The Real Story You Need To Know Behind the Detroit Pension Fight

When the city of Detroit filed for Chapter 9 bankruptcy in July 2013, America sucked in a collective gasp. This was the largest municipal bankruptcy filing in U.S. history by the amount of debt ($18–20 billion), and Detroit was the largest city ever to officially go bust. A few months before the bankruptcy, the state of Michigan appointed an emergency manager, Kevyn Orr, to sort things out in Motor City. Orr was given extraordinary powers to rewrite contracts and liquidate some of the city’s most valuable assets. The burning question: Who would be responsible for the enormous debt? Soon enough it became clear that the folks who would be asked to take the hit were not those who created the problems. Just as in so many other parts of the world in the wake of the 2007-’08 financial meltdown, innocent people who did nothing but get up every day and go to work would be asked to pay the bill.

To understand this story, first you have to understand the truth of what is happening with pensions across America. Media accounts, often influenced by the campaigns of well-funded organizations and individuals like billionaire anti-pension activist John Arnold, have too often promoted the false image of a widespread crisis in which overpaid public workers have been promised unaffordable and bloated pensions. That’s far from reality, Johnson’s work shows. In a new paper that will serve as an antidote to a distorted national narrative, he makes several facts clear:

1. Pension underfunding is not widespread.

2. State and local employees are not overcompensated.

3. Underfunding is linked to unrealistic expectations of returns.

4. Chasing big yield leads to big problems.

5. Big money politics and corruption are major culprits.

6. Cutting pensions is a choice, not a necessity.

7. Decisions made now have far-reaching implications.

Detroit is a city being looted and stripped bare. If we decide that those who are weak and vulnerable will be sacrificed to protect the wealthy and the powerful, then no one is safe. When promises are made, but then broken, a “train wreck is set up,” as Johnson puts it, and emergency manager Kevyn Orr appears to have his foot on the gas.


The Real Story You Need To Know Behind the Detroit Pension Fight

If you think of Detroit’s bankruptcy and its effect on public workers as far away and unrelated to life in your hometown, think again.