Detroit’s bankruptcy has just teed up one of the most consequential court cases in recent memory. As part of the plan to help the city exit bankruptcy, the government will likely cut pensions promised to city workers, a move allowed under federal law. But there’s a catch: the state constitution of Michigan forbids it. Citing this fact, a state judge ruled the bankruptcy unconstitutional (she also rather bizarrely argued that the bankruptcy doesn’t ”honor the (United States) president, who took (Detroit’s auto companies) out of bankruptcy”). The WSJ has more:
But despite the judge’s ruling on Friday, the issue is likely far from settled, said legal experts.
“It’s an issue that’s completely up for grabs,” said Gary Klausner, a bankruptcy lawyer at Stutman Treister & Glatt in Los Angeles, who has worked on Chapter 9 cases. “You just haven’t seen too many courts deal with it.”
Detroit’s situation seems almost unprecedented, and it’s not clear how the city can best respond to it. The unions’ biggest problem is that Detroit simply cannot pay their pension claims without destroying city services. Detroit doesn’t have the money to provide even minimal services to its current population while paying off the large numbers of retired workers, many of whom hail from times when the city was larger and richer.
Because there is no money, there is no solution that gives the unions the relief they seek. Total obedience to the state constitutional mandate might not be possible, and that’s a problem. The government can pass a law saying that everyone has a constitutional right to a free trip to the moon, but if it doesn’t build the spacecraft that can get you there the right is void.
While the principle that federal law trumps state law on most issues is pretty clear, there are real arguments on both sides in this complicated case. But if the state constitution is unenforceable as well as being in conflict with federal law, it would be that much harder for the state constitution to block the execution of federal bankruptcy law.
However the courts eventually decide, decades of misgovernance, the criminal corruption of the Democratic Party in Detroit, and the depraved indifference of politicians at every level as crooks and hacks conspired together to loot and wreck a great American city have brought us to a place where Detroit’s problems seem almost beyond solution. The saddest part of this story is that there is still much, much more pain to come for a lot of people. Both the residents of current day Detroit and the cops, teachers, firefighters and others who trusted in the promises of Detroit politicians and union officials face a world of hurt.
Detroit is going to need some outside help to get back on its feet, but that help should be tied to deep reform in the way city government works. Many liberals will want to offer the help without requiring reform; many conservatives will want to impose the reform without offering the help. Republicans need to do more than gloat over the ruins, and Democrats need to do more than wring their hands. Detroit can become a great example of a post-blue city emerging from the ashes, but that won’t happen unless some smart people in both parties take the crisis as the call for creative thinking.
At Via Meadia, we’ll be looking for practical ideas for making Detroit work again; this crisis is a challenge for everyone who cares about the future of the United States. It’s not enough to find fault with what has been done in the past; what matters is figuring out how to make a better future. We’d like to see more competition between the left and the right to develop creative approaches to the problems of Detroit: that’s the kind of intellectual and political competition the whole country needs.