Dec

10

 A silver lining in detroit's bankruptcy?

In the short run, a recent ruling in the Detroit bankruptcy is a win for muni bond investors and a loss for city employees. The longer-run consequences could make both sides better off.

Stefan Jovanovich writes:

When my Dad was doing the circuit as a textbook salesman in the late 1940s, he managed to visit every one of the lower 48 states — all (except for New Jersey and Connecticut and our home state of New York) by train. He once told me that those travels were what gave him the time to think about schools and school book publishing and the changes that could be made.

On his trips to Michigan Dad would visit our relatives in the Detroit area — his mother's brothers and sister and their children. Three of Dad's cousins worked at Dodge Main; and one of them was a union rep. Dad, who had never worked with his hands in life but had been raised by Wobblies, was a dedicated New Deal Democrat; so, of course, were his cousins.

On one visit Jerzy, the cousin who was the union representative, invited Dad to come visit him at the plant. Jerzy had his own window office on the 3rd floor of Assembly Building; the office also had an interior window with venetian blinds that looked out on a section of the line. During his visit Dad, showing the usual Jovanovich tact, asked what the blinds were for. "Privacy." And, what was the need for privacy? Dad's cousin, like all good politicians, knew that some things needed to be kept private. In his case it was the pinochle game that the cousin, other shop stewards and the Dodge assistant plant managers in charge of labor relations played after lunch each day.

I can believe that many and probably most of the "city employees" in Detroit were unaware of the fiscal impossibility of any business or government being able to pay the defined benefits that they were promised. The people working the line at Dodge Main, including Dad's two other cousins, were blissfully unaware of the pinochle game.


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