Not a lot of comment on this, other than to say it jibes with my own personal observations.
After this decision came out, Joe Scarborough said to his panel on MSNBC, “The problem came from, you know, unions that, you know, push politicians to overpromise benefits that they couldn’t pay for in exchange for votes and money.” What do you make of that kind of analysis?To me, it's interesting that Turbeville mentions Detroit's high number of subprime mortgages and that financial entities took advantage of that...Detroit had its own subprime lending bust years earlier than the rest of the country experienced in the mid-2000s.
Well, it’s just based on preconceived notions and not careful analysis of the circumstances. That isn’t what has transpired over the last five years. Because the data don’t reflect that.
And what do they show?
The data show that the current level of salaries paid out by the city, and benefits that are to be paid out are very moderate … The city over the last five years has tremendously cut its operating expenses, close to 40 percent – which is mostly salaries — and is now operating at levels of employee per capita that are imprudent. And the benefits, if you look into them carefully, are quite modest …
The time scales that we’re operating in now suggest strongly that this is largely an issue of a devastated tax base and a reduction in state revenue-sharing, exacerbated by some really potentially concerning cash requirements associated with derivatives deals and overly complex and imprudent financial transactions.
Who’s to blame for the devastated tax basis?
There’s a lot of things. One is the policies encouraged flight from the city … There are several other issues … 70 percent of the mortgages were subprime in the city of Detroit — so in one sense the banks caused it, right? So there’s lots of different causes that put them in a position where in 2007, 2008, they were absolutely keyed up to be devastated by the financial crisis and the Great Recession.
Read the whole interview, although there's an interesting observation below the fold:
On the revenue sharing, you wrote following the decision that “the bankruptcy was ‘fixed.’” In what sense?
There was evidence produced before the judge that the bankruptcy was fixed, but he concluded that the evidence was insufficient to say that it was …
I’m not a court and I don’t have rules of evidence, so I can draw conclusions based on looking at something that quacks and walks like a duck, and conclude it’s a duck.
There were tremendous incentives … benefits that the state the political forces that control the state derive from this whole thing … The city is largely African-American, largely has a certain political philosophy, and [for] a lot of reasons unions are relatively strong forces in the city and can pursue their political agendas. The state is far more characterized by the kind of philosophies that the Tea Party espouses, right? And it’s a state that’s split fairly evenly. That means it’s a swing state and is in play in federal elections. It also means it can go back and forth in statewide elections.
So it would be in the political interests of the governor and the prevailing forces in the state Legislature to restructure the city of Detroit and reduce the political virility of Detroit and its environs by politic[s], right? So one sort of looks at the series of events, the whole notion of the emergency manager is for the state to take over the political power of municipalities, and in particular Detroit, which is of course the largest city by far in Michigan, and use the occasion of a financial crisis to give effect to their philosophies. So that, as Rahm Emanuel once famously said, no good crisis should go to waste. There was a disincentive to do reasonable prudent things to avoid the worst, if you will … When it came time to deal with state revenue-sharing effective 2012, ’13, the state Legislature elected to reduce state revenue-sharing, particularly as it related to Detroit …
If you look at [the emergency manager’s] recommendations, they’re clearly designed to be based on a philosophy that workers’, public employees’ salaries and benefits should be reduced. And that is not so much based on an analysis of whether they’re too high right now. It is based on a belief that that is directly connected to the power of unions …
The outcome was what they wanted.