Now that Michigan’s GOP governor has forced the City of Detroit into bankruptcy, it’s expected that retired city workers will have to settle for a fraction of the pensions they were awarded under contract.
As a result of the expected bankruptcy settlement, many of the retirees may be forced to file bankruptcy themselves and find jobs to make up for their lost pensions. The governor and his supporters responded to that news by saying that’s what bankruptcy does. It forces all creditors to settle for the same percentage of their claims.
This is a complete reversal of the GOP position regarding the failure of the too-big-to-fail banks. Back then, many GOP leaders argued that the very executives whose decisions led to the banks’ failure should not be denied the multi-million dollar bonuses that were written into their six and seven-figure contracts.
But many of those same GOP leaders now argue that city workers who had been paid salaries as little as $19,000/year should agree to voiding their contracts as part of the bankruptcy. These contracts were the result of negotiations with city managers during which they agreed to give up short-term salary gains in lieu of a secure retirement.
Indeed, long-term retirement benefits have always been the incentive for taking government jobs over equivalent jobs in the private sector. Taking away or reducing the pension payments after the fact is not only a violation of the workers’ contract. It’s a complete betrayal of public trust. The natural outcome of such a violation will be to make government workers at every level demand higher salaries knowing that they will no longer be able to trust governments to live up to their obligations.
We have long known that we can’t count on corporations and private companies to live up to their promises. But we should be able to count on our governments to live up to theirs.