Obama, Detroit, and the New Gilded Age

If you don't see yourself in my hometown, you're not paying attention.

DETROIT, MI - OCTOBER 28: Retired City of Detroit worker Donald Smith protests in front of the U.S. Courthouse where Detroit's bankruptcy eligibility trial is taking place October 28, 2013 in Detroit, Michigan. Michigan's Governor Rick Snyder is expected to testify today at the trial. Judge Steven Rhodes will decide to authorize the largest municipal bankruptcy filing in U.S. history, if the City of Detroit is eligible to enter Chapter 9 bankruptcy. (National Journal)

The best lede of the day may be this: "Someday, Detroit's bankruptcy may well be seen as the start of an era of broken promises."

Written by Mary Williams Walsh of The New York Times, the paragraph sets the table for a story about the biggest losers in municipal decline: city workers and pensioners. The story continues:

For years, cities have promised rock-solid pensions without setting aside enough money to pay for them, aided by lax accounting practices, easy borrowing and sometimes the explicit encouragement of labor unions.

Officials were counting on rich investment gains to fill the holes; unions and their retirees were counting on legal provisions — like Michigan's Constitution — that said pensions were unassailable and that benefits would always be paid, whether through higher taxes or budget cutbacks elsewhere.

But a bankruptcy judge, Steven W. Rhodes, threw a wrench into that thinking on Tuesday, ruling that pension benefits could be reduced in a bankruptcy proceeding. The decision recast the landscape and gave distressed cities leverage to backtrack on their promises.

Williams's story doesn't lay blame for Detroit's bankruptcy on a single source. While other writers exploit their op-ed pages, blogs, and social-media accounts to cast blame and pursue political agendas, Williams leaves room to find a broader truth. Detroit's demise is the result of the systematic failure to adapt to wrenching economic change, of corrupt and incompetent politicians, of rigid institutions (including the auto industry, labor unions, and school systems), and of chronic debt and racism. As I wrote in July, these are the things that bankrupted Detroit, morally and fiscally, and they're an exaggerated reflection of the nation's challenges.

Which brings me to the best speech of the day--the one President Obama delivered on social and economic inequality as Rhodes's ruled on Detroit. Like he did two years ago in Osawatomie, Kan., Obama stirred echoes of the Gilded Age, when vast economic transition at the turn of the 20th century threatened to suffocate the concept of social mobility, the central promise of American exceptionalism.

"We know that people's frustrations run deeper than these most recent political battles. Their frustration is rooted in their own daily battles, to make ends meet, to pay for college, buy a home, save for retirement," Obama said. "It's rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. And it's rooted in the fear that their kids won't be better off than they were."

Covering the speech for The Washington Post, Zachary A. Goldfarb wrote, "Obama acknowledged that his administration has not arrested two stubborn trends: widening income inequality and declining mobility, where lower-income people have a harder time finding a path to the middle class."

These are existential trends (I'd call them crises). Our political and business leaders can choose to address them, as we did a century ago, or use them as wedge issues, which is the habit today. My hometown Detroit is a sad example of what will happen to other cities, counties, states, and even the nation as a whole if we dither and blame.

One more point about blame and dithering in Detroit. There is one group of people who did not bankrupt the city: its municipal workers and pensioners. Police, firefighters, ambulance medics, sewage workers, garbage collectors, and the like--these men and woman work hard for modest pay and the promise of a modest pension. Now they face drastic cuts, and will stand in line behind banks, bondholders, and other modern-day robber barons for meager shares of Detroit's bankruptcy payout.

Take it from the son of a retired Detroit police officer, city workers don't get rich. If you don't believe me, visit my hometown. Ask an ex-cop or a current firefighter what it's like to live so lazy and fat. I dare you.