Detroit to renege on pensions? CA next?

June 16, 2013

By John Seiler

California’s finances are overflowing today. The Legislature just passed a $96.3 billion budget, although Gov. Jerry Brown still will have its say. It reminds me of the Detroit of my youth in the 1960s, called the “Arsenal of Democracy” because it built the guns, bombs and planes that crushed Hitler and Tojo in WWII. Not just rich people lived well, but the middle class was solid. Millions, black and white, flowed in from the American South and Europe to work high-wage factory jobs.

In an omen for California, Detroit just was declared insolvent by Emergency Manager Kevyn Orr, who said, “We are tapped out.” Bankruptcy is expected in 30 days.

As with California, pensions are a big part of the problem:

“Orr recognizes the state constitution protects retiree pensions but wants to negotiate anyway – or possibly change the law.

“ ‘We might need legislative relief,’ he said. ‘This is the culmination of years and years of kicking the can down the road and borrowing from wherever they could.”

“Instead of the current health-care system, retirees would be offered a new program that relies heavily on Obamacare and Medicare, Orr said.”

Effectively, Orr is saying the city could default on its pensions, but might have to get the Legislature to change the state constitution. Given that the state doesn’t want to pick up the tab, that well could happen.

As to changing Detroit’s medical system for retirees, that’s only fair. The unions have been big supporters of Obama and Obamacare. So their union retirees, instead of enjoying gold-plated retiree health care, should get the same socialist Obamacare and Medicare as the rest of us.

Orr’s attitude toward the Michigan Constitution is important, because the California Constitution supposedly has a similar clause protecting pensions. But if there’s no money, then that will just have to be changed. People simply will not put up with half or more of their local taxes going to pensioners who no longer work for the people, thus mandating massive cuts in city services.

If government just sends out pensions checks, why even have a government at all?