Few people have been talking about a bailout for Detroit as it enters what is sure to be a long and painful journey through bankruptcy.
But Steven Rattner, a well-known player in New York and Washington who knows Detroit well, writes in Saturday's New York Times that there are ways the state and federal governments can help Detroit emerge successfully from Chapter 9.
The lead outside adviser to President Barak Obama during the Chrylser and General Motors bankruptcies, Rattner notes that neither the state nor the federal government signals an inclination to provide meaningful financial assistance.
That’s a mistake. No one likes bailouts or the prospect of rewarding Detroit’s historic fiscal mismanagement. But apart from voting in elections, the 700,000 remaining residents of the Motor City are no more responsible for Detroit’s problems than were the victims of Hurricane Sandy for theirs, and eventually Congress decided to help them.
America is just as much about aiding those less fortunate as it is about personal responsibility. Government does this in so many ways; why shouldn’t it help Detroit rebuild itself?
Detroit faces greater challenges than the automakers because the structure of its obligations is quite different from those of General Motors and Chrysler, Rattner writes.
The first duty to help lies with the state: Gov. Rick Snyder has made clear that Detroit’s success is key to Michigan’s success.
For starters, if the state assumes responsibility for the $1.25 billion in reinvestment spending that Detroit’s emergency manager, Kevyn Orr, has included in his proposed budget, the city could use those freed-up funds to trim the potential pension reductions of retirees. And the Obama administration should comb through its urban programs to try to allocate more funds to a city that is truly in distress. (If I thought it could pass Congress, I’d happily support a special appropriation, but the politics of any spending are toxic in Washington these days.)
Given the depth of Detroit’s hole, no one should doubt that one of the important principles of the auto rescue — shared sacrifice by creditors, workers and other stakeholders — should be maintained.
