Detroit's Bankruptcy is the First Domino
It is likely that few people understand the political and national significance of Detroit, Michigan's declaration of Chapter 9 bankruptcy this past week. It is very easy and convenient to dismiss Detroit as a unique case - a once-proud national city that has lost over half its population over the past decade and is a poster child for what can wrong in a city - middle-class flight to the suburbs, the loss of a once-large industrial base, corrupt politicians and mismanagement of city services.
But that is far too convenient a story. Detroit is not the first municipal bankruptcy and will not be the last. The reasons and the numbers associated with them are staggering.
In 1994, Orange County, California went through a municipal bankruptcy process after making very poor borrowing and investment choices. At the time, this was the largest municipal bankruptcy in American history, with $1.7 billion in debt to be resolved. Orange County proved to be an outlier and no other major municipal bankruptcy followed for the next 14 years (there were some smaller ones in small towns, but nothing anywhere close to Orange County.)
Over the past few years, three significant but not large California towns have filed for bankruptcy. Vallejo filed in 2008 followed by Stockton and San Bernadino in 2012. These three filings all had one thing in company - the cities were awash in funded pension obligations that they could not meet. Many in political circles and the media attributed this to be a uniquely Californian problem, a by-product of California's uniquely generous public pension scheme, large number of public employees and overall poor financial management.
Detroit's filing, a whooping $20 billion bankruptcy that crushes the size of all previous municipal bankruptcies, follows the same pattern as California. Detroit has a mere $3.5 billion in bond obligations - the rest of the debt are massive unfunded pension liabilities. Starting to see a pattern here?
Forbes documented a list of cities in similar situations to Detroit that may ultimately be the next victims of Chapter 9 bankruptcy filings. Forbes estimates that there are over $1.4 TRILLION in unfunded municipal retiree benefits across the country, with New York City leading the way with $330 billion in liabilities alone. Chicago has $63 billion in unfunded retiree liabilities. And so on. Virtually every northeastern and midwest city has a problem of unfunded retiree liabilities.
All of these funding needs obviously do not come due at once as public sector retirees draw on pension and health care benefits over long periods of time. So one might mistake this as a very slow moving crisis which will have limited political impact over the next few years.
But Detroit's bankruptcy accelerates things. Immediately following Detroit's filing, the major credit rating agencies began rapidly downgrading the credit rating of cities with unfunded liabilities. This means that borrowing costs for major cities will shoot up - after all, post-Detroit and knowing what I just said, would you want to own bond obligations from New York or Chicago? Municipal bankruptcies will accelerate and the effects will not be good.
A look back at the three cities in California who led the way shows that city services are still horrible, their economies are stagnant and populations are leaving en mass for better opportunities.
Detroit pensioner-receivers appear likely to only receive 15 to 20 cents on the dollar post-bankruptcy on their pension obligations. Municipal pensions are NOT backstopped by a pension guarantee board like corporate pensions, so those folks are on their own in bankruptcy court. A 15 to 20% payout would be devastating to retirees. Imagine you are a retired municipal refuse worker who receives a $40,000 per year pension that you live off of, are 70 years old and have been retired for 10 years. Suddenly having your income cut to $6,000 per year and your health care benefits cancelled would be destroyed. Whether you believe that he or she should have received such a generous benefit is irrelevant at that point - the worker would struggle to go back to work and would have no mechanism to pay rent or utilities or buy groceries.
I believe that this will be a meaningful, perhaps defining issue in 2016, and no one has been out in front of the issue like Governor Scott Walker in Wisconsin. He fought the unions to reduce state-funded pension and health care liabilities. This fight led to a recall election that Walker narrowly won, as well as tons of insults hurled at Walker, including that he was trying to take away hard-earned benefits from teachers and fire fighters.
But Walker has a great narrative now - a guy who fought powerful unions, almost ending his political career to save the state from financial ruin. "Is it really better for the state to promise benefits to workers that it cannot provide?" Walker can say, "is it really better for public employees to promise them benefits and then cut them off after they are retired, while devastating government?"
It's a pretty powerful argument. Walker is one to watch in 2016.
For Shame
The House of Representatives this week voted to continue to allow the government gathering of metadata, such as your personal cell phone records. This assault on civil liberties is shameful and bipartisan.
An unusual coalition of Neocon Republicans and Obama loyalists garnered 217 votes (134 Republicans and 83 Democrats), overcoming the votes of libertarians and liberals who support civil liberties (94 Republicans and 111 Democrats) to vote to continue to allow the practice.
None of those 217 deserve our support in 2014.
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Saturday, July 27, 2013
Friday, July 19, 2013
Reflections from a Camden City Bus
My life can be a little self-contained. Sure, I'm well traveled,
having visited 6 continents and lived in 7 states. I've lived in the
slow-moving small town south, in the hyper aggressive big city
northeast, in the laid back west coast and many places in between.
But most of my life follows a particular pattern. I hang out in upper-middle class neighborhoods. I eat at nice restaurants. I work in an office and I live in a neighborhood where I forget to lock my doors a lot of days and it doesn't worry me when I do.
Sometimes, random events in life disrupt your routines in ways that you don't expect. And sometimes you learn things from that seemingly random disruption that you would have never learned as a part of your routine.
Such was the case on Saturday night. My wife and I had just had a fun day in New York City and were riding a comfortable evening BoltBus (a very nice Greyhound bus line in the Northeast US that provides direct transit between major cities, for those of you from elsewhere) back to the New Jersey Philadelphia suburbs. Late in the ride, it became evident that we had accidentally boarded the wrong bus as we whizzed by our stop at the Cherry Hill Mall (if you aren't form New Jersey, Cherry Hill is the famous destination of Harold & Kumar in Harold & Kumar Go to White Castle, despite the fact that there has never been a White Castle in Cherry Hill.) The driver informed us that we were on the "express" bus and that he wasn't allowed to stop until 30th street station in New Jersey.
With a car at Cherry Hill Mall and a physical presence at 30th street station in Philadelphia, I quickly scoured the internet for a transportation plan to rectify the situation. What I found was the 406 bus from Philadelphia to Cherry Hill, which was not a direct route but got me back to the car. Off we went!
The 406 bus route winds through part of Philadelphia, a large portion of Camden and ultimately on to Cherry Hill. It goes through some pretty rough urban neighborhoods in Camden and basically the entire ridership of the bus on this particular Saturday night consisted of myself, my wife and a group of Camdenites that didn't own cars. They were mostly working class or unemployed and all African-American.
"They let Zimmerman off!" proclaimed a heavy-set woman on the bus part way into the ride, sharing the news that broke that day. I could not have been in a better location to gauge and understand the black community's response to the verdict.
What impressed me on bus 406 was how complex and nuanced that response was. There were no calls for violence and retaliation. To be sure, it was a more liberal than average crowd and most disagreed with the verdict, but the responses were rational. One man said, "I get he might not have been guilty of murder, but he had to be guilty of SOMETHING. I mean, the 911 operator told him to stop following Treyvon and he didn't." fair enough. Another man recalled growing up in rural South Carolina and how they "castle law" there allowed his mother to shoot a crack addict that was breaking into their storage shed without fear of retaliation. "Okay, that makes sense" said another passenger, "but Treyvon wasn't on Zimmerman's property. It's different if someone comes on your property." So it is. "Why does everyone assume that a black boy in a hoodie is a criminal?" asked one woman, "well, I heard a bunch of black kids had broken into homes nearby" said another man on the bus, "that doesn't make it right!" shot back the woman. No, it doesn't.
The discussion quickly turned into a broader political discussion and talked turned to Chris Christie. "Chris Christie cost my wife a ton of money", said a man whose wife was a teacher in the Camden Public Schools, "He raised the fares on this bus!" exclaimed another man, referring to the New Jersey Transit fare hikes that Christie pushed through as part of his push to eliminate the budget gap, his first year in office, "couldn't rich people just afford to pay a little bit more in taxes?" "Yeah" said another man, "but they'd never pay, they'd just move to Pennsylvania" reflecting a frequent talking point of the GOP in the state. "I like Christie" declared a woman with a young child, "but only because he is pro-life."
Black voters and the black community in general tend to get painted as a monolith. They are obviously a voting block that has gone heavily (and increasingly) Democratic in the past two election cycles. What was reconfirmed for me that night in Camden was that such a view is a dramatic oversimplification. Black voters, like any group, have a complex set of political leanings that run the gambit of electoral politics. Their views are varied and nuanced. Some even vote Republican, but almost none are straight-line liberals.
Perhaps rather than choosing political sides in things like the Treyvon Martin case, both parties would be better served by taking a little time to understand the underlying social nuances in a case like this. And Republicans would certainly be wise to start inviting them to their party.
By the way, I agree with the man on the bus. Treyvon Martin does not appear from the evidence to have been guilty of murder. But he was guilty of SOMETHING, most likely criminally negligent homicide, a less severe felony. Had the prosecutor charged him with this more appropriate crime, perhaps the outcome would have been different. Or perhaps not.
If you like this site, tell your friends.
But most of my life follows a particular pattern. I hang out in upper-middle class neighborhoods. I eat at nice restaurants. I work in an office and I live in a neighborhood where I forget to lock my doors a lot of days and it doesn't worry me when I do.
Sometimes, random events in life disrupt your routines in ways that you don't expect. And sometimes you learn things from that seemingly random disruption that you would have never learned as a part of your routine.
Such was the case on Saturday night. My wife and I had just had a fun day in New York City and were riding a comfortable evening BoltBus (a very nice Greyhound bus line in the Northeast US that provides direct transit between major cities, for those of you from elsewhere) back to the New Jersey Philadelphia suburbs. Late in the ride, it became evident that we had accidentally boarded the wrong bus as we whizzed by our stop at the Cherry Hill Mall (if you aren't form New Jersey, Cherry Hill is the famous destination of Harold & Kumar in Harold & Kumar Go to White Castle, despite the fact that there has never been a White Castle in Cherry Hill.) The driver informed us that we were on the "express" bus and that he wasn't allowed to stop until 30th street station in New Jersey.
With a car at Cherry Hill Mall and a physical presence at 30th street station in Philadelphia, I quickly scoured the internet for a transportation plan to rectify the situation. What I found was the 406 bus from Philadelphia to Cherry Hill, which was not a direct route but got me back to the car. Off we went!
The 406 bus route winds through part of Philadelphia, a large portion of Camden and ultimately on to Cherry Hill. It goes through some pretty rough urban neighborhoods in Camden and basically the entire ridership of the bus on this particular Saturday night consisted of myself, my wife and a group of Camdenites that didn't own cars. They were mostly working class or unemployed and all African-American.
"They let Zimmerman off!" proclaimed a heavy-set woman on the bus part way into the ride, sharing the news that broke that day. I could not have been in a better location to gauge and understand the black community's response to the verdict.
What impressed me on bus 406 was how complex and nuanced that response was. There were no calls for violence and retaliation. To be sure, it was a more liberal than average crowd and most disagreed with the verdict, but the responses were rational. One man said, "I get he might not have been guilty of murder, but he had to be guilty of SOMETHING. I mean, the 911 operator told him to stop following Treyvon and he didn't." fair enough. Another man recalled growing up in rural South Carolina and how they "castle law" there allowed his mother to shoot a crack addict that was breaking into their storage shed without fear of retaliation. "Okay, that makes sense" said another passenger, "but Treyvon wasn't on Zimmerman's property. It's different if someone comes on your property." So it is. "Why does everyone assume that a black boy in a hoodie is a criminal?" asked one woman, "well, I heard a bunch of black kids had broken into homes nearby" said another man on the bus, "that doesn't make it right!" shot back the woman. No, it doesn't.
The discussion quickly turned into a broader political discussion and talked turned to Chris Christie. "Chris Christie cost my wife a ton of money", said a man whose wife was a teacher in the Camden Public Schools, "He raised the fares on this bus!" exclaimed another man, referring to the New Jersey Transit fare hikes that Christie pushed through as part of his push to eliminate the budget gap, his first year in office, "couldn't rich people just afford to pay a little bit more in taxes?" "Yeah" said another man, "but they'd never pay, they'd just move to Pennsylvania" reflecting a frequent talking point of the GOP in the state. "I like Christie" declared a woman with a young child, "but only because he is pro-life."
Black voters and the black community in general tend to get painted as a monolith. They are obviously a voting block that has gone heavily (and increasingly) Democratic in the past two election cycles. What was reconfirmed for me that night in Camden was that such a view is a dramatic oversimplification. Black voters, like any group, have a complex set of political leanings that run the gambit of electoral politics. Their views are varied and nuanced. Some even vote Republican, but almost none are straight-line liberals.
Perhaps rather than choosing political sides in things like the Treyvon Martin case, both parties would be better served by taking a little time to understand the underlying social nuances in a case like this. And Republicans would certainly be wise to start inviting them to their party.
By the way, I agree with the man on the bus. Treyvon Martin does not appear from the evidence to have been guilty of murder. But he was guilty of SOMETHING, most likely criminally negligent homicide, a less severe felony. Had the prosecutor charged him with this more appropriate crime, perhaps the outcome would have been different. Or perhaps not.
If you like this site, tell your friends.
Monday, July 1, 2013
The Inevitable March Towards Universal Gay Marriage Continues
A Measured Set of Supreme Court Decisions, Public Opinion Ahead of Law
The supreme court, in a pair of twin rulings last week, came down modestly on the side of gay rights but stopped short of overriding public opinion in two important ways of advancing a political agenda from the bench.
The first ruling, by a 5-4 majority (which seems to be the norm for the last 30 years in decisions of a controversial nature) struck down the provision of the Defense of Marriage Act that defined marriage as between a man and a woman for federal purposes. This means that legally married gay couples in states that permit gay marriage now have access to federal deductions and benefits associated with being married, rights previous denied to them under DOMA. The reasoning of the court was two-fold - first, a traditional conservative argument around federalism that essentially stated that definition of marriage has been historically the province of states and that on 10th amendment grounds there was no enumerated power for the federal government to overrule state judgement on that issue. Interestingly it was 4 liberal judges joined by moderate opinion-writer Anthony Kennedy that overruled 4 conservatives on what would seem to be a judicially conservative view but for the social politics around gay rights.
The tenth amendment text in question is as follows:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The second reason given by Kennedy's opinion, and perhaps the more intriguing one, was the notion that the clause in question violated the equal protection principle articulated in the 14th amendment. This is a fascinating argument, as the 14th amendment is clearly targeted at state laws. Text is below:
No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
The supreme court, in a pair of twin rulings last week, came down modestly on the side of gay rights but stopped short of overriding public opinion in two important ways of advancing a political agenda from the bench.
The first ruling, by a 5-4 majority (which seems to be the norm for the last 30 years in decisions of a controversial nature) struck down the provision of the Defense of Marriage Act that defined marriage as between a man and a woman for federal purposes. This means that legally married gay couples in states that permit gay marriage now have access to federal deductions and benefits associated with being married, rights previous denied to them under DOMA. The reasoning of the court was two-fold - first, a traditional conservative argument around federalism that essentially stated that definition of marriage has been historically the province of states and that on 10th amendment grounds there was no enumerated power for the federal government to overrule state judgement on that issue. Interestingly it was 4 liberal judges joined by moderate opinion-writer Anthony Kennedy that overruled 4 conservatives on what would seem to be a judicially conservative view but for the social politics around gay rights.
The tenth amendment text in question is as follows:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
The second reason given by Kennedy's opinion, and perhaps the more intriguing one, was the notion that the clause in question violated the equal protection principle articulated in the 14th amendment. This is a fascinating argument, as the 14th amendment is clearly targeted at state laws. Text is below:
No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
The ruling seems contradictory. The ruling struck down a federal law, and, believe it or not, there is nothing in the constitution that expressly forbids a federal law that does not protect citizens equally. There are constitutional protections that prohibit voting rights discrimination on the basis of race (15th amendment) and that prohibit slavery (13th amendment) and specifically enumerated rights that cannot be denied by the federal government (articulated in the Bill of Rights, the first 10 amendments), but nothing that prohibits a federal law from unequal treatment. What would have made far more sense than striking down the federal law under an equal protection argument would have been to strike down state laws prohibiting gay marriage as an equal protection violation imposed by the states.
The 10th amendment violation would have been sufficient to strike down the provision in question. That Kennedy chose to reference equal protection likely foreshadows a building majority on the court around the equal protection of gay marriage equality itself. But the court is taking a measured pace - by passing on the opportunity to make a national ruling relative to California prop 8. The court let stand a lower court ruling striking down the prohibition on gay marriage in California by ruling that the state Republicans making the appeal did not have standing to appeal - an intellectually devoid argument since it chose to rule in the DOMA case under very similar circumstances (the Republicans defended that case as well since the Obama administration chose not to defend the law), but a clever dodge nonetheless. This leaves the overall question of the constitutionality of gay marriage for another year and another court, but the 14th amendment argument in the DOMA ruling clearly projects a likely outcome when that day comes. Kennedy simply decided to let the court of public opinion form a little more before the Supreme Court intervenes.
And the court of public opinion is moving. By a massive majority, the American public now favors gay marriage. A just-released Gallup poll shows national support at 55% for and 40% opposed, an epic turn in the past 17 years since Gallup first started polling the issue, when support was at less than half that level. 55% is far more support than any Presidential candidate has received since Ronald Reagan in 1984. In other words, 55%-40% is a landslide. And the opponents are dying. The only demographic group (unless you count conservatives or Republicans as their own "demographic group") that still opposes gay marriage are those 65 and over, and only 51% of seniors now oppose it.
It is highly likely that we will see gay marriage in every state outside of the south (where majority opposition still exists) in the next 5 years.
Politicians in both parties had better get on board or history will remember them harshly. This is not a Republican/Democratic issue, as bipartisan support for gay marriage bills in places like New York State has proved. It is a right/wrong issue.
The one thing that surprised me about the Supreme Court ruling was that the court elected NOT to strike down the provision of DOMA that permits states to not recognize gay marriages from other states. This creates a legal and administrative mess, is unprecedented in US marriage law (states recognize marriages of first cousins from other states, of minors from other states and so on) and is black letter unconstitutional, in my opinion. The relevant section of article 4, section 1 of the constitution is below:
Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.
Perhaps this is more judicial restraint in letting the political process play out. But it is wrong on the law.
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