Today I found out for the first time that the city of Detroit had filed for bankruptcy — exactly one week after the petition was filed: [http://www.mieb.uscourts.gov/news/city-detroit-bankruptcy-filing].
It is interesting that after searching for this in Google, I actually did not find any results, besides from one or two blogs. I went to the Eastern District of Michigan Bankrupty Court and there appeared the information on the front page. Just to confirm that I had not done anything wrong, I went to FoxNews, CNN, and then to NBC News, just to see if the story was hidden anywhere. I could not even find this story mentioned in a footnote. I just found a whole bunch of stories about all of this “social tension” happening in the U.S. and wrecked planes and trains.
Most of what we know is maintained simply by perserving an image. Over time, cracks begin to develop and more and more people see past the image. Then, when the image dissipates, or when the floor drops, the floor drops quickly. Most people do not believe in rapid change due to the Normalcy Bias. This bias “causes people to underestimate both the possibility of a disaster occurring and its possible effects. … People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.” [http://en.wikipedia.org/wiki/Normalcy_bias]. There is probably something good to be said of the Normalcy Bias, it maintains social order. However, it is bad when a situation needs to be acknowledged to prevent a worse one from developing.
The bankruptcy filing is important not because Detroit is in clear decline. (Detroit is downsizing for the medium to long-term for a multitude of reasons, not just those pertaining to trade or even the invention of the air conditioner). The filing is important because of the effects this decision will have on the pension funds of Detroit workers. The city owes about $18.5 billion in debt, $9.2 of which is unfunded pension and retiree healthcare. This is not surprising, since the majority of the expenses of any business (including governmental ones) should be comprised of wages which it pays out to its workers.
Earlier this week, the city’s two pension funds — which have claims to $9.2 billion in unfunded pension and retiree healthcare — filed suit in state court to prevent Orr from cutting benefits as part of a bankruptcy restructuring.
The pension funds and, in a separate lawsuit, employee groups, argue that Michigan Gov. Rick Snyder, who would have to sign off on a bankruptcy petition, cannot do so if the filings include plans to reduce pension benefits, because the state’s constitution explicitly protects public pensions.