What happens now for bankrupt Detroit

Dec 4, 2013

When I was growing up in the 1960s, there was a popular genre of fiction: Novels about the world when and after the presumably inevitable nuclear war happened.

One that I remember was set in rural Florida, one of the few places that avoided total destruction. The survivors set up what amounted to a working subsistence and barter economy. 

But for some, the psychological adjustment was impossible. The town banker sat among piles of paper money that he had always revered as sacred, and which suddenly had no value whatsoever. Unable to adjust, he kills himself.

Things are not nearly that bad in Detroit. But yesterday, there were clear signals that sacred cows really are going to be sacrificed. Public pensions were thought to be sacrosanct, protected by the state constitution. Well, they aren’t, according to Federal Bankruptcy Judge Steven Rhodes. Federal law trumps state law. 

I work in Detroit and know a lot of people there, and I don’t think most really believed, deep down, that their pensions were threatened -- until yesterday. I don’t think white suburbanites really believed the treasurers of the Detroit Institute of Arts were threatened. But they’ve now been inventoried and valued, just as if they were equipment on a bankrupt horse farm.

That doesn’t mean they’ll be auctioned off, any more than what the judge says means that 90-year-old city retirees will have their pensions canceled and then be thrown into the snow. What it does mean is reality time, across the board.

It used to be fashionable for firms to pretend to what they called “zero-based budgeting,” as if they could start from scratch every year. I never knew one that really did this; there were always far too many untouchable expenses, and assumptions that couldn’t be challenged. Well, welcome to the zero-based world of today’s Detroit.

Things are not as dire as you might think. For one thing, it is entirely possible that a group led by another federal judge, Gerald Rosen, who is acting as a mediator in the bankruptcy proceeding, will find a pool of cash to somehow protect the DIA.

For another, the bankruptcy judge himself said he would not approve any plan that treated pensioners unfairly. Nobody will lose their entire pension. But everybody is going to have to get used to the stark reality of mathematics. Two minus two doesn’t add up to four left over.

Beyond any doubt, Detroit needed more conservative and prudent economic practices and budgeting assumptions. But also beyond any doubt, the region needed less selfishness and shortsightedness on the part of those who used and still use the city to get rich, drained its assets, and then moved homes and offices to the suburbs and proclaimed -- we’re not responsible for Detroit anymore. Don’t ask us to share its expenses.

The truth is that if it weren’t for those ruined and abandoned buildings and factories, Bloomfield Hills would be a marsh inhabited largely by rabbits. In coming months, we will work out and learn what kind of city shattered Detroit can afford to be. 

But we must also determine what kind of society we want Michigan to be. That may turn out to be most important. For Detroit, and especially for ourselves.

Jack Lessenberry is Michigan Radio’s political analyst. Views expressed in the essays by Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.