Does Detroit Deserve Another Bailout?

It’s not really a secret that Detroit isn’t doing well. It’s population is dwindling, unemployment is at a whopping 17.7%, and they just filed for bankruptcy. Meanwhile, Michigan’s Governor Rick Snyder is offering $350 million from the state to back unfunded liability pensions and the city’s art collection. As Snyder puts it, “This is a settlement. This is not a bailout.” 

This is a refrain he has been stating over and over, while trying to mitigate any damage to his businessman brand. “This is not a bailout of paying the debts directly of the city of Detroit. This is not a bailout of banks and other creditors,” said Governor Snyder, “This is focused on helping reduce and mitigate the impact on retirees.”

Although there are strings attached, it does still seem to be, at it’s core, just that: a bailout. 

“Much like the auto bailouts, a state bailout of detroit will only mask the underlying problems and make reform more difficult to achieve,” Said Ben Howe, contributor and director of the upcoming film Bankrupt, which digs into the financial straits in which Detroit finds itself. “There are massive structural issues with the city that have caused citizens to flee the area in droves.”

He also understands why the unions feel that they have this bargaining power. Howe continued, “Why should (the unions) be afraid? When the UAW challenged GM, the government caved and they got everything they asked for. I’m pretty sure that’s what they’ll expect this time as well.”

Currently, Detroit’s powerful labor unions are fighting the bankruptcy. In order to get the backing from the state, they would have to drop these legal challenges.  Union leaders, however, aren’t convinced. They say that Snyder needs the state of Michigan to fund all city pensions, and won’t accept anything less. Another caveat is that pensions would require more independent oversight. In the past, bad investments have plagued the finances of Detroit. 

This deal would also mean that the incredible collection at the Detroit Institute of Arts would stay in Detroit. Some have suggested that the DIA sell the collection to pay for other needs within the city. A group of private foundations are also working to save Detroit’s collection, pledging $330 million to that cause. Any deal would, of course, still be subject to legislative approval.

The question being asked by many Michiganders, though, is this: does Detroit deserve what is, essentially, another bailout? Do taxpayers around Michigan need to keep spending money to subsidize Detroit’s mismanagement?

As Michigan Capitol Confidential put it, “The financial burden for cleaning up this mess should fall more closely on those who made it.” Just last month, Detroit Emergency Manager Kevyn Orr was asked if state help was on the table, and he replied “No. It was made abundantly clear that a state bailout of Detroit’s finances was not a possibility.” 

I have family and great friends in the Detroit area, and hate to see Detroit suffer. As a Michigander (and an American), however, I’m tired of having my money subsidize poor choices. Semantics aside, that appears to be just what this proposal is.