Michigan: Detroit Bankruptcy, Pensions, and Abortion Insurance Coverage

There's a lot happening in Michigan. Recently a federal bankruptcy judge ruled that yes indeed Detroit was bankrupt.This shouldn't have surprised anyone. However the judge didn't stop there. Among other things he found that Detroit municipal pensions were not entitled to special protection despite what the Michigan constitution states. In the judge's view the pensions were contracts just like any other. The judge also implicitly agreed that the state and city did not negotiate in good faith but basically shrugged his shoulders and said that there was no alternative. If you're not familiar with the writer David Cay Johnston, well you ought to be. He has a knack for explaining what's going on in the worlds of finance and economics in an easily understandable manner. You should read this article.

The result will mean even worse poverty in the sputtering Motown, where a once robust industrial tax base has withered away, the starkest example of the economic devastation wrought by government policies that for decades have encouraged companies to move manufacturing offshore.

Financial mismanagement in Detroit under every mayor in the past six decades also contributed to the disaster, except for the honorable exception of Coleman Young in the mid-1970s. The result: Public worker pensions averaging $19,000 a year will be cut to the bone. That is sure to increase demands for federally funded food stamps, a program which Congress has just cut, and other welfare to make up for some of pensions workers earned but will not collect.

Norman Stein, a Drexel University law professor who is an expert on pensions, said that if the Detroit order stands it will become standard practice to slash benefits. “It would be a human catastrophe of the first order if pensions of vulnerable older workers can be cut whenever a local government goes to bankruptcy court,” Stein said. “We will be consigning firemen and policemen, who did nothing wrong other than protecting the city and depending on the city's promise, into old-age poverty.”

I thought that Johnston's article distilled everything down to its essence. I seem to remember international banks causing the near destruction of the modern semi-capitalist world as we knew it back in 2008-2009. Although the spokesmen and servitors of these financial institutions are extremely fond of quoting neo-liberal free-market bromides to other people, especially those who lack capital, when it was their own behind in a sling they ran to the US government for a bailout. That same US government also bailed out most of the US auto industry. These actions were obviously massive violations of free-market principles and the sorts of things the US screams about when China or other nation states engage in them.

However, generally speaking most people won't permit their ideology to interfere with their survival if it comes down to it. A Muslim shipwreck survivor with nothing to drink but wine and nothing to eat besides pork sausages will likely choose survival over religious dictates. A feminist egalitarian trapped in a burning house will not complain when a strong fireman saves her by lifting debris from her which she was unable to lift. And a bigot experiencing a heart attack probably won't make too much of a fuss when the doctor performing the angioplasty is of a different race than he is. There are exceptions but most people would agree that such folk are well, stupid.

And yet some people seem to think that a society which committed trillions to a bank bailout which did little to help working people and fretted over the rights of speculative bondholders in an auto bailout should stand and do nothing as the rights of retired pensioners are thrown into the trashbin. It's a mean old world indeed. No one wins in bankruptcy other than the lawyers and business entities who suck up public dollars and goods. That said though I do think that state and federal law should recognize a difference between money being paid to a retired fireman who does not receive Social Security and money being paid to an institutional investor who made a bet. Unfortunately Emergency Manager Kevyn Orr seems to want to ensure that the banks get paid first.

Moving along.
You may remember a recent post in which we discussed whether corporations have religious rights and whether the federal government can make corporations pay for birth control abortifacients which violate the owner's conscience. I wrote then that supporters of such rules tend to overlook the fact that just because you have a right to do something does not imply that you have a right to make someone else pay for it. Something that was on my mind then which I didn't mention was this next story. The Michigan State Board of Canvassers confirmed a petition drive which will make anyone who wants abortion insurance coverage purchase a separate rider. This initiative can be made into law by the legislature within 40 days and can't be vetoed by the governor. That is how we do things in Michigan. Direct democracy still has a place in our process. No one challenged the signatures. They were certified. I sometimes think that pro-choice people can get outworked on the ground game.

Lawmakers took preliminary procedural action on a voter-petitioned proposal to ban group health coverage for abortions as its supporters and opponents sparred in press conferences Tuesday at the state Capitol.

The exchange occurred a day after the Board of State Canvassers confirmed a Right to Life-backed drive had secured enough petition signatures to put the initiative before lawmakers.

On Tuesday, the Senate sent the petitions to its Government Operations committee as an initial step in the legislative process. The House took the default step of putting it on the floor calendar for a second bill reading.

Senate Majority Leader Randy Richardville said he has discussed the proposal with the Senate’s GOP majority but doesn’t know whether the group is ready to vote yet. Richardville, R-Monroe, would say only he expects action “within the next 40 days.”
Lawmakers have 40 legislative session days from Monday to enact this type of voter-initiated legislation. Inaction would send it to the statewide ballot in the November 2014 election.                                                                                       

LINK

Admittedly this will be the state interfering with private contracts to enforce its idea of the good. Unfortunately for those opposed to this particular instance I think it's difficult to honestly have too much outrage as the state does this in various other ways all the time. PPACA supporters explicitly cheered the state's power to do this in other cases. We must be careful giving the state powers like this because people with differing ideas about what's good than us eventually obtain power. An argument in support of the PPACA was that insurance costs would drop for everyone if we forced those dastardly "free riders" to pay their fair share. Well that argument swings the other way too. Those who want an abortion should not make everyone else share the cost. I am pro-life so I'm not too bothered by this. Because I'm leery of the state sticking its nose into employment contracts willy-nilly I'd be willing to oppose this action provided that there was some realization on the other side that making people pay for certain things which violate their conscience is often a bad idea. But there is rarely that concession. Lacking compromise things devolve to power politics. 

So it goes. As abortion is uncommon, if this initiative should become law I don't expect a lot of cost changes to policies. This is about principle. There are already 23 other states which have similar rules around abortion and insurance. It's not as if Michigan is breaking any new ground here. Both the Michigan Senate and House are Republican dominated. There are also some pro-life Democrats. Nevertheless this is not a slam dunk. Michigan Governor Rick Snyder is not a social issues hard right governor. Although under our constitution he can't veto this measure he may attempt to twist arms to convince legislators to let the people vote on it. We shall see in 40 days.

What's your take on these two issues?