Good News: Detroit Heads into Bankruptcy
In a very important, U.S. Bankruptcy Court Judge Steven Rhodes ruled this month that government pensions are not different from any other municipal liability and do not require special protection in a local government's (in this case, Detroit's) bankruptcy filing.
In other words, to whatever extent — however many cents on the dollar — Detroit is able to pay the claims of any creditors, the city's retired employees should recoup only that same percentage of their pensions. My guess is this number will be in the 20 percent range, though much depends on the city's ability to restructure its overall costs and credibly access financial markets.
Many former city workers will suffer from what has happened to Detroit (and some even worse than others because some actually opted out of Social Security), but for everyone else this ruling is a huge victory, an economic blessing (not even in disguise.)
For decades, we have had unionized municipal workers pillaging taxpayers, both at the time and in perpetuity, or so they thought, not caring one whit about the bad government and over-spending which they were supporting and enabling by their lack of interest in restraining anything that any Democratic politician or union honcho wanted to spend other people's money on.
The fact that it turns out to have been the workers' money too, not just everyone else's, is an excruciatingly painful wake-up to city workers everywhere: You support reckless politicians at your own peril, not just at ours.
The judge will have to approve the city's eventual bankruptcy plan, and he surely won't let pensioners take more than their "fair share" of pain, especially since he said that the city did not deal with the unions adequately -- but not inadequately enough to stop the process. He also said that he would not stay his own ruling pending appeal, allowing the process to continue immediately.
Frequently, humans need lessons to be very expensive in order to learn them — for politicians and liberals, that seems to be doubly true. Today's ruling is, I hope, expensive enough that municipal workers across the country at least consider whether their blind support of unions and Democrats is actually in their best interests.
[First published at the American Spectator.]