The City of Detroit, with it's bankruptcy, is an unmitigated disaster. The
stories coming out of the Motor City are freighting to say the least. The number of creditors and size of the debt
are unimaginable, more like a large U.S. state instead of a mid-sized city.
But the real tragedy in this whole debacle is the
over-promised and under-delivered pension payments. With 20% of the city’s debts contributed to
unfunded pension liabilities, many retired employees could see their pensions
reduced or eliminated.
Too often, warnings of these unfunded plans go ignored. The same politicians that are quick to
provide these benefits are unwilling to address the problems that are predicted
down the road. The losers end up being
the folks that believed the political promises and are counting on these
A similar story is playing out across the country as states
grapple with the problem of Medicaid expansion.
The Obama Administration is pushing every state to expand an already
bloated Medicaid program to cover millions of new Americans. And what is the plan for paying for this
expansion? The feds promise to pick up
the costs for four years (with borrowed money), and then the states are on
their own to figure it out.
This is why Wisconsin chose to fight the expansion. It is irresponsible to promise government
health care coverage to tens of thousands of people without a plan to pay for
it. Governor Walker’s opponents called
his plan cruel, but isn’t it more cruel to promise a service only to take it
away once the money runs out?
Detroit is teaching us that no unit of government is immune
from bankruptcy. The false hope that
government is forever and will cover its promises in perpetuity came crashing
down a couple of weeks ago when Detroit went to bankruptcy court.
Conservatives are attacked for being realistic and only
offering to provide services that we can realistically pay the bills.
The ones that should be attacked are those that make
short-sighted promises that can’t possibly be kept. Then, when the writing is on the wall, do
nothing to prevent the oncoming disaster.
The worst part is that Detroit isn’t alone. Federally, Social Security and
Medicare/Medicaid are on a path to insolvency.
States and cities across the country have trillions in unfunded
pensions. These are all time bombs just
waiting to go off, often times we know the exact date.
With any luck this tragedy can be used as a lesson for the
rest of the nation. Bold, responsible
actions are needed right now to prevent the next Detroit. A little dose of reality now is better than
the pain that is inevitably down the road.
Hopefully it’s not too late.