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| Detroit is the largest American metropolis to file for bankruptcy. Image: Patricia Drury via Flickr CC |
The word on the street is that America’s recession is far from over. Despite pieces of positive news floating in here or there, many Americans are still out of work and underwater on their homes. Take those people as a group, and you will understand what has happened to Detroit.
Although once home to a thriving auto industry, Detroit has become the largest American city to ever file for bankruptcy. In June, the city defaulted on $39.7 million on taxable pension debt. Their restructuring plan has been called “unconventional” by the credit rating group, Moody’s. Moody’s, whose CEO is Raymond McDaniel, said this would be sure to lower Detroit’s credit rating.
This is a huge concern for those coming up on retirement. They worry that they will have nothing to live on if they are unable to access their pension funds.
K.D. Bullock is one of those people. He used to work for the Detroit Police Department. After retiring, he took on another job, as a casino security supervisor, to help pay the bills. However, he felt like his health was starting to go as he was often short of breath. Bullock was finally diagnosed with rheumatoid arthritis. With bills to pay, including that for work he had done on his house, he faced losing his $2,400-a-month pension. He is not alone.
Labor unions say the $3.5 billion in pension benefits are protected by state law, but the city has already slated them to be cut.
What got Detroit in this pickle in the first place? Mainly it was out of control spending and failure to balance the budget. It works pretty much the same for cities as it does for people. You cannot just go about your business, doing whatever you want, with no regard for the consequences. The main difference is that, when a city budget breaks down, almost all of the citizens are affected.
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