Detroit's financial criminals leave evidence the size of a hockey stadium
Every now and again there's a piece of crystal clear evidence left at the scene of a complex financial crime that shows, beyond any reasonable doubt, what went down.
If future generations want to understand why the current era is sometimes referred to as a new Gilded Age, they need look no further than Detroit. The city's financial troubles have far more to do with deindustrialization, destructive trade policies, population loss, political mismanagement and Wall Street's shady municipal rip-off schemes than it does public pension liabilities.
Yet, as you might have heard, a judge yesterday handed down a landmark ruling allowing Michigan officials who took control of the city to violate the state's constitution and slash the average $19,000-a-year pensions of Detroit's municipal retirees. This ruling is already being touted as a precedent setter for places like California, where a pension-slashing ballot initiative campaign is already underway and where some cities are trying to get out of paying the pension promises they made to retirees.
In celebrating the ruling that allows him to now economically punish fixed-income pensioners, Kevyn Orr (an appointee of Michigan Governor, Rick Snyder) said:
“There’s not enough money to address the situation no matter what we do,” he said. “That is clear.” At another point, he said of the pension question, “We’re trying to be very thoughtful, measured and humane about what we have to do.”(Emphasis mine.)
In this particular financial crime, the incriminating piece of evidence isn't some tiny fingerprint or shred of clothing. It's a professional hockey stadium. As CNN/Money reported back in July (but as almost no media outlet reported in their bankruptcy stories in the last 24 hours):
New $444 million hockey arena is still a go in Detroit
By Chris Isidore
Detroit's financial crisis hasn't derailed the city's plans to spend more than $400 million in Michigan taxpayer funds on a new hockey arena for the Red Wings.
Advocates of the arena say it's the kind of economic development needed to attract both people and private investment dollars into downtown Detroit. It's an argument that has convinced Michigan Gov. Rick Snyder and Kevyn Orr, the emergency manager he appointed to oversee the city's finances, to stick with the plan. Orr said Detroit's bankruptcy filing won't halt the arena plans. Yes, you read that right: according to Orr, "there's not enough money" to shore up pensions, but there's somehow plenty of money to subsidize a professional hockey stadium, even though there's plenty of evidence proving that such subsidies do not result in positive economic returns for taxpayers.
If this sounds like a shocking heist, that's because it is - but it also isn't.
It is certainly shocking to behold politicians so clearly lying about public finances - and lying is putting it mildly. Consider the numbers:
Detroit allegedly faces a 30-year, $3.5 billion pension funding gap (and its worth stressing the word "allegedly"). That's about $100 million a year. At the same time, Michigan spends $6.5 billion a year on taxpayer subsidies to corporations. So when the politicians running Michigan's state government claim there are no resources that could shore up the pension plan, that's just not true. What is true is that there's plenty of money for the state and city to meet the pension promises they made to public employees - but politicians in charge of spending want that money to go to corporations that disproportionately fund politicians' election campaigns. To insist otherwise - to do what Orr is doing and pretend there's no money around - is just shockingly dishonest.
But then, it's not shocking in the sense that this is now the trick du jour.
At the municipal level, for example, only a few weeks before Detroit's ugly tale began to unfold, nearby Chicago saw politicians plead poverty to justify one of the largest mass public school closings in recent history all while insisting they had plenty of money to funda $173 million taxpayer subsidy for the construction of a private college's basketball stadium.
Likewise at the state level, New Jersey Gov. Chris Christie (R) pled poverty to justify big cuts to public employee pensions. Yet, in just the four years he's been in office, he's cheerily doled out a whopping $1.57 billion in tax subsidies to some of the largest corporations in his state.
In all, public pensions collectively face a $30-year, $1.3 trillion shortfall and this gap is being used to justify efforts to slash those pensions. Yet, as the New York Times notes, "states, cities and counties are giving up more than $80 billion a year" in the form of corporate subsidies. That's $2.4 trillion over 30 years - or almost twice the entire pension shortfall.
Now look: if you want to argue on the merits that reneging on the retirement promises to teachers, firefighters, police officers, first responders, sanitation workers and other public employees is good and moral public policy - fine, go ahead and try to make that argument on the supposed merits. Likewise, if you want to ignore lessons of many productive companies and somehow argue that punitively reducing employees' retirement benefits is a good way to motivate those employees - well, have at it and try to make your case.
But enacting those cuts under the guise of fiscal necessity while simultaneously handing out huge subsidies to already-wealthy corporate campaign contributors is a whole other matter. Sure, you can follow the lead of power-worshiping political reporters and obsequiously label that kind of thing "toughness" or shrewd politics. But if you are even minimally honest you will call it what it actually is: a financial crime.
We can thank Detroit and its new hockey stadium for microcosmically proving that point - and making this all-too-common crime so obvious.