The U.S. auto industry is so synonymous with Detroit that when the Bush and Obama administrations threw a lifeline to struggling Chrysler and General Motors in 2008-09, the shorthand way of saying that was: The feds bailed out Detroit. (Or, in Mitt Romney's famous New York Times op-ed counseling against the bailout: "Let Detroit go bankrupt.")
Now, once-mighty Detroit itself really has filed for Chapter 9 federal bankruptcy protection. There will be casualties from the filing — either the city's creditors will take a big haircut on their investments, or the city's 30,000 retirees will see their pensions reduced, or both. About $3.5 billion of Detroit's $18.5 billion deficit is from unfunded pension obligations.
The possibility of reduced pensions, endorsed by Detroit emergency manager Kevyn Orr, prompted Circuit Court Judge Rosemarie Aquilina of Ingham County, Mich., to order the bankruptcy filing withdrawn, on the grounds that the Michigan constitution doesn't allow the state to "diminish or impair pension benefits." The ruling isn't expected to halt the bankruptcy process.
There is one possible lifeline left for Detroit, though: A federal bailout. Michigan Gov. Rick Snyder (R) and Orr both appeared on the Sunday political talk shows to talk about the bankruptcy filing, and they were asked about the possibility of a bailout. NBC's David Gregory pointed out that the automakers got about $80 billion when they needed it, so what's another $18 billion from the federal coffers?
Snyder wasn't enthusiastic about the idea. Detroit's problems are 60 years in the making, he told CBS's Bob Schieffer, and a bailout is "not the right answer." It's not about pouring in more money, he said. "The right answer is, bankruptcy is there to deal with the debt question.... It's about better services to citizens again. It's about accountable government."
Detroit Mayor Dave Bing (D) is a little warmer on the idea of a federal bailout, though he told ABC's This Week that he hasn't asked the Obama administration for help, and doesn't think it's time to — "not yet." The mayor's powers have been greatly weakened under the state's emergency takeover of Detroit. Motor City is "not the only city that's going to struggle through what we're going through," Bing added. "And so we have got to set a benchmark in terms of how to fix our cities and come back from this tragedy."
A federal bailout makes more sense than this bankruptcy nonsense, says Max Rivlin-Nadler at Gawker. Obama shouldn't let Snyder and Orr turn "this historic American city" into "a Randian nightmare." The conservative governor and his cronies "would surely like to see Detroit reborn without any of its burdens — a public sector, poor people, or fair wages," says Rivlin-Nadler, but it's time the U.S. government started "bailing out its people, and not businesses."
The "severe dysfunction" of Detroit can't be fixed by a pile of federal cash, says Jazz Shaw at Hot Air. Snyder is right about the need for "tough medicine," but his bailout resistance "is going to prove to be serious bait for liberal activists and union supporters to attack him." Detroit needs "drastic cuts in money going out, not only on a day-to-day basis but in terms of long-term obligations." That, plus better city services, clearing away abandoned buildings, and a lot of luck, Shaw says, and maybe Detroit will come out of this alive.
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