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Detroit, Chicago, and Public Debt

When the city of Detroit finally imploded last month, liberal pundits and politicians told us that it was an anomaly. Rather than address an approach to governance in which overspending driven by liberal ideology and powerful municipal unions created an unsustainable equation, they urged us to put aside the notion that what happened there would be repeated elsewhere. They said the specific conditions that led to the Motor City’s bankruptcy were more a function of the decline of the auto industry and the peculiar dysfunction of local politics.

But while Detroit’s problems were undoubtedly exacerbated by those circumstances, the same math that sunk that city is at work throughout the country as similar municipal financial obligations are piling up in spite of the dwindling resources available to meet them. As today’s front-page story in the New York Times makes clear, even prosperous cities that have little in common with the devastated urban wasteland that Detroit has become may soon face the same dilemma. If a booming metropolis like Chicago is sinking under the weight of underfunded public worker pensions, how could we possibly expect Detroit or hundreds of other municipalities to survive?

The pension fund for retired Chicago teachers stands at risk of collapse. The city’s four funds for other retired city workers are short by $19.5 billion. At least one of the funds is in peril of running out of money in less than a decade. And starting in 2015, the city will be required by the state to make far larger contributions to the funds, which could leave it hundreds of millions of dollars in the red — as much as it would cost to pay 4,300 police officers to patrol the streets for a year.

It is true that Chicago’s fiscal woes are at present nowhere near the catastrophic level of those of Detroit. But what the Times (whose editorial page has been a consistent advocate of the “what me, worry?” liberal school of fiscal irresponsibility) rightly terms the “overwhelming pension liabilities” of cities like prosperous towns like Chicago, San Jose, and even a reviving Philadelphia are putting their futures at risk. The question is, are local politicians prepared to bite the bullet and face down their erstwhile union allies and deal with the source of the problem?

Some three years ago, Jeff Jacoby presciently wrote in COMMENTARY about the looming meltdown that threatened the nation. In his “What Public-Sector Unions Have Wrought,” Jacoby rightly pinned the problem on the unprecedented growth of government workers throughout the 20th century and their ability to force states, cities, and other local authorities to grant them generous benefits and pensions via collective bargaining negotiations in which the unions held all the cards. Their ability to blackmail governments via strikes that effectively shut down vital services combined with the political and financial clout they exercised to, in effect, elect their own bosses, the unions were able to rig the game “in favor of a privileged government elite and against the private taxpayers who pay its bills.” The result was the creation of a “multi-trillion dollar avalanche” of debt that no city, no matter how well off it might be, could possibly afford.

The only answer to this problem is to reform the collective bargaining process and to institute a series of changes that will end the guarantee of a lavish pension to current and future public workers. As Jacoby wrote:

Without depriving employees of any benefits they have earned to date, governments have to be able to amend the terms on which future benefits are earned. Tens of millions of Americans working in the private sector—including many belonging to labor unions—know from first-hand experience that the terms and conditions of future employment can be changed. That is how real life works, and a government job should not confer immunity from real life.

That still makes sense, but instead of confronting the reality of the meltdown, as Wisconsin Governor Scott Walker did with his controversial reforms that led to a union mob storming the state capitol in Madison and an ultimately unsuccessful attempt to force him from office, most states and cities are just looking for more ways to raise money from already overburdened average taxpayers who aren’t likely to be able to enjoy the same kind of benefits from their own jobs. To his credit, Chicago Mayor Rahm Emanuel has confronted this issue and enraged unions that think they should get their benefits even if no one can pay for them.

But what must be understood is that this drama isn’t limited to Detroit or Chicago. Liberals have spent the last century believing that paying for government spending is an insignificant detail. That has created a debt crisis that will soon have to be faced virtually everywhere in the country. It’s high time for liberals to face up to this fact and admit that the era of unfunded big government spending and public-sector union power must end now.



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