In
the wake of Detroit’s bankruptcy, you may be wondering: How could anyone
be surprised that a city so tied to manufacturing faces crippling
problems in an era that has seen such an intense public policy assault
on domestic American manufacturing? You may also be wondering: How could
Michigan officials possibly talk about cutting the average
These
are fair questions — and the answers to them can be found in the
political mythology that distorts America’s economic policymaking.
As
mythology goes, the specific story being crafted about Detroit’s
bankruptcy is truly biblical — more specifically, just like the
,
it is copied right from the chapter in the conservative movement’s
bible about how to distort crises for maximum political effect.
In
the conservative telling of this particular parable, Detroit faces a
fiscal emergency because high taxes supposedly drove a mass exodus from
the city, and the supposedly unbridled greed of unions forced city
leaders to make fiscally irresponsible pension promises to municipal
employees. Written out of the tale is any serious analysis of
macroeconomic shifts, international economic policy failures, the
geography of recent recessions and unsustainable corporate welfare
spending.
This is classic right-wing dogma — the kind that employs
selective storytelling to use a tragic event as a means to radical
ends. In this case, the ends are — big shocker! — three of the
conservative movement’s larger long-term economic priorities: 1)
preservation of job-killing trade policies 2) immunity for corporations
and 3) justification for budget policies that continue to profligately
subsidize the rich.
Detroit
isn’t just any old city — it happens to be the biggest population
center in the state hit the hardest by the right’s corporate-written
trade agenda. Indeed, according to the Economic Policy Institute, the
state
lost more jobs than any other from NAFTA (43,600, or 1 percent of its total job base) and lost another
79,500 jobs thanks to the China PNTR deal. And that’s just two of many such trade pacts. Add to this the city’s
disproportionate reliance
on American auto companies which made a series of horrific business
decisions, and Detroit is a microcosmic cautionary tale about what
happens when large corporations are allowed to write macro economic
policy and dictate the economic future of an entire city.
If told,
this cautionary tale would likely spark a discussion about revising
current trade deals, regulations, public investment and industrial
policy in general. That is, it would spark precisely the discussion that
the conservative movement and the corporations that fund
politicians don’t want America to have. So the right works to make sure
that discussion is short circuited by a narrative that focuses the
Detroit story primarily on taxes and public pensions.
That is, of
course, by design. The less Detroit prompts serious questions about
trade policies and the auto industry, the less Detroit can be used as a
rationale for changing those conservative, corporate-enriching policies
and that industry. Likewise, the more taxes and retirement benefits can
be blamed for Detroit’s downfall, the more Detroit’s tragedy can be used
as a clarion call by the right to slash both.
Focusing on pensions to protect corporate welfare and tax cuts
That
brings us to how this all plays into the right’s push to enact ever
more regressive tax cuts, protect endless corporate welfare and
legislate new reductions in workers’ guaranteed pensions.
These
latter objectives may seem unrelated, but they all complement each other
when presented in the most politically opportunistic way. It’s a
straightforward conservative formula: the right blames state and
municipal budget problems exclusively on public employees’ retirement
benefits, often underfunding those public pensions for years. The money
raided from those pension funds is then used to enact expensive tax cuts
and corporate welfare programs. After years of robbing those pension
funds to pay for such giveaways, a crisis inevitably hits, and workers’
pension benefits are blamed — and then slashed. Meanwhile, the massive
tax cuts and corporate subsidies are preserved, because we are led to
believe they had nothing to do with the crisis. Ultimately, the extra
monies taken from retirees are then often plowed into even more tax cuts
and more corporate subsidies.
We’ve seen this trick in states all
over America lately. In Rhode Island, for instance, the state
underfunded its public pensions for years, while
giving away $356 million in a year in corporate subsidies (including an epically embarrassing
$75 million to Curt Schilling). It then
converted the pension system into a Wall Street boondoggle), all while preserving the subsidies.
Similarly, in Kentucky, the state raided its public pension funds to finance
$1.4 billion a year in tax subsidies, and then when the crisis hit, lawmakers there
slashed pension benefits — not the corporate subsidies.
The
list of states and cities following this path goes on — but you get the
point. In the conservative narrative about budgets in general, the
focus is on the aggregate annual
$333 million worth of state and local pension shortfalls — and left out of the story is the fact that, according to the
New York Times,
“states, counties and cities are giving up more than $80 billion each
year to companies” in the form of tax loopholes and subsidies.”
The mythology around Detroit, then, is just another version of this propaganda.
So, for instance, from the administration of right-wing Gov. Rick Snyder, we are hearing a lot of carping about the
$3.5 billion in pension obligations
that are part of the city’s overall $18 billion in debt. The focus
leads casual onlookers to believe that — even though they on average get
a pension of
just $19,000 a year
— municipal workers’ supposed greed single-handedly bankrupted the
city. What we aren’t hearing about, though, is the city and state’s long
history of underfunding its pensions, and using the raided money to
spend billions of dollars on corporate welfare.
For a good sense
of some of the most expensive, absurd and utterly wasteful boondoggles
in the Detroit area over the last few decades, read this piece from
Crain’s Detroit or see this 2011 article entitled
“Detroit’s Corporate Welfare Binge” by
Detroit News columnist Bill Johnson. Alternately, recall this is in the
heart of a region whose governments infamously spent
$55 million
of taxpayer money in 1975 (or a whopping $180 million in
inflation-adjusted dollars) on one professional football stadium, then
spent another
$300 million on yet another football stadium, then
sold off the original stadium for just $583,000. Or, just note that Detroit is the largest city in a state that, according to the
New York Times, spends more per capita on corporate subsidies — $672 or $6.6 billion a year — than most other states.
By
focusing the blame for Detroit’s bankruptcy solely on workers’
pensions, rather than having a more comprehensive discussion that
includes both pension benefits and corporate giveaways, the right can
engineer the political environment for the truly immoral reality
mentioned at the beginning of this article — the one highlighted this
week by the
Associated Press
story headlined “Arena Likely Still On Track, Business As Usual For
Sports Teams Despite Bankruptcy Filing.” Yes, that’s correct: at the
same time government officials are talking about slashing the meager
$19,000-a-year pensions of workers who don’t get Social Security, those
officials are promising that they will still go forward with a plan to
spend a whopping $283 million of taxpayer money on a new stadium for the
Red Wings.
Notably, a political environment that encourages these
kind of immoral decisions is beneficial not merely to the corporate
interests who directly benefit from such giveaways, but also to the Wall
Street investors who
still own the outstanding bonds
that financed some of the subsidies. Taken together, then, a skewed
discussion about budget shortfalls that excludes scrutiny of these
subsidies and focuses only on worker pensions predictably ends up
prioritizing the financial interests of corporate welfare recipients and
Wall Street bondholders over municipal retirees.
It’s the same
dynamic on taxes. From the right, Detroit is being cited in the
discussion about budget shortfalls as proof of the need for austerity.
Yet, we aren’t hearing much about why in the face of such shortfalls
Snyder just
devoted $1.7 billion to a new corporate tax cut that will likely
exacerbate the state’s deficit, nor are we hearing much about why state law
compelled Detroit to forfeit other desperately needed tax revenues. Again, the goal here is to make sure that the conversation is one that
only is about cutting retirement benefits — not one that adds the prospect of progressive tax reform to the debate.
For
his part, Kevyn Orr — the unelected “emergency manager” imposed on
Detroit by Snyder — insists he will be evenhanded in distributing the
pain of the city’s bankruptcy. But with Wall Street bondholders
intensifying
their push to make sure all the pain is felt by public employees, and
with the right’s blame-the-workers narrative preventing any real
discussion of corporate subsidies and tax policies, it’s a good bet the
$19,000-a-year pensioners are going to bear a disproportionate share of
the sacrifice. After all, out of all of this situation’s players —
corporations that want public subsidies, bondholders, rich folk who want
more tax cuts, right-wing Synder administration officials and municipal
workers — the retirees earning benefits just above the poverty line
have the least amount of political power.
So, as always, they
probably won’t be at the negotiating table. Instead, they’ll almost
certainly be where they usually are: on the menu, exactly where the
conservative movement wants them.
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