To The UAW: There's No Money
Let me explain the situation to those who think this is some sort of "negotiation":
(Reuters) - With the threat of a city bankruptcy looming, Detroit city workers and retirees are pushing back against the state-appointed emergency manager, filing lawsuits to limit his options and refusing to accept demands to keep details of their discussions secret.
One lawsuit, filed in Ingham County Circuit Court in the state capital Lansing, seeks to stop Governor Rick Snyder from allowing the emergency manager, Kevyn Orr, to file Chapter 9 municipal bankruptcy. That lawsuit claims Orr's plan to significantly cut vested pensions would violate strong protections in the Michigan constitution for retirement benefits of public-sector workers.
So let's say you win the lawsuit. What good does it do you?
There's no money.
See, this is the problem at its root. The unions bargained in bad faith, either knowing factually or being in possession of enough information to know that what they were asking for couldn't be provided. It was fiscally impossible given the projected increase in cost over the retiree lifetimes.
They didn't care and they bludgeoned the city and its people into approving these "contracts" anyway.
The problem is that the only remaining options are to take some fraction of the original amount which can actually be paid or get nothing. And the longer they wait and the harder they push the closer to zero their recovery becomes, as the cost of litigation takes from the recovery and in addition the city continues to decay and will keep doing so until it is fiscally restored to a sound foundation with its taxes and spending brought both into balance and to a competitive level.
Kevyn Orr doesn't have to concede anything. He holds the whip hand in that the city is a wasting asset and the longer the unions keep screwing around and screaming the less they get.
The myth behind so-called "full faith and credit" bonds, commonly known as "general obligation" bonds in the municipal world, is that a municipality can raise taxes to whatever level is necessary to pay them off. The same fantasy-land view appears to be prevalent when it comes to forward pension obligations.
That view is false.
You can set tax rates anywhere you'd like. You can't force anyone to pay, because they can move and once they do they owe nothing. Since some proportion of the people are non-productive and effectively pay no taxes, as you drive those who are productive out your revenue decreases while costs remain stagnant or rise. The paradox is that by raising taxes you actually wind up reducing free cash flow, and it is free cash flow that you need to pay those obligations.
The unions and retirees refuse to accept this but it doesn't matter whether they accept it or not. Facts just are. All the screaming about "fair share" is meaningless when the only people left in the city to hear you and pay are those who pay nothing as they're leeches, suckling on welfare of one form or another rather than working and thus contributing exactly nothing to the economic welfare of the city.
This is the future of essentially all public-service and other large unions to some degree whether they admit it to their membership or not and whether the membership accepts it or not.
If you're a firefighter, cop, teacher, city or township employee somewhere what's happening in Detroit and what will happen to those pensions and medical benefits is going to happen to you.
And no, it's not the city's fault nor the residents' fault as a whole.
It's yours -- personally and specifically.
Enjoy that which you cooked up for yourself; it tastes like **** and it's what's for dinner, like it or not.