just the latest example of the habitual addiction of the ruling welfare state. In the essay, Public Employee Unions Guarantee National Bankruptcy, the scale of the unfunded public indebtedness is noted, as is the dependency on useless and destructive public employment.
“The U.S. is broke. Public Employee Unions refuse to void their unconscionable contracts. The taxpayer can no longer afford this destructive fraud. Society can only be rejuvenated through a total downsizing of all public services. The biggest deadbeats that skim off the system are your phony public servants. The only bright spot from a collapse and natural bankruptcy is the evaporation of the public sector.”
The insightful Zero Hedge summarizes perfectly in Ponzi-Scheme Expert To Oversee Detroit Bankruptcy.
“For those who missed it, in the Kevyn Odd statement listing the primary reason for the bankruptcy of Detroit, this was the punchline: “Absent restructuring, the City is projecting cash flows of negative $198.5 million in the current 2014 fiscal year and negative $260.4 million in fiscal year 2015. This cash depletion would leave the City in a net cash position (after required property tax distributions) of negative $11.6 million as early as December 2013. The City also has experienced negative cash flow for years, and that trend is expected to continue and accelerate if not addressed…. For years, the City has spent more than it takes in and has borrowed and deferred paying certain obligations to make ends meet. The City is insolvent.” In other words, a pure pyramid scheme whose final can kicking day has finally come. Which perhaps explains why the just appointed Judge to preside over the largest municipal bankruptcy in US history is none other than Judge Steven Rhodes, 64, who just happens to be the co-author of “The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes.”
As the day of reckoning approaches, the lyrics of Bob Dylan in Subterranean Blues, stands the better test of time and applies, to past, and the current regime in Detroit.
Thinking about the government
The man in a trench coat
Badge out, laid off
Says he’s got a bad cough
Wants to get it paid off
James Hall – July 24, 2013
Read the entire article on the BATR archive page
Discuss or comment about this essay on the BATR Forum