4 ms·

>Years of unsustainable policies... Yeah like kicking cans down roads with funny bond schemes http://blogs.marketwatch.com/fundmastery/2010/03/12/goldman-sachs

>Years of unsustainable policies... Yeah like kicking cans down roads with funny bond schemes http://blogs.marketwatch.com/fundmastery/2010/03/12/goldman-sachs-detroit-junk-bonds-robocop/ http://blogs.marketwatch.com/fundmastery/2010/03/12/goldman-... >pension benefits, and health benefits to retirees. This is money taken away from providing services to current residents of the city. It's called paying your bills. Honoring commitments made to those retirees, some of which are current residents of the city.

tptacek 13y ago
It's all well and good to talk about "honoring commitments made to retirees", but if the city can't provide basic services because 40 cents of every dollar it spends goes to debt service, the city isn't in a position to honor those commitments anyways; it will simply fail harder and more painfully for all its residents in the futile attempt to honor those intractable commitments.
- fnordfnordfnord 13y ago
  I know, it's a shame for Detroit that it isn't "Too Big to Fail."
  - tptacek 13y ago
    Is there some constructive alternative you have? In your dream world, how would Michigan have handled its Detroit problem?
    - mhuffman 13y ago
      I do. Raise property taxes and sales taxes until you can pay your bills. The solution is actually simple. It is impossible for elected officials to do and keep their job, but simple.
      - tcoppi 13y ago
        That might not actually work, seeing as how Detroit already has a population problem and higher taxes will probably force even more of them out, leading to flat or lower overall revenue.
        fr0sty 13y ago
        Wouldn't work in the least. Property tax delinquency in Detroit is already > 50% (http://www.detroitnews.com/article/20130221/METRO01/302210375 http://www.detroitnews.com/article/20130221/METRO01/30221037...) You can't squeeze blood from a stone.
    - fnordfnordfnord 13y ago
      In dream-world, we'd never have problems like this! A constructive alternative to Detroit's problem? They should have declared bankruptcy a long time ago, before levering up their debt with bond schemes.
      - zevyoura 13y ago
        I'm not sure it counts as a constructive alternative if it requires time travel.
- bilbo0s 13y ago
  Fnord is also being a bit misleading... Not to put too fine a point on it... But the VAST majority of the money spent "honoring commitments made to retirees" is not made to "current residents of Detroit". Most of it was just a one-way funnel of money from Detroit out to the suburbs, other areas of Michigan and beyond. It makes no sense for Detroit... to essentially be funding people in the suburbs... by taking on debt. That was just craziness.
rayiner 13y ago
A lot of those bond schemes were undertaken because overly generous pension promises had left the governments in a situation of having to meet unreasonable growth targets in order to meet their obligations. A lot of the craziness in 2008 was the result of pension fund managers struggling to recoup the losses of 2001 and get back on track.
- lostoptimist 13y ago
  And how is bankruptcy going to prevent this from occurring again? Will future politicians still have the ability to grant crazy pensions knowing their term won't endure its negative effects? Not sure what the solution is but I don't think bankruptcy will solve it.
  - rayiner 13y ago
    1) Those lofty retirement guarantees were much easier to bargain for before everyone realized that the days of heady growth in America were done. 2) The bankruptcies will dramatically weaken the public sector unions.
    - fnordfnordfnord 13y ago
      LOL, what public sector unions?
      - mh- 13y ago
        In 2009 the U.S. membership of public sector unions surpassed membership of private sector unions for the first time, at 7.9m and 7.4m respectively. http://en.wikipedia.org/wiki/Public-sector_trade_union#cite_note-17 http://en.wikipedia.org/wiki/Public-sector_trade_union#cite_... http://www.nationalaffairs.com/publications/detail/the-trouble-with-public-sector-unions http://www.nationalaffairs.com/publications/detail/the-troub...
        fnordfnordfnord 13y ago

tptacek 13y ago

It's all well and good to talk about "honoring commitments made to retirees", but if the city can't provide basic services because 40 cents of every dollar it spends goes to debt service, the city isn't in a position to honor those commitments anyways; it will simply fail harder and more painfully for all its residents in the futile attempt to honor those intractable commitments.

fnordfnordfnord 13y ago
I know, it's a shame for Detroit that it isn't "Too Big to Fail."
- tptacek 13y ago
  Is there some constructive alternative you have? In your dream world, how would Michigan have handled its Detroit problem?
  - mhuffman 13y ago
    I do. Raise property taxes and sales taxes until you can pay your bills. The solution is actually simple. It is impossible for elected officials to do and keep their job, but simple.
    - tcoppi 13y ago
      That might not actually work, seeing as how Detroit already has a population problem and higher taxes will probably force even more of them out, leading to flat or lower overall revenue.
      - fr0sty 13y ago
        Wouldn't work in the least. Property tax delinquency in Detroit is already > 50% (http://www.detroitnews.com/article/20130221/METRO01/302210375 http://www.detroitnews.com/article/20130221/METRO01/30221037...) You can't squeeze blood from a stone.
  - fnordfnordfnord 13y ago
    In dream-world, we'd never have problems like this! A constructive alternative to Detroit's problem? They should have declared bankruptcy a long time ago, before levering up their debt with bond schemes.
    - zevyoura 13y ago
      I'm not sure it counts as a constructive alternative if it requires time travel.
bilbo0s 13y ago
Fnord is also being a bit misleading... Not to put too fine a point on it... But the VAST majority of the money spent "honoring commitments made to retirees" is not made to "current residents of Detroit". Most of it was just a one-way funnel of money from Detroit out to the suburbs, other areas of Michigan and beyond. It makes no sense for Detroit... to essentially be funding people in the suburbs... by taking on debt. That was just craziness.

rayiner 13y ago

A lot of those bond schemes were undertaken because overly generous pension promises had left the governments in a situation of having to meet unreasonable growth targets in order to meet their obligations. A lot of the craziness in 2008 was the result of pension fund managers struggling to recoup the losses of 2001 and get back on track.

lostoptimist 13y ago
And how is bankruptcy going to prevent this from occurring again? Will future politicians still have the ability to grant crazy pensions knowing their term won't endure its negative effects? Not sure what the solution is but I don't think bankruptcy will solve it.
- rayiner 13y ago
  1) Those lofty retirement guarantees were much easier to bargain for before everyone realized that the days of heady growth in America were done. 2) The bankruptcies will dramatically weaken the public sector unions.
  - fnordfnordfnord 13y ago
    LOL, what public sector unions?
    - mh- 13y ago
      In 2009 the U.S. membership of public sector unions surpassed membership of private sector unions for the first time, at 7.9m and 7.4m respectively. http://en.wikipedia.org/wiki/Public-sector_trade_union#cite_note-17 http://en.wikipedia.org/wiki/Public-sector_trade_union#cite_... http://www.nationalaffairs.com/publications/detail/the-trouble-with-public-sector-unions http://www.nationalaffairs.com/publications/detail/the-troub...
      - fnordfnordfnord 13y ago