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Comment by fnordfnordfnord | Hacker News Reader

>Years of unsustainable policies...

Yeah like kicking cans down roads with funny bond schemes 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.

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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.

I know, it's a shame for Detroit that it isn't "Too Big to Fail."

Is there some constructive alternative you have? In your dream world, how would Michigan have handled its Detroit problem?

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.

I'm not sure it counts as a constructive alternative if it requires time travel.

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.

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.

Wouldn't work in the least. Property tax delinquency in Detroit is already > 50% (http://www.detroitnews.com/article/20130221/METRO01/30221037...)

You can't squeeze blood from a stone.

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.

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.

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.

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.

LOL, what public sector unions?

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_...

http://www.nationalaffairs.com/publications/detail/the-troub...

From your second link "dramatic decline in overall union membership." which is what I meant to imply. Unions are fairly impotent today.

Unions in general are impotent, but the public unions (teachers, police, etc) are among the only ones that still have a lot of leverage.

Public-sector unions are the only unions left in the U.S. with much political zorch, more's the pity.

Why should unions have any political zorch? Why must collective bargaining require any amount of state intervention (besides, obviously, protecting individual liberty and property)?

I think the pattern has been established in cities which avoided bankruptcy, like San Jose - you hire a barebone skeleton of public employees, re-negotiate the contracts in light of macroeconomic conditions, and subcontract everything else - those employees are now eligible for 401k or IRA or other more exciting things.

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