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<h1 class="title" id="page-title">Applying the Shock Doctrine in
Detroit</h1>
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<div class="field-item odd"> <big><big>by Dianne Feeley </big></big></div>
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<div class="field-item odd"><big><big> December 5, 2013 </big></big></div>
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<p><big><big>The fix was in from the beginning – that’s pretty much
what U.S. Bankruptcy Judge Steven Rhodes announced in his
December 3 ruling that gives state-appointed Detroit Emergency
Manager Kevyn Orr the green light to take the city into
bankruptcy. Even while chiding Orr’s lack of “good faith” in
the negotiations with unions and other creditors before filing
for bankruptcy last July, Rhodes agrees with Orr's claim that
the city no longer has the resources to provide basic
services. That (alleged) reality trumps the Michigan
Constitution guaranteeing the integrity of public workers’
pensions, the city’s control of its assets, the dubious
legality of the Emergency Manager law itself, and all other
considerations. Detroit, the judge mused, should have filed
bankruptcy years earlier.
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<p><big><big><img src="cid:part1.09000204.06050209@comcast.net"
style="border: 1px solid #000" width="580"> </big></big></p>
<p><big><big>The bankruptcy procees, Rhodes further ruled, will
proceed without interruption while his decision is appealed.
Next Orr will develop a “plan of adjustment” by early 2014 and
reopen negotiations with those who are expected to take a
haircut. In reducing those obligations, Orr would supposedly
free up that money to rebuild the city’s deteriorating
infrastructure. Millions are already being used to pay
consultants for their restructuring proposals, including Orr’s
own former law firm Jones Day.
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<p><big><big>Rhodes would then approve or modify the results
sometime in late spring or early summer of 2014. While stating
that Chapter 9 of the federal bankruptcy law permits the
raiding of pension funds despite the state’s constitutional
ban on doing so, he announced that he would not necessarily
“rubber stamp” Orr’s plan. The big question for the
shock-doctrine restructurers may be how far pensions can be
cut for retired city workers – many of whom barely get by as
it is, and in the case of uniformed personnel (fire and
police) do not collect Social Security – without the risk of a
political or social explosion. </big></big></p>
<p><big><big><img src="cid:part2.09040406.09030802@comcast.net"
style="border: 1px solid #000" width="580"><br>
Detroit's "Emergency Manager" Kevyn Orr. Photo by Rebecca
Cook, Reuters.</big><big>
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<p><big><big>Even if the pensions of city workers are only slightly
trimmed rather than stolen outright, Rhodes’ decision sets a
frightening precedent for state workers in Michigan. Other
states, such as Illinois, also have constitutional guarantees
that can now be overrun if the decision were to stand.
</big></big></p>
<p><big><big>When the full text of Rhodes’ 140-page opinion is
released within a day, it will lay out the objections to the
bankruptcy eligibility and refute them. Rhodes agrees with
Orr’s assessment that the city owes $18.5 billion in long-term
debt, of which $3.5 billion is for retiree pensions and $5.7
billion for retiree health care. Of course workers have
contributed to the pension plan, and the city has put aside
money for both over the years. (Orr, however, skipped the
city’s 2013 contribution.)
</big></big></p>
<p><big><big>Also counted in the debt is $5.7 billion for Metro
Detroit’s water and sewerage bill, even though that debt is
considered a “secured” debt, completely covered by user fees.
</big></big></p>
<p><big><big><img src="cid:part3.06030703.06000900@comcast.net"
style="border: 1px solid #000" width="580"><br>
Photo by David Guralnick.</big><big>
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<p><big><big>One might wonder why long-term debt features so
prominently in the discussion. After all, most homeowners have
a long-term debt (their mortgage) but don’t count that total
amount when they are figuring up their yearly cash flow. One
might also wonder why the banks--who have stiffed the city
with huge fees, variable interest rates and taken advantage of
lowered bond ratings to jack up interest--are not castigated
for their role. But the banks are first in line for repayment,
under the pretext that their loans are properly “secured”
through pledged tax revenues. Orr has stated that secured
loans would be paid in full.
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<p><big><big>To understand the politics behind this bankruptcy one
has to understand the essence of capitalism. It is the
expropriation of assets — land, nature’s resources and
workers’ capacity to produce — that produces wealth. Detroit’s
assets are on the chopping block. After so many years of
corporate downsizing and relocation, after so many years of
renovating the downtown at the expense of the neighborhoods,
this is a deepening austerity. The pillage is on.
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