If you've been following the ongoing ordeal of Detroit, Michigan and its struggles with staggering debts, you've probably heard about the billions of dollars owed, in part due to onerous benefits and pension debts incurred through over-generous contracts with public employees. The narrative is that those greedy unions bled the city dry while its industrial base was collapsing and whites were fleeing to the suburbs.
And, there may some truth to that narrative - BUT, there's also some other things going on you may not have heard about, including some deliberate moves to make a bad situation far worse than it has to be. Detroit is a crime scene, with the fingerprints of the Wall Street looters all over it, along with their enablers on the right. The more one looks beyond the narrative in the press about Detroit, the more clearly it can be seen as Shock Doctrine disaster capitalism at work.
More below the Orange Omnilepticon.
The Guardian UK has an article detailing some of the findings of the DEMOS Thinktank.
Detroit's debts are a fraction of the $18bn lawyers pushing for bankruptcy say they are, and their costs are "irrelevant, misleading and inflated," according to a report released Wednesday.
A Demos thinktank report, issued as a city judge decides whether to allow Detroit to file for the largest municipal bankruptcy in US history, lays the blame for the city's woes at the feet of falling revenues, Wall Street banks and "extreme assumptions" calculated to make its problems worse than they are.
emphasis added
DEMOS has a straightforward mission:
Demos is a public policy organization working for an America where we all have an equal say in our democracy and an equal chance in our economy.
Our name means “the people.” It is the root word of democracy, and it reminds us that in America, the true source of our greatness is the diversity of our people. Our nation’s highest challenge is to create a democracy that truly empowers people of all backgrounds, so that we all have a say in setting the policies that shape opportunity and provide for our common future. To help America meet that challenge, Demos is working to reduce both political and economic inequality, deploying original research, advocacy, litigation, and strategic communications to create the America the people deserve.
Demos’ work is guided by three overarching commitments:
Achieving true democracy by reducing the role of money in politics and guaranteeing the freedom to vote,
Creating pathways to ensure a diverse, expanded middle class in a new, sustainable economy, and
Transforming the public narrative to elevate the values of community and racial equity.
DEMOS has got its work cut out for it, and that's understating the case if anything. There are a number of reports at the site; it looks like quite a resource for a number of critical economic issues. The
Detroit report is here. The opening two paragraphs pull no punches:
THE DETROIT BANKRUPTCY November 20, 2013 Wallace Turbeville
The City of Detroit’s bankruptcy was driven by a severe decline in revenues (and, importantly, not an increase in obligations to fund pensions). Depopulation and long-term unemployment caused Detroit’s property and income tax revenues to plummet. The state of Michigan exacerbated the problems by slashing revenue it shared with the city. The city’s overall expenses have declined over the last five years, although its financial expenses have increased. In addition, Wall Street sold risky financial instruments to the city, which now threaten the resolution of this crisis. To return Detroit to long-term fiscal health, the city must increase revenue and extract itself from the financial transactions that threaten to drain its budget even further.
The Shortfall
Detroit’s emergency manager, Kevyn Orr, asserts that the city is bankrupt because it has $18 billion in long-term debt. However, that figure is irrelevant to analysis of Detroit’s insolvency and bankruptcy filing, highly inflated and, in large part, simply inaccurate. In reality, the city needs to address its cash flow shortfall, which the emergency manager pegs at only $198 million, although that number too may be inflated because it is based on extraordinarily aggressive assumptions of the contributions the city needs to make to its pension funds.
LOTS of emphasis added
The entire report is available for download, and it demolishes the narrative playing out in the press coverage of the Detroit's financial woes. A snippet from the conclusion:
Detroit’s bankruptcy is, at its core, a cash flow problem caused by its inability to bring in enough revenue to pay its bills. While emergency manager Kevyn Orr has focused on cutting retiree benefits and reducing the city’s long-term liabilities to address the crisis, an analysis of the city’s finances reveals that his efforts are inappropriate and, in important ways, not rooted in fact. Detroit’s bankruptcy was primarily caused by a severe decline in revenue and exacerbated by complicated Wall Street deals that put its ability to pay its expenses at greater risk. To address the city’s cash flow shortfall and get it out of bankruptcy, the emergency manager should focus on increasing revenue and extricating the city from these toxic financial deals….
emphasis added
The attacks on union pensions and benefits, the calls to privatize city services, and sell off the city collection of fine art, the structuring of bankruptcy in a way that would put Wall Street ahead of the interests of the citizens of the city, the exaggeration of debts… this is how disaster capitalism works.
The troubled history of the city, its dysfunctional former mayor helped set up the situation. "Mistakes were made" is putting it mildly. But - it didn't happen in a vacuum. There's the bad deals for the city from which financial institutions profited; generous deals were handed out to businesses with little actual return to justify them - and a state government under Governor Rick Snyder who saw a chance to push a corporate-conservative disaster capitalism agenda under cover of 'cleaning up' Detroit. The state's Emergency Manager Law is a convenient tool to short-circuit the operation of democratic government and legal obligations.
Make no mistake - what's happening in and to Detroit is part and parcel of the struggle for what kind of country America is going to be: a country of, by and for the people, or a piece of property for the ownership class, to be carved up as suits their fancy. Charles P. Pierce has a couple of examples of this agenda at work elsewhere, in Washington State, and in Costa Rica.
Keep an eye on DEMOS - there's starting to be some pushback against the looters of Disaster Capitalism, and DEMOS could turn out to be a critical part of that effort. It's about time we had an alternative to the "pravda" put out by the American Enterprise Institute, the Cato Institute, etc. etc.