Tuesday, August 27, 2013

Rahm Emanuel: Still the Worst

The long and the short of this is that Detroit is in some serious shit, where as Rahm just likes to watch people (particularly unionized public worker people) suffer:
We see this attitude on display currently in the Detroit bankruptcy proceedings. It is even more clearly on display in efforts by Chicago Mayor Rahm Emanuel to default on the city’s pension obligations.

The basic story in both cases is that the contracts that workers had labored under are being laughed at by the elites because they find it inconvenient to carry through with the terms. In the case of Detroit, public sector workers face the loss of much of their pension as a result of the city’s effort to declare bankruptcy.

These workers could be forgiven for laboring under the illusion that they would see the pensions for which they worked. These obligations were actually guaranteed under the state’s constitution.

But Detroit’s emergency manager, Kevin Orr, thinks a constitutional guarantee is just a joke that you tell people to trick them into working. Even though the City of Detroit is legally a creation of the state of Michigan, Orr believes that he can ignore the state constitution and pursue a federal bankruptcy that could have workers’ pension cut by as much as 90 percent.

As bad as the story is in Detroit, there is the reality that the city really does face an economic crisis. Its population has shrunk more than 60 percent from its heyday in the 1950s. At the national level, Detroit has been the victim of policies designed to weaken U.S. manufacturing to the benefit of finance, like an over-valued dollar. At the state level, it has suffered from an urban policy that invited middle-class people to escape from Detroit’s social and fiscal problems by stepping over the city line.

Chicago presents a qualitatively different picture. It is a vibrant city with a diversified economy. While large chunks of Detroit have been nearly abandoned, developers are moving to build on long abandoned railroad yards and factory sites in Chicago. In Detroit, paying for pensions or anything else without outside assistance poses a real problem. In Chicago, the cost of the city’s pensions is an inconvenience.
While media like to play the scary number game -- $20 billion in unfunded pension liabilities – this comes to about to about 0.5 percent of the city’s GDP over the next 30 years, the time period in which the shortfall would have to be made up. The city could of course raise this much revenue, but the current mayor Rahm Emanuel thinks it would be too inconvenient. And hey, these are just contracts with workers, not obligations to people who really matter.

Emanuel’s cavalier attitude toward contracts with the city’s workers apparently does not apply to its other contracts, for example its deal with Morgan Stanley to lease its parking meters for 75 years. The city arguably received less than half the market price for this long-term lease, but Emanuel apparently thinks the city can still afford to honor its contract with the huge Wall Street bank.

Contracts with Wall Street types always seem to draw more respect than contracts with workers. Folks may recall that when AIG was bankrupt and effectively a ward of the government, we were told by the Obama administration (where Emanuel was then chief of staff), that it had to pay out $165 million in bonuses to its senior staff. Many of the AIG employees, who had taken the company into bankruptcy, pocketed hundreds of thousands of dollars from these bonuses.
I haven't seen many polls since his approval plummeted during the teachers' strike, but Rahm getting his ass kicked in the next election would be pretty fucking sweet.

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