"We have made a decision that for the balance of this year, the next six months, we're not touching pension or health care.  So all pensioners, all employees you should understand: It's status quo for the next six months."

“Orr has not yet specified the cuts to pensions he will seek through the bankruptcy process. He has proposed freezing pensions and moving workers to a 401(k)-style plan to help alleviate the pension systems' unfunded liabilities of $3.5 billion [almost 20% of the City’s total debt].  He also wants to move retirees to Medicare or health care exchanges being set up through the Affordable Care Act.”

Thus, part of Detroit’s bankruptcy plan is to dump city retirees’ health care costs on the feds. 

Michigan Governor Rick Snyder said Detroit had reached “the end of the line”; that the city was “done in” by 60 years of “residential and business flight to the suburbs, loss of its manufacturing base, chronic overspending and mismanagement and corrupt leadership, all reaching a climax as the economic meltdown and the national housing crisis hit.”

In essence, the people of Detroit have seen their lives ruined by 60 years of big and bad government.  That’s why Detroit—which, in A.D. 1950, was America’s 5th largest city with a population of 1.8 million—is today America’s 18th largest city with a population of 700,000.  In the same time that America’s population more than doubled from 150 million to 310 million, a big, bad, corrupt and greedy government helped drive over 1 million productive people (55%) out of Detroit. 

•  In “Virtually Unreported: Detroit's Bankruptcy Came With Sky-High Tax Rates, Not 'Small Government,'” Newsbusters agreed.

Although, “MSNBC's Melissa Harris Perry claimed that Detroit's bankruptcy is a result of ‘when government is small enough to drown in your bathtub,’ . . . The truth is that Detroit has had quite a large government, . . . frightening rates of violent and nonviolent crime, incredibly awful schools, and a race-based culture that the press once praised. What is far less appreciated is what Detroit did to chase citizens and businesses out of the city in the form of sky-high taxes.  In 2012, Detroit's income tax was the highest in Michigan by far . . . .  The following graph illustrates how Detroit's property tax rates compare to the average of the 50 largest other cities in the U.S.:”



Generally speaking, Detroit’s recent tax rates have been two or three times higher than the national average.

Under the leftist political and financial model of “big government,” people and businesses are expected to accept all tax increases gracefully, just follow orders, pay them, and go on with life and business as usual. But, the reality is that the people don’t accept high taxes but instead try to leave the taxing jurisdiction or simply refuse to pay those taxes. 

The city government’s incompetence, corruption and mindless greed chased Detroit’s most productive private-sector members (on which the government predates or at least depends) out of the city. 

Result?  Detroit caved under the weight of big government—including the weight of pensions for government retirees who used to gloat over how “sweet” it was to work for the government.

Now, government retirees who once expected a lifetime of generous pensions have just six months of pension security.  After that, they might receive as little as ten cents for every pension dollar due.  

I guarantee that Detroit’s government pensioners won’t be gloating this time next year.


City of Chicago

According to the Chicago Sun-Times (“City of Chicago’s cash cushion plummets, debt triples, arrests drop, water use rises”), Chicago isn’t as bad off as Detroit is, but it’s not be so far behind, either.

“Last week, Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s ‘very large and growing’ pension liabilities, ‘significant’ debt service payments, ‘unrelenting public safety demands’ and historic reluctance to raise local taxes . . . .

“Mayor Rahm Emanuel closed the books on 2012 with $33.4 million in unallocated cash on hand—down from $167 million the year before—while adding to the mountain of debt piled on Chicago taxpayers . . . .  Experts recommend a cash cushion of at least $200 million for a budget the size of Chicago’s, according to the Civic Federation.

“Budget Director Alex Holt blamed the $133.6 million drop on ‘honest’ budgeting . . . .”

“Let’s be straightforward about what we’ve got to spend . . . . This is about matching revenues with expenses. You don’t want to over-tax people.”

“The new round of borrowing brings Chicago’s total long-term debt to nearly $29 billion. That’s $10,780 for every one of the city’s nearly 2.69 million residents. . . . Last year, now-retiring City Comptroller Amer Ahmad argued that the city’s debt load was not ‘troubling’ because, ‘We still have a very strong bond rating. Our fiscal position is getting better every year and we are aggressively managing our liabilities and obligations.’”

“Illinois Governor Pat Quinn cut $13.8 million for legislators' paychecks from a budget bill earlier this month, saying it wouldn't be restored until lawmakers addressed the state's $97 billion pension shortfall. He also suspended his own pay.”

“Illinois Comptroller Judy Baar Topinka said she has no choice but to withhold lawmakers' paychecks, citing a precedent-setting court case that bars her from paying state employees without a budget appropriation or court order.

“She said, a ‘serious precedent is being created,’ that was, ‘no way to run government.  Threats, blackmail and inertia may be good theater, but it makes us look ridiculous . . . . It’s time for leaders to lead.’"

She’s right about the “ridiculous”.  But even Comptroller Topinka seems ridiculous when she says “It’s time for the leaders to lead.”

“Illinois' unfunded pension liability is the worst in the nation because lawmakers either skipped or shorted payments to the state's five retirement systems for decades. Inaction on solving the pension problem has led to repeated credit rating downgrades . . . .”