From one moment to the next the city of Detroit doesn’t know where its next bailout is coming from. Chronically unable to pay its bills, the city looks to the state for cash gifts to stave off default. Operating under the terms of a consent agreement hammered out with the state, Detroit faces fiscal uncertainty largely because it has failed to get adequate concessions from public employee unions that are unsustainable. And those concessions that they have wrested from unions, politicians in Detroit have been unwilling to enforce.
One prominent Detroit attorney, however, is facing the future of the Motor City with a bit more certainty.
He’s calling upon the city to declare bankruptcy.
"Detroit should go bankrupt," says Douglas Bernstein, according to the Detroit News. Bernstein is a partner in the law firm of Plunkett Cooney who specializes in bankruptcies. "It would be a recognition that they've hit bottom, and it's a chance to go on the upswing. I don't think they're going to be stigmatized as much as people think…. Otherwise, you're going to go down the path and be in one crisis after another. Yes, it's expensive and it should be a last resort. But at some point, you've had enough."
The bankruptcy would be the largest municipal bankruptcy in the history of the US.
While we are not at the point yet for the federal government to declare bankruptcy, you may rest assured that that day is coming, because the same forces that are driving Detroit to bankruptcy are driving the US as well.
There are fewer people building things and more people demanding things they didn’t build.
Whatever else one may say about it, if Obama meant to throw Detroit a fiscal lifeline with the auto bailout, it hasn’t worked. It demonstrates the futility and danger of the federal government commanding and controlling the recovery of any industry- or even the county.
It’s just not going to work out for most of us, but only for a favored few.
After $85 billion in federal bailout funds for the automakers headquartered in Detroit, there are no fiscal answers to what ails the city and the surrounding areas.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 29th, 2014 | John Ransom
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