Motor City Madness

You’ve probably already heard that a judge has decided to allow the city of Detroit to file for Chapter 9 bankruptcy, which would make the Motor City the largest municipality in the country to do so. The judge also ruled that pensions for the city’s workers and retirees can be cut as part of the bankruptcy process. Not surprisingly, the Pension Rights Center is appalled by this decision. In a statement that we released last week, PRC Executive Vice President Karen Friedman said,

The decision to let Detroit’s bankruptcy move forward means that Emergency Manager Kevyn Orr can proceed with his plan to cut the pensions of the city’s workers and retirees. This is unprecedented and it is unconscionable…

Cutting the benefits of retirees, who are less able to get back into the workforce, is simply wrong. These hard-working Americans didn’t create this mess, but they are being scapegoated for it…

Until now, it was universally recognized that retirees’ benefits deserved the strongest protections. This is written into the federal private pension law and is ingrained in laws in almost every city and state in the country, as well as many state constitutions. But with the Detroit bankruptcy court’s ruling, this fundamental principle is being undermined.

We are not the only ones who feel that already-earned benefits shouldn’t be cut. Detroit’s public pension plans have already filed appeals challenging the judge’s decision. Michigan’s Attorney General Bill Schuette issued a statement vowing to protect the city’s pensions, even though he agrees that the city should be allowed to file for bankruptcy. The city’s largest paper, the Detroit Free Press, called on Michigan Governor Rick Snyder to protect city pensions in an editorial titled, “Snyder must uphold state's constitutional protection of Detroit pensions.”

Dean Baker, co-director of the Center for Economic and Policy Research, said of the decision, “We have opened up a new sport for America's elite: pension theft.” In Newsweek, journalist David Cay Johnston echoed a similar sentiment: “This is nothing short of theft, as pensions are simply deferred wages, that is, money that workers could have taken as cash in their regular paychecks had they not opted to set it aside.” Like the Pension Rights Center, Johnston sees a link between actions that are undercutting public pensions and attacks on pensions in the private sector.

We are committed to stopping these attacks on guaranteed pensions, to ensuring that people get the benefits they have earned, and to fighting for retirement security for all.