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Motor City Meltdown
Michigan One Step Closer to Detroit Bailout

Almost six months to the day after Detroit filed for bankruptcy, Michigan’s state government may finally lend a hand to the troubled city. Earlier this month, a group of foundations, aided by a bankruptcy judge, came up with a plan to allow Detroit to get money from its precious art collection without losing control of the art. The foundations would buy the art and place it in a public trust; the city would use the money to help fund its pension programs, among other things. The foundations were extremely generous, pledging $330 million, but the art is worth more than twice that much, and the plan is unlikely to work without a major contribution from the state.

Now it looks like the state may be on board with the plan. The Governor’s office has been hinting that it  plans either to match the contributions of the foundations, or at least to pledge money to help Detroit pay its pensions directly, as the WSJ reports:

The Republican governor in recent private meetings told legislative caucuses in the state capital of Lansing that Michigan could speed Detroit out of bankruptcy by at least matching the $330 million promised by foundations to preserve public access to the collection of the city-owned Detroit Institute of Arts while helping to fund the city’s pension obligations.

It was unclear Tuesday night what the final amount of the state’s financial commitment would be, but it is expected that it would be doled out over many years, possibly over two decades. Another person familiar with the matter described the announcement as focused more on shoring up the city’s underfunded pensions serving more than 20,000 retirees. […]

In talks with legislators, the governor floated the idea of using part of the state’s tobacco litigation settlement fund as a way to pay for the bailout without new appropriations.

We hope Governor Snyder follows through on this: letting Detroit collapse is not a policy. This is a great American city, and its retirees are American citizens who should not be left destitute in their old age.

But the money to shouldn’t be given unconditionally. There have been huge governance problems in Detroit over the years, and any rescue deal ought to include serious and enforceable reforms to prevent this from happening again. As always, it’s hard to take a stand on a particular set of proposals until more facts emerge. In general, however, it makes sense for the state government to step in to mitigate the disaster. It would be scandalous if the state’s assistance simply enabled another round of government malfeasance by a new generation of crooks. But it is definitely the responsibility of the state authorities to help develop and implement some kind of turnaround.

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  • RAS743

    Could you cite your reasons for saying “this is a great American city”? I think your use of the present tense is completely inappropriate. Detroit’s fiscal predicament *is* a blot on the very concept of representative democracy, and proof of the utter moral decay that underlies contemporary liberalism in general and African-American sub-culture in particular. People in a democracy get the form of government they deserve, and it’s incontestable that Detroit, including its public employees active and retired, is completely deserving of its fate.

    And, to the extent that the public-employee retirees’ played a role, through their union membership, in the militancy that extorted benefits far beyond what would have been available to similarly salaried individuals in the private sector, the continued payment of benefits to keep them from destitution should be similarly aligned to the private sector. No more, no less. They played an essential role in making this mess in the first place.

  • Jacksonian_Libertarian

    Bailouts are wrong, and just encourage more bailouts in the future. If they there isn’t any cost to fiscal irresponsibility, then politicians will always be irresponsible. The Detroit pensions must take a serious haircut in order to force responsibility onto public pensions all over the country.

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