The real implications of Detroit’s bankruptcy

Detroit has been given Federal court approval to go ahead with its bankruptcy proceedings.  This is the end of the beginning, but there’s a long way to go.  City unions and retirees immediately took steps to appeal the judge’s decision, even though their chances of success appear limited.

What strikes me is the willful blindness exhibited by many of those opposed to the bankruptcy proceedings.  It’s willful because they’ve consistently and persistently refused to face the facts of the situation, instead parroting on about “rights” or “the Michigan constitution”  or “democracy”, or blaming anyone and everyone except the municipal government and trades unions of Detroit, instead of confronting the single most important question of all:  where’s the money to come from?  Their answer to that is always, “From someone else!”  Just look at these examples of protest signs outside the court yesterday.

There were many like that, and they all said the same thing – someone else is responsible!  Someone else (the banks, or the state of Michigan, or the Federal government) owes us!  They must pay!

That’s a load of bovine manure.

Detroit’s problems can be ascribed to many causes, but there’s one overriding, foundational problem that’s been at the root of most of them.  That’s the incestuous, you-scratch-my-back-I’ll-scratch-yours relationship between the Democratic Party political machine that’s run Detroit since the 1960’s, the public sector trades unions that have supported it in return for massive kickbacks to their members, and the corrupt politicians, lawyers and union leaders who’ve lined their own pockets in the process.  It’s those players who are now leading the protests and trying to find some way – any way – to keep the gravy train on the rails and operating.  Their goose that laid the golden egg is being killed, and they’re desperate.  It’s not just conservative news sources or independent commentators who recognize this:  even far-left-wing progressive socialists openly acknowledge the extent to which the unions and the Democratic Party machine are in bed together in Detroit.  It’s that blatant.

(Please note that I’m not suggesting such relationships between power and money are confined to the Democratic Party.  Far from it.  They’re commonplace throughout the US political system, from local [i.e. municipal] through regional [i.e. county] and state to national government, across both major political parties and – to a certain extent – the minor ones too.  You’ll find examples of it almost everywhere you look.  At federal level, just look at political contributions to PAC’s that representatives can use to cover all sorts of ‘costs’.  On the local level, how many small towns have a local chapter of Rotary, or Lions, or Kiwanis, or Freemasons, or some other fraternity or sorority?  Most of them do, and their membership usually includes leading local businessmen, local politicians and officials, and occasionally local labor leaders.  Deals are done with a nod, a wink and a handshake, preceded by much ‘fraternal discussion’ about ‘issues that need to be addressed’.  It’s amazing [not!] how often contracts are exchanged between members of such organizations, while outsiders are ‘frozen out’ of the bidding process.  In my [admittedly limited] personal experience, small-town Republicans appear to prefer such associations to more overt political machines in making deals to their benefit;  but they’re no less assiduous in doing so than their Democratic Party opponents.)

Throughout the USA, on every level of government, such incestuous relationships have developed between business, politics and organized labor.  It’s a ‘culture of corruption’ that blatantly and cynically exploits the structures and systems of government to the advantage of those ‘insiders’ who can manipulate them.  Elections are more often than not a contest between the ‘insiders’ and the current ‘outsiders’ who want to change places with them.  The great H. L. Mencken made a series of justly famous observations over the years that sum up this reality.  Here are some of them.

  • Government is a broker in pillage, and every election is a sort of advance auction in stolen goods.

  • All government, in its essence, is organized exploitation, and in virtually all of its existing forms it is the implacable enemy of every industrious and well-disposed man.

  • A professional politician is a professionally dishonorable man. In order to get anywhere near high office he has to make so many compromises and submit to so many humiliations that he becomes indistinguishable from a streetwalker.

  • Every decent man is ashamed of the government he lives under.

  • The art of government is the exclusive possession of quacks and frauds. It has been so since the earliest days, and it will probably remain so until the end of time.

  • Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule — and both commonly succeed, and are right . . . The United States has never developed an aristocracy really disinterested or an intelligentsia really intelligent. Its history is simply a record of vacillations between two gangs of frauds.

  • The chief difference between free capitalism and State socialism seems to be this: that under the former a man pursues his own advantage openly, frankly and honestly, whereas under the latter he does so hypocritically and under false pretenses.

  • Each party steals so many articles of faith from the other, and the candidates spend so much time making each other’s speeches, that by the time election day is past there is nothing much to do save turn the sitting rascals out and let a new gang in.

The older I get, the more I think that Mr. Mencken was one of the wisest observers of the political scene I’ve ever encountered.

At any rate, the bankruptcy of Detroit is a classic example of the end result of an alliance of politicians, organized labor leaders and other ‘insiders’ looting a city for their benefit over an extended period.  Look at the number of the city’s politicians, administrators and ‘insiders’ convicted of crimes over the past thirty to forty years and you’ll see only the tip of the iceberg.  Far more went on that’s never been discovered – or, if revealed, was never punished.

To this day, politicians across the nation continue to behave in the same way.  They promise heaven and earth to voters if only the latter will re-elect them to office . . . then they make the entity they represent (town, city, county, state, whatever) responsible for paying for their promises.  That’s how we’ve built up so many trillions of dollars in entitlement program deficits over the coming decades.  They’re all promises made by politicians and passed into law, without the money being there to pay for them.  There are literally millions of people who’ve built their hopes and plans for the future around those promises being real.  They’re doomed to, not just disappointment, but real financial hardship when they don’t materialize – but that’s inevitable, because the money simply isn’t there.  The politicians who made those promises and passed those laws knew the money wouldn’t be there, but they didn’t care.  All that mattered to them was getting votes now, and paying for them with promises that wouldn’t fall due until they were safely retired and long gone.

What few people think about is that these incestuous relationships between business, unions and politics go all the way from the bottom to the top.  If one level hits trouble, it will look to the next level up for a bailout.  Local politicians will be threatened by defaults at municipal level, so they’ll look to county or state government for money, with the implicit threat that if they don’t get it, they won’t turn out their voters to support the party machine at those levels in forthcoming elections.  In their turn, state politicians will turn to Washington for a bailout, using the same threat to bring federal politicians and administrators into line.  That’s why there have already been calls for Washington to bail out Detroit, funneling billions of dollars of federal taxpayer money into the city.  (Follow those three links for more information.)

However, the unspoken message behind such calls is that they’re merely a means to allow the pillaging of local coffers by politicians and special interests to continue.  All that will happen is that, instead of draining those coffers of local money, they’ll drain them of Federal money – and then demand more of the same.  As Steven Malanga has pointed out:

Politicians and unions have been emboldened in resisting reform because they expect that the federal government won’t let big cities or their major pension systems fail.

. . .

Bailout advocates argue that some American cities have such massive retirement debts that they could never repay them without Washington’s help … But what these nearly insolvent governments really need are voters angry enough—and worried enough—to bring an end to the special interests’ tight grip on the public purse.

There’s more at the link.

Look at the list of major government defaults and bankruptcies in the USA.  To name only a few of them, there’s New York City in 1975Cleveland in 1978Orange County, California, in 1994Harrisburg, Pennsylvania, in 2011Jefferson County, Alabama, in 2011;  and three California cities in 2012, with more expected to follow.  One analyst predicts that up to 100 US cities are at risk of following suit in the short to medium term.  If you look at the cities most at risk, you find certain common denominators.  Almost all had made extravagant promises to public employee unions, but had failed to fund those promises, allowing deficits to build up until they’ve become unsustainable.  Almost all exhibit the sort of mutually beneficial partnership between municipal government, local business and public unions that we’ve seen in Detroit.

I confidently predict that before too long, you’ll see a major initiative launched for a trillion-dollar bailout of all financially challenged municipalities.  It’ll be couched in terms of ‘not letting pensioners suffer’, or ‘ensuring the well-being of innocent citizens caught up in problems not of their making’, or something like that – but in reality it’ll be political machines trying to ensure that they can go on feathering their own nests at others’ expense.  We dare not allow such a bailout to become law.  If we do, it’ll become the first of many, because politicians’ appetite to feed at the public trough is insatiable.  That’s the real message of Detroit’s bankruptcy, and of the heartfelt pleas from the Left that it’s anti-democratic, or bankrupts democracy, or must be paid for from other sources.  It’s not about humanity;  it’s not about social concern;  it’s about institutionalized political, social and economic corruption.  That’s it, pure and simple.

We’ll let H. L. Mencken have the last word, because it sums up Detroit’s – and America’s – situation perfectly.

The main thing that every political campaign in the United States demonstrates is that the politicians of all parties, despite their superficial enmities, are really members of one great brotherhood. Their principal, and indeed their sole, object is to collar public office, with all the privileges and profits that go therewith. They achieve this collaring by buying votes with other people’s money. No professional politician is ever actually in favor of public economy. It is his implacable enemy, and he knows it. All professional politicians are dedicated wholeheartedly to waste and corruption. They are the enemies of every decent man.



  1. I am waiting to see if the municipal bond holders are forced to take a haircut in the bankruptcy proceeding.

    If not, then the game is rigged against the workers.

  2. Of course it's rigged against the workers; the judges are also elected officials or worse: political appointees.

  3. Well spoken.

    I worked for the City of Detroit two decades ago and as is usual in union jobs, I was one of the highest-paid workers in my job description across the country. However the writing was on the wall way back then for those interested in reading it. I got out, and I took my pension money with me when I did. A lot of my former co-workers are at retirement now or retired within the last few years and they're all hosed now. Most are too old to start over towards another pension. Sad, but not unexpected or unforeseen.

    And yes, the demand in Detroit is always "We are OWED by: ________" Insert the county/state/federal government/corporations interchangeably. They always refused to stop the spending when they always knew that the money wasn't there and the tax base was shrinking.

  4. Good article. The so-called "workers" screwed themselves and that is whom to blame. They voted those socialist pols into office and now want to blame someone else for the inevitable result.

    A pox on 'em.

  5. Enjoy this one:

    …it is a settled conclusion among seasoned observers that, Congress apart as a separate case, the lower legislatures — state, county, and municipal — are Augean stables of misfeasance, malfeasance, and nonfeasance from year to year and decade to decade, and that they are preponderantly staffed by riffraff, or what the police define as "undesirables," people who if they were not in influential positions would be unceremoniously told to "keep moving." Exceptions among them are minor. Many of them, including congressmen, refuse to go before the television cameras because it is then so plainly obvious to everybody what they are. Their whole demeanor arouses instant distrust in the intelligent. They are, all too painfully, type-cast for the race track, the sideshow carnival, the back alley, the peep show, the low tavern, the bordello, the dive. Evasiveness, dissimulation, insincerity shine through their false bonhomie like beacon lights….

    As to other legislatures, Senator Estes Kefauver found representatives of the vulpine Chicago Mafia ensconced in the Illinois legislature, which has been rocked by one scandal of the standard variety after the other off and on for seventy-five years. What he didn't bring out was that the Mafians were clearly superior types to many non-Mafians.

    Public attention, indeed, usually centers on only a few lower legislatures — Massachusetts, New York, New Jersey, California and Illinois — and the impression is thereby fostered in the unduly trusting that the ones they don't hear about are on the level. But such an impression is false. The ones just mentioned come into more frequent view because their jurisdictions are extremely competitive and the pickings are richer. Fierce fights over the spoils generate telltale commotion. Most of the states are quieter under strict one-party quasi-Soviet Establishment dominance, with local newspapers cut in on the gravy. Public criticism and information are held to a minimum, grousers are thrown a bone, and not many in the local populace know or really care. Even so, scandalous goings-on explode into view from time to time in Florida, Texas, Louisiana, Oklahoma, Missouri and elsewhere — no state excepted. Any enterprising newspaper at any time could send an aggressive reporter into any one of them and come up with enough ordure to make the Founding Fathers collectively vomit up their very souls in their graves.

    [The Rich and the Super-Rich, 1968]

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