Detroit Pensions and Bankruptcy Bode Poorly For Union Workers Nationally

Detroit will be the rise and fall of the United States. At a time when the American Economy and spirit were at Golden Age highs, the Motor City was the pinnacle of American manufacturing, the embodiment of one of America’s most important innovations; a city that could hold its own. Along with one of the most booming jobs markets, Detroit also touted one of the strongest Labor Unions in the country. While some may argue that the autoworker’s unions were part of the American automotive industry’s collapse, I think that could more easily be attribute to Reagan era tax cuts, a “globalization” (see: outsourcing) friendly environment, and no small amount of over-regulation. No, the Labor Unions were part of what made the industry, and thereby the City, thrive.

Thriving cities have strong infrastructures, well-staffed governments and support systems. Those staff members are usually well taken care of—or at least moderately taken care of. In a union town like Detroit, they had at least some collective protection. The worker’s were able to get benefits and pensions. They paid into the system, upheld their part of the bargain, worked their years. The expectation was that the city could continue to thrive and would then keep their end of the arrangement and pay out what the workers paid in. That was then. That was the rise, maybe even the height.

Today is a different day. If China is the rousing dragon, economically, then it’s probably fair to say the United States is the dozing one. Detroit is in a long battle for bankruptcy protection (that it arguably should have sought years ago), and by all indications has won it. With apparently over 100,000 individual creditors to arbitrate with, the judge in the case—Honorable Steven Rhodes—has declared that despite a Michigan State Constitutional Amendment that states that pensions are non-negotiable, that bankruptcy laws trump that legislation. Meaning that Detroit—billions of dollars short on pensions and $18 billion in hoc all in—will be allowed to make pension payment cuts, impacting the lives of thousands of retirees.

There is little information, and Judge Rhodes even acquiesced in light of the Union appeals that this case may find its way to the Supreme Court, but those reliant on that money are waiting in turmoil until the nature and scope of the cuts are revealed in January. Rhodes has stated that he will not allow cuts without compassion, but pension benefits are not—in many cases—very much money to begin with…for some it may be like cutting a peanut in half rather than losing a drumstick on a turkey.

Scarier yet is that regardless of a hearing by the Supreme Court, this sets a precedent of pensions being negotiable in the case of a major metropolitan meltdown and is a serious blow to the seriousness of union negotiations. After all, how binding can agreements be if they aren’t binding? Detroit’s pension ruling bodes poorly for union workers all across the nation.

As this country is seeing a transparent hostile takeover of its political representation and structures regarding corporate and unlimited political funding, who’s to say that the mega-wealthy wouldn’t gladly bankrupt a municipality or a company in order to break or modify pricey pension deals? If that was a possibility, why not agree to any benefits demands put forth by unions, and then take the money and run claiming bankruptcy? It’s a dangerous proposition.

For many of us working in strong unions—as I do in the United Federation of Teachers—we find much solace in our good benefits and pension packages. Especially in situations where our base pay isn’t quite cutting it, we know the sacrifice now will save us later in our lives when we won’t be able to pick up extra hours tutoring, or working a variety of side jobs, or work at all. You make a deal, put in your time and money, and expect the other side to deal evenly. This ruling and its ramifications are frightening for anyone relying on the money they put in now to be there in full when they need it. If it becomes a common happenstance it will be a mark—if not the brand—of the fall.

In a country where free speech is money can we really afford a practice such as this? Where is the consistency of justice? If an individual goes bankrupt and student loans are not negotiable, why should a City find itself negotiating the terms of pensions? Where’s the bailout of the retired Detroit City Workers? The Detroit Automotive Corporations were deemed to big to fail, are the citizens of the same city too small to help? Who’s to say this kind of leverage couldn’t be extended to banks, FDIC, or insurance companies?

Perhaps the mark of the fall has already been branded, and if so, poetically on the same city that shone as one of its most productive gems in a crown of economic prosperity. While it is fair to say that Detroit is broke and needs a break, that break needn’t be the backs of it’s retired public servants—who incidentally broke their backs already in service to Detroit.
We’ll just have to wait and see what comes of this, but suffice it to say that—with no uncertainty—the way Detroit goes will be the way of the nation. Supreme Court or not.


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  1. Great article, except the Ronald Reagan toss in, who’s tax cuts and loop hole tightening lead too many years of prosperity and the intel revolution. Perhaps for another discussion and another article.

  2. Just had to add, perhaps he judge shouldn’t have been so quick to approve bankruptcy for Detroit. There was a time NYC was looking for a bail out and our President Gerald R. Ford,told NY to drop dead or so the headlines read, but in retrospect this was the best thing this president could have done for NYC, it help N.Y. governing powers to kick into high gear and find a solution and they did and President Gerald R. Ford finally did sign a three year loan and NYC is stronger for it. Thank you and G-D bless the Late great Gov. Hugh Carey & Mayor Ed Koch.

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