Detroit Bankruptcy Goes Forward

Detroit is one step closer to dealing with the scrum of creditors trying to wrest away the city’s few resources.  Federal Judge Steven Rhodes’s ruling allows the city to proceed in Chapter Nine bankruptcy, meaning a resolution to the financial tug-of-war is on the horizon.  The designation protects the city from other suits.  The eventual payouts will be decided in one case in one court, as Rhodes now has exclusive jurisdiction.  In statements, Rhodes made it clear that everything is on the table.  Protesters outside the Federal Courthouse in Detroit, some of them retired Detroit employees, made known their passion with demanding signs and chants of “Protect our pensions now,” but inside, the Judge’s word was pensions have no “extraordinary protection” under the law.  The sale of art from the Detroit Institute of Arts and other city assets could not, the judge explicitly stated, prevent cuts into funding for retirees.  City workers’ union AFSCME is appealing the decision, taking their case to the U.S. District court within hours of the ruling, but the bankruptcy case is going ahead.
This is good.  Bankruptcy is often seen as a failure, and of course it should be avoided, but in the eventuality of true financial crisis, it is often the best option.  When Detroit shakes its many claimants, paying them cents on the dollar, the city government will be freer than it has been for a long time to serve its citizens well.  Debt has sucked massive portions of limited funds from city services for years.  A debtless city can better curb crime, improve schools, and elevate quality of life.  One important reality is that there will be suffering involved when a municipality charged with the governance of so many people ends up in such a bind.  The bankruptcy makes it more likely that some of that pain is felt by retirees, people who worked for the city, some of whom have other sources of income, some of whom contributed knowingly or not to the massive issues facing the city today.  Nobody deserves to lose something they were promised, especially considering the horrid circumstance such loss creates for some blameless individuals.  The bankruptcy is inherently imperfect.  Promises will be broken, but it may allow more important promises to be kept.  Detroiters are promised safety, education, and opportunity, or in other words, life, liberty, and the pursuit of happiness.  If the bankruptcy means that an innocent child born in Detroit gets a little bit more of what he or she deserves, even if an adult who used to work there does not, then the bankruptcy is better than nothing.  Ideally, the wealthiest speculators, some of whom purchased Detroit bonds hoping that the city’s inability to pay on time could pay off through extortionist court battles, will hurt the most, but it is likely that suffering will be shared disproportionately by workers and citizens.  Of course, it did not have to get this bad.  According to Judge Rhodes, Detroit “could have and should have filed for bankruptcy long before it did, perhaps even years before.”