Update: Detroit files for bankruptcy. More thoughts tomorrow. Below is our post from earlier today.
Detroit, one of the 20th century’s great American cities, is now almost certain to stagger through the early 21st century in Chapter 9 bankruptcy. The WSJ reports that the chances of out-of-court settlement are scant. Emergency manager Kevyn Orr is unlikely to reach agreements with enough of Detroit’s bondholders and pension funds to restructure the city’s debt:
Mr. Orr “has taken such a hard line with creditors that a bankruptcy filing is inevitable,” [research advisory director Matt] Fabian said. […]
A “free fall” bankruptcy filing—one without a clear plan or much agreement beforehand with creditors—is a likely outcome.
Buried in the middle of the report is a telling climax to this sorry tragedy:
Any hope of a federal bailout to avert bankruptcy fizzled last week after Mr. Orr spoke with the White House, including Obama confidante Valerie Jarrett, according to city and White House officials.
This is where blue governance has brought Detroit in the end: not even a liberal Democratic administration will step in to save the pensions of thousands of public workers and African Americans, condemning countless innocents to having their pensions and health benefits gutted in bankruptcy court.
Blue model defenders will point to the cruel exodus of General Motors, the unjust outsourcing of American manufacturing, and the general unfairness of life in the big city as the culprits in the slaying of Detroit. But these champions of the marginalized should keep a few facts in mind.
Detroit has been spending on average $100 million more than it has taken in for each of the past five years. The city’s $11 billion in unsecured debt includes $6 billion in health and other retirement benefits and $3 billion in retiree pensions for its 20,000 city pensioners, who are slated to receive less than 10 percent of what they were promised. Between 2007 and 2011, an astounding 36 percent of residents lived below the poverty line. Last year, the FBI cited Detroit as having the highest violent crime rate for any major American city. In the first 12 years of the new century, Detroit lost more than 26 percent of its population.
And now Detroit’s desperate request for a bailout has been turned down by the Obama White House.
Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long. The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.
[Obama tours the Daimler Detroit Diesel Plant. Photo courtesy of Getty Images]