The Detroit bankruptcy filing is Michigan’s biggest news story of the year, with effects that will ripple out in all kinds of ways; many that are unpredictable. It would be naïve to suggest that politics will not be a big part of how this plays out – if it hasn’t already.
So let’s run the bases on this, starting with Governor Rick Snyder. Snyder approved the bankruptcy filing, the largest in U.S. history, and it is now part of his legacy and his resume (whether he likes it or not) as he prepares to seek reelection next year. Every painful and controversial decision by a federal bankruptcy judge will be laid upon Rick Snyder by Democrats. Snyder may not own Detroit, but he sure owns its problems.
This is an awkward place for any leader to be, although not an unusual one. This is a governor being controlled by events, not controlling them. A couple years ago Snyder relentlessly, positively insisted that bankruptcy for Detroit was not an option; almost unthinkable. Now, he says there was really no other choice. “This is a difficult situation – but the answer is, by not doing this path, where would we be? And, so, this is an opportunity to say ‘let’s get that fresh start’ and show the rest of the country why Detroit can be an exciting place that can grow into the future,” Snyder said yesterday evening, about two hours after the Chapter 9 filing.
We can be fairly certain that the Detroit bankruptcy can and will be used against him even if we don’t know yet exactly how. Mark Schauer, the putative Democratic challenger for Governor, issued a statement this afternoon with a kind of Wall Street vs. Main Street theme. He stepped cautiously; he didn’t directly criticize Governor Snyder but warned that Wall Street investors shouldn’t be given priority in bankruptcy over public employees and retirees. He pretty much had to say that. Public employee unions are an important part of the Democratic base. The statement was vague and, eventually, Schauer is going to have to offer more specific plans to contrast with what’s happened under Snyder’s watch.
Meanwhile, all of this is not happening in a vacuum. What if we see other municipal bankruptcies? What if Flint goes bankrupt? This morning Eric Scorsone, a respected municipal finance expert at Michigan State University, said that Detroit is not unique in its high pension legacy costs. “It’s why Flint’s in an emergency manager situation. They have huge legacy costs that are as high as Detroit’s. In fact, on a per-capita basis, they me be higher.” So, what if we see a bankruptcy filing by a Flint or a Pontiac? And how many more cities and school districts will be placed under emergency managers between now and Election Day 2014?
Let’s also not forget the Republicans in the state Legislature who pushed through the emergency manager law. Twice, in fact. The new law was controversially passed after the first one was rejected by voters in a referendum. This is their small moment in history. Do their efforts wind up in honor and glory? Or ignominy?
As we’ve pointed out before, a crisis is also an opportunity. Who are the new heroes and villains going to be? Detroit will have a new mayor. We’ve got a whole crop of new people coming into the Detroit city council – which has served as the launching pad for careers in Congress and the state Legislature. These are the people who will be in charge when bankruptcy and emergency management for Detroit end. And, remember, Emergency Manager Kevyn Orr’s 18-month appointment expires just six weeks before the 2014 election. Rick Snyder has made a big deal of his background as a CPA and his passion for measuring things. The end of emergency management will be a stark moment when people - voters - will be measuring the impact of Snyder’s vision (and his ability to enact it) for fixing – or re-inventing, in his words – Michigan and Detroit.
Does One Tough Nerd come out on the other side as a failure? Or, a problem solver?