Sad Time for Motor City...

Paul Evans

Once upon a time Detroit (Michigan) was a place where dreams were designed, manufactured, and sent to the far reaches of our world.

From the Model T to the Mustang, from the Camaro to the Cadillac, Detroit supplied the machines that reinforced our sense of untamed destiny. In time, Detroit might still provide a significant contribution to the emerging era of green vehicles.

For good or ill, Detroit was the innovative nexus of the zeitgeist that forged our associations with technology and transportation.

Few things equal the instrumental and ornamental associative power of the automobile – at least in US Culture. And for over a century, Detroit was the place that made automobiles: cars, trucks, and yes – even the minivan.

The Motor City is now navigating the procedural hurdles of bankruptcy: most news reports focus upon the $11.5 Billion in liabilities associated with debts and pensions.

However, for the Tea Party (and the folks that fund the Tea Party), the realities of Detroit’s crisis are far more complex – far more familiar – than we are comfortable with.

Fact: most public pensions for retired Detroit public employees are at or below the national averages.

Fact: Detroit made some financial decisions that exacerbated the debt challenges, but in many cases could not rationally make alternative decisions because of legal requirements – similar legal requirements faced by major cities across the US.

Fact: the blame (and shame) so many are heaping upon the leadership of Detroit is dramatically out of synch with the actual performance of the men and women that generally did more good than harm – in spite of global economic transitions far beyond their control.

This post is neither an apologia nor tribute. As a former elected official I consider the failures sufficient cause for replacing the leadership: right or wrong, the captain answers when the ship treks aground.

It is fitting and proper for the elected (and appointed) leadership of Detroit to accept responsibility for the financial straits of their city – it is important for leaders to be held to account by our structures and systems of representational democracy.

And yet, even as we watch the spectacle unfold, we are all well-served to do so with an understanding heart. Detroit did not choose this outcome. While a hundred little decisions played a part, there was no cosmic conspiracy of the left or the right.

As in all things, incremental (often rational – to the circumstance) measures came to define realities. Our political culture favors optics over substance; we reward the appearance of achievement whether or not achievement was actually made.

Moreover, the public pensioners that have become poster-children for public pension reform are not “the cause” of the default. Truth be told, the vast majority of public pensioners earned their retirements after honorable careers doing the things, big and little that are necessary for a great city to prosper.

The evidence suggests that Detroit is at the crossroads of our past, present, and future.

Retiring Boomers, BRIC maturity, 21st Century Globalism, the Great Recession of 2008-9, the “flight” to the suburbs and exburbs, and an emerging static uncertainty in the international marketplace are all contributors to the demise of the Detroit we thought we knew.

These factors neither excuse nor justify the more egregious policies reflecting poor fiduciary management within the bureaucracy of the City of Detroit – but understanding these pressures can help us to discern possible solutions for future exigencies.

Detroit may be the first – or at least largest – major metropolitan city to navigate bankruptcy as it seeks to shed itself of the weight of a retiring boomer population and the burden of maintaining services impossible to afford with a declining tax base.

In the end, Detroit will likely be compelled to attempt the following: 1) rebalance pension liabilities (adjust contracts for pensioners); 2) restructure and/or write off certain/specific municipal debts; and 3) accept federal assistance (and oversight) for certain/specific expenditures – think sewer, transportation, water projects.

The political ambition of the Governor of Michigan is a wildcard in these efforts. Well executed restructuring might well provide Detroit with a period of industrial renaissance; poorly executed restructuring might cripple the city and its workforce for the next quarter century.

As a guarded optimist, I believe Detroit offers us all a path forward.

Detroit is a community with significant human, physical, and political resources. Even those that prosper politically from deriding the city understand that same city is a major driver for the state economy: nobody gains if Detroit collapses completely, nobody.

History tells us such extraordinary moments provide us with extraordinary opportunities for doing what we all know to be necessary, if not politically desirable – or easy.

Consider this: when employers are responsible for health care, retirement, and wages – the short-term advantages of out-sourcing, so familiar with globalism, appear to be rational alternatives.

Company CEOs tell shareholders that costs associated with our workforce are expensive luxuries; the profit motive requires responsible corporate officers to pay the least amount for the most manufacturing value.

However, in societies where health care and retirement are not the responsibility of employers but rather a shared "community venture," the “fool’s gold” of out-sourcing can be identified as short-term gimmickry, with long-term consequences.

When the middle class devolves into an underemployed, undereducated (because of spiraling declines in education funding) working class, the capacity of community consumption threatens the very survival of manufacturing.

Somebody has to have sufficient wages to purchase the widgets being produced by the corporations seeking to maximize profitability.

Henry Ford and his fellow Titans built an economy upon the labor – and purchase power – of a viable middle class. It is vital to remember that Ford paid his workers more than competitors because he understood the rationale of an empowered consumer class.

Smart CEOs do not focus upon the short-term yields of cost-shedding, out-sourcing, and relocation: smart CEOs understand the values and virtues of strengthening a middle class in order to secure long-term profitability.

There was a time, in our America, when corporate leaders understood that a schism too great would weaken the entire system. These were the true “Conservatives” that modern-day Republicans invoke in hushed, reverent tones.

Sadly, too few heirs of Harding and Reagan take the time to understand the principles of the “Free Market” they espouse so loudly, and so often. The immobility of capital (argued Ricardo) is critical to the comparative advantage theories of industrial primacy.

That said, over the past fifty years we have allowed our fears and paranoia to devolve the “contract” for private employees. As unions have faded so too have the living wage of millions of workers. Lately, as the result of a thousand tiny cuts, we have gradually weakened the “contract” for public employees.

Ironically, FDR emphasized employer mandates during the Great Depression as a last result: he fought for employers to pay the cost because in that environment, only the employers had the money required for the health care the workers so desperately needed.

Isn’t it time we recognized the value of a smart retirement system for all Americans?

Isn’t it time we fully implemented Obamacare and perhaps, even pushed it closer to universal coverage through a network of private/public providers – only possible with the purchase power of 300 million Americans?

And isn’t it time we stopped demonizing cops, librarians, firefighters, and maintenance workers that kept their part of a fair bargain?

Good companies be they private or public understand that an educated, healthy, secure workforce is the force-multiplier in 21st Century innovation, profitability, and viability. This isn’t a fight between corporations and workers: it’s a fight between bad corporations and our future.

Why is it fair to rewrite the retirement plans of millions of middle class public servants (or private pensioners for that matter), when so many Wall Street Profiteers retire with millions made possible only through the continuation of corporate welfare of historical proportion?

It isn’t.

It never has been.

And it’s time to shine a light on the real causes of our slow recovery.

The era of “Robin Hood in Reverse” must close.

It is time we recognize that we cannot continue to cut the pensions of the many, without any hesitation whatsoever regarding the pensions and parachutes of the few – the few that found sufficient influence to protect themselves during the recent troubles.

We don’t need a class war or anything approaching it; we need fairness – simple fairness – the kind of fairness that Eisenhower, Truman, and the Greatest Generation built our nation to sustain.

Detroit is a harbinger of likely events to come. Our retirement population is too large to be supported by the structures and systems put into place during the New Deal. This is not news, it's fact. And it's not an excuse for simply devaluing pensions - it is a call to arms for creativity, collaboration, and cooperation.

Our "Oregon Story" is a story of pioneers working together in common cause for shared gain. We can blaze a new trail, if we choose it.

We need a new model, but we cannot accept a model that protects the privileged at the expense of everyone else.

Here in Oregon, we cannot allow ourselves to be subject to the "fool's gold" of out-sourcing (of government activities), or to the tyranny of scapegoating workers (private or public) guilty of nothing less or more than earning a fairly negotiated retirement.

Each, every great nation reinvents itself as circumstances require. Soon, very soon, we will be called upon to make our choice – to decide whether our America was an “interesting experiment,” or a Union of Ideals with the demonstrated capacity to adapt, adjust, evolve, and learn.

By Paul Evans July 23, 2013