Detroit suffers economic collapse, files for Chapter 9 bankruptcy

And down goes the city of Detroit. Following the decision to file for Chapter 9 bankruptcy, Michigan Republican Governor Rick Snyder and the bankruptcy specialist appointed to handling the case defended the move and blamed the Motor City for the present situation. This makes it the largest municipal bankruptcy in the history of the United States.

Detroit initiated its own problems and fiscal mess, according to The Wolverine State governor. He added that the city ignored the warning signs of corruption, a bloated budget and generous pension plans for the past six decades. The city, at the time of the bankruptcy filing, is $19 billion in debt.

Mayor David Bing warned that Detroit may not be the only city in the country to file bankruptcy. Since many other municipalities, such as Baltimore, Chicago and Los Angeles, are on the same path, it could be announced at anytime that they must also declare bankruptcy – Central Falls, Harrisburg, Jefferson County, Boise County, Stockton, Mammoth Lakes and San Bernardino have already filed for bankruptcy.

“We’re not the only city that’s going to struggle through what we’re going through” the mayor said in an interview with ABC. “There are over a hundred urban cities that are having the same problem’s we’re having. We may be the one of the first, we are the largest, but we absolutely will not be the last.”

According to the numbers, the mayor might be correct. Here are some figures to digest from what used to be the middle-class capital of the world:

–          Chicago: $8.3 billion budget | $19 billion in unfunded pension liabilities

–          Baltimore: $3.1 billion budget | $680 million in unfunded pension liabilities

–          Los Angeles: $7.7 billion budget | $9.4 billion in unfunded pension liabilities

What contributed to this bankruptcy? Here are some additional statistics to look at:

–          16 percent unemployment rate

–          Seven percent of eighth graders are proficient in reading

–          A population drop of about one-quarter in the last 10 years

–          Highest crime rate in a city over 200,000; it takes police one hour to respond to 911 calls

–          Due to enormous public sector unions, its pension promises have become astronomical

Despite the White House and Congress bailing out General Motors and Chrysler during the recession, the Obama administration has not yet offered any help to Detroit. The mayor noted, though, that the White House has offered “great support” since Friday.

Vice President Joe Biden told reporters that “we don’t know yet” how to handle Detroit’s broken finances.

There has already been some opposition to any bailing out of Detroit. Kentucky Republican Senator Rand Paul, a 2016 presidential hopeful, has already warned that he will not support a bailout initiative of Detroit because no one will bail out the U.S.

“I say over my dead body because we’re not going to bailout Detroit,” stated the Tea Party favorite. “We don’t have the money. Who is going to bailout the United States if we bail out Detroit? I don’t wish any harm or ill feelings toward people in Detroit.”

Although the senator thinks bankruptcy will provide a clean slate for Detroit, one Michigan judge is contesting the constitutionality of the measure. Circuit Judge Rosemarie Aquilina in the Michigan capital of Lansing ordered Detroit Emergency Manager Kevyn Orr to withdraw the bankruptcy petition and noted it violates the state constitution.

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