For your late Sunday chuckle, do read John Tamny’s The Unions Didn’t Bankrupt Detroit, But Great American Cars Did. I am not chortling over Detroit putting out great American cars (several of our homegrown vehicles are excellent), I am groaning over the wage American autoworkers get in comparison to our foreign partners. I am all for our folks getting a livable salary, but the generous benefits package, plus the legacy costs of retired autoworkers really drive up the cost of our cars.
I had wanted to buy an American car when I returned from deployment and the two I looked at (the Jeep Wrangler and the Dodge Charger) were overpriced in comparison to what I could get from a foreign maker. And the American dealerships were run-down dumps. It was, quite frankly, very disheartening. Now at my Japanese car dealer, I’ve gotten to know folks from every department. I even hugged my sales-lady good-bye, emailed my service rep about questions, and generally enjoyed going to the dealer. It has never happened like that in my life.
As Detroit looks at a possible bankruptcy, the question becomes where do the cuts occur? Of the several options, retirees (pensioners) and investors are both being considered:
Officials overseeing Detroit’s finances have called for reducing — not eliminating — pension payments to retirees, but have not said how big those reductions might be. They emphasized that they were trying to spread the pain of bankruptcy evenly.
When the small city of Central Falls, R.I.,declared bankruptcy in 2011, a state law gave bondholders preferential treatment — effectively protecting investors even as the city’s retirees saw their pension benefits slashed by up to 55 percent in some cases.
Detroit, by contrast, wants to spread the losses to investors as well as pensioners, and hopes to find cheaper ways to cover retirees through the subsidized health exchanges being created by President Obama’s health care law.
Bill Nowling, a spokesman for Kevyn D. Orr, said the emergency manager’s restructuring plan would treat bondholders the same as retirees in bankruptcy.
“How can we tell pensioners or city workers that we’re going to have to adjust their payments on their pensions because of decisions that they didn’t make but that affect them, but that we’re going to pay more to people who made risky investments?” he said.
There are no quick solutions, but part of the blame rests squarely on the corruption that was/is rampant in Detroit. Thugs like former Mayor Kwame Kilpatrick and his pals looted the city. And they were not the only ones. . .