July 25, 2013

Lance Selfa explains how the state of Michigan is trying to push its largest city into bankruptcy--and what the impact will be for a majority Black population.

ON JULY 18, a legal team representing the state of Michigan proved, as Woody Guthrie once sang, that some people "rob you with a six-gun, and some with a fountain pen." At 4:06 p.m., lawyers working on behalf of the state-appointed Detroit emergency manager Kevyn Orr petitioned for bankruptcy in federal court.

In doing so, they upstaged lawyers for two union pension funds who appeared at 4:11 p.m. at a hearing in Ingham County court to block the bankruptcy. Lawyers for the state had asked the unions to delay their filing. Unbeknownst to the attorneys from the pension funds--one covering police and firefighters, and the other covering the general public workforce--this delay was aimed at assuring that the bankruptcy filing trumped the unions' lawsuit.

Only a day before, Tea Party Republican Gov. Rick Snyder told the press that he had no intention of forcing Detroit into bankruptcy. In fact, he had said repeatedly that bankruptcy would be a bad road for any municipality to go down. Yet after the deed was done, Snyder claimed credit: "I'm making this tough decision."

Not surprisingly, the unions saw it differently.

"Governor Snyder's plan to suspend democracy, drive one of America's largest cities into bankruptcy and deprive workers of their hard-earned retirement security moved dangerously closer to reality today when, without a single negotiation with unions, workers or retirees, Snyder authorized Detroit's financial manager to file for bankruptcy," said AFSME's national president Lee Saunders in a statement.

Within a day, Ingham County Circuit Court Judge Rosemarie Aquilina had blocked the bankruptcy as unconstitutional under the Michigan state constitution. Inconveniently for the rogue's gallery of creditors determined to wring money out of Detroit, the Michigan constitution guarantees public-sector workers' pensions.

Over the next week, Michigan Attorney General Bill Schuette appealed to the Michigan Circuit Court of Appeals to overturn Aquilina's ruling. The conservative Republican, normally a champion of states' rights, is arguing that federal bankruptcy law should overrule the state's own constitution.

The stage is set for a drawn-out fight in the courts between the state and federal governments and different creditors to shape the outcome of the bankruptcy of what was once the U.S.'s fifth largest city.

No one should lose sight of what's at stake here. The living standards and quality of life of hundreds of thousands of people--disproportionately workers and people of color who have already endured dire cutbacks as a consequence of Detroit's financial crisis--will be placed in further jeopardy. And the most basic democratic rights of millions of Michiganders stand to be trampled underfoot in a further imposition of austerity.

And Detroiters should forget about receiving a bailout from the federal government like Citibank, General Motors and Chrysler, among others, have all gotten over the years. "Can we help Detroit?" Vice President Joe Biden asked. "We don't know." White House Press Secretary Jay Carney told reporters that the Detroit bankruptcy is "something that local leaders and creditors are going to have to resolve. But we will be partners in an effort to assist the city and the state as they move forward."

DETROIT'S BANKRUPTCY had been in the works for years. But it accelerated last March, when Snyder used his powers as governor to appoint Orr, a bankruptcy specialist at the prestigious corporate law firm of Jones Day, as the city's emergency manager.

Snyder and Orr both claimed that the appointment was necessary to devise solutions to stave off bankruptcy. But that's what the two had planned from the start. In fact, Snyder's office had lobbied Orr to take the job as early as January and openly discussed with him arranging for the Chapter 9 bankruptcy, according to e-mails obtained by labor activist Robert Davis.

Orr was only in the position to consider the job of emergency manager because the Republican-controlled state legislature had passed a law allowing Snyder to appoint "emergency managers" to run city and county governments by fiat. Once the managers took over, elected officials, like Detroit Mayor Dave Bing or members of the Detroit City Council, became largely powerless and ceremonial figures.

The emergency manager law--passed by the same lame duck session of the state legislature late last year that made Michigan a "right to work" state--directly flouted the will of state voters, who in November, voted by a 52-48 percent margin to repeal an earlier emergency manager law.

On taking over, Orr immediately ordered up an inventory and appraisal of city assets, in case they had to be sold off to pay the city's debts, then thought to be up to $20 billion. So Detroiters were faced with the macabre spectacle of appraisers estimating the price of a giraffe in the Detroit Zoo, a piece of artwork in the Detroit Institute of Arts or the privatization of the city's water system. Coincidentally, and along the way, Orr's old law firm pocketed as much as $1.4 million in fees from the city and state, according to progressive radio journalist Joshua Pugh.

THE NATIONAL media and the political class have treated the bankruptcy as if it was the unavoidable consequence of a combination of natural processes, like deindustrialization and depopulation, and incompetent city government.

While these may be factors in the equation, the conventional explanations conveniently sidestep the fact that all of these "natural" processes answered to the class and political priorities of big business and its servants in state and federal government.

Take, for example, deindustrialization. The decline of manufacturing in the Detroit region is certainly one of the chief contributors to the decline in the city's population from 1.8 million in 1950 to a little over 700,000 today. But the shift of the auto industry out of the "Motor City" wasn't just the outcome of impersonal market forces. It was the direct result of a conscious--in fact, a class conscious--strategy of the auto bosses to decentralize the industry away from the unionized heartlands of the upper Midwest.

In the years immediately following the Second World War, Detroit represented the American Dream. "You've got a vast city of working people who no longer have insecure lives, people with high school and less than high school degrees who can earn enough to buy a house, a car, a boat and sent their kids to Wayne State University," historian Kevin Boyle, author of The UAW and the Heyday of American Liberalism, told the Associated Press.

That confident and occasionally militant working class had to be disciplined and disorganized. "Beginning in the early 1950s," historian Thomas Sugrue explained in the New Yorker, "Detroit steadily hemorrhaged manufacturing jobs, losing them to outlying suburbs, small towns, the Sunbelt and, over time, to Canada, Mexico and overseas. Today, there is only one auto assembly plant fully within the boundaries of Detroit."

Actually, even during the Second World War years, when Detroit was known as the "arsenal of democracy," the Big Three auto companies had already located most of their factories, offices and research centers outside the city limits--and away from city taxes. Today, Detroit is undergoing an economic collapse while the auto industry is touting its recovery and strong profits.

The result is a number of stunning contrasts. For example, the Detroit region remains one of the most prosperous and economically dynamic areas of the country, with the second-highest concentration of engineering and architectural talent next to Silicon Valley; the fourth-highest concentration of high technology jobs; and the fifth-most important financial center in the country. Meanwhile, some parts of the central city of Detroit are so blighted that they are devolving back to nature.

Oakland County in the Detroit metro area is the fourth-richest county in the U.S.--while 60 percent of Detroit children live below the poverty line.

The city has been starved for resources while powerful interests that could have at least forestalled the bankruptcy have, instead, pushed Detroit into the abyss. For example, the state of Michigan owes Detroit more than $220 million in revenue-sharing state assistance. But it has refused to release the money.

Meanwhile, the banks that pushed unaffordable mortgages on thousands of Detroit homeowners during the boom should be maintaining and paying taxes on the foreclosed properties they repossessed in recent years. Instead, in many cases, they've simply refused to pay up. In other cases, the banksters have taken homeowners into foreclosure without completing the process and obtaining title to the homes. Thus, thousands of people have been forced out of their homes, only to find out that the banks continue to stick them with the tax bill.

Consequently, only about half of Detroit property owners pay taxes. This costs the city almost $250 million annually, according to the Detroit News. "[W]hile it's easy to blame Detroit's financial troubles on deadbeat homeowners," wrote David Dayen in Daily Kos, "the more appropriate parties to blame may well be the deadbeat banks."

OF COURSE, all of this plays out in racial terms, too, as the political and media establishment make Detroit an object lesson in the failure of a city that is 83 percent African American, and whose top governmental positions have been held by Blacks since the 1970s. According to this telling of events, Detroit's decline really gained momentum with "white flight"--the retreat of the white middle class to the suburbs--after the 1967 urban rebellion.

But tying Detroit's fate only to 1967 evades the more uncomfortable truth that federal and state policy promoted racial segregation. Racism continued to deny Blacks opportunities.

The "second wave" of the Great Migration of African Americans to the Detroit area in the 1940s through the 1970s helped fuel the city's growth into an industrial powerhouse. But Black workers who wanted to enjoy the American Dream ran into racist mobs when they tried to move into majority white neighborhoods.

Industry practices, such as insurance redlining, and federal policies, such as the interstate highway system and maintenance of the color bar in Federal Housing Administration mortgage guarantees, promoted the extreme segregation that arose in northern cities like Detroit.

Historian James Loewen, writing in his 2006 Sundown Towns, told the story of how the historic divide between white and Black areas at Detroit's Eight Mile Road came to be:

In the late 1930s, as Detroit grew outward, white families began to settle near a Black enclave adjacent to Eight Mile Road. By 1940, the Blacks were surrounded, but neither they nor the whites could get FHA insurance because of the proximity of an inharmonious racial group. So in 1941, an enterprising white developer built a concrete wall between the white and Black areas. The FHA appraisers then took another look and approved the mortgages on the white properties.

In other words, the 1967 riots accelerated trends toward segregation and racial polarization that were already in place. In 1970, the NAACP sued the Michigan state government, accusing it of promoting racial segregation in schools by upholding housing segregation. Federal courts largely agreed with the NAACP in holding Michigan officials responsible for maintaining this educational apartheid. Those court decisions opened the possibility of a regional solution to maintain equal educational opportunity.

But the U.S. conservative Supreme Court scotched that possibility in its 1974 Milliken v. Bradley decision. In Milliken, the Court ruled that school districts were not required to desegregate unless it could be proven that they drew their boundaries with racist intent. Since this was nearly impossible to prove, the state and suburban school districts were largely absolved of pressure to desegregate.

According to Wayne State University law and urban affairs professor John Mogk:

Everybody thinks that it was the riots [in 1967] that caused the white families to leave. Some people were leaving at that time, but really, it was after Milliken that you saw mass flight to the suburbs. If the case had gone the other way, it is likely that Detroit would not have experienced the steep decline in its tax base that has occurred since then.

Whether Mogk is correct about that road not taken isn't certain. But it is clear that the extreme isolation of Detroit--with an overwhelming majority African American population in a state that is nearly 80 percent white--made the city's residents expendable and disregarded in the eyes of many of the state's power brokers.

BEFORE APPOINTING Orr to run Detroit, Snyder had shoved aside elected governments in favor of emergency managers in the cities of Benton Harbor, Ecorse, Flint, Pontiac and Allen Park, and in the school districts of Muskegon Heights, Highland Park and Detroit. All except one of these cities--Allen Park is the exception--have Black majorities.

By one estimate, fully 50 percent of Michigan's African American population has, via emergency manager rule, lost the democratic right to choose representatives who will have any influence over the direction of their cities.

In case there's any doubt about what emergency management and bankruptcy will mean for Detroit, we can look at the experiences in those other cities.

In Pontiac, the emergency manager privatized the city's public works department, outsourced the police, cut the city's workforce by 90 percent and sold off the Silverdome stadium for less than it cost to build in the 1970s. In the Muskegon Heights school district, the emergency manager fired 158 teachers and brought in a private operator to run the schools.

For the privatizers and union-busters, Detroit is the big prize. It still has major assets (the zoo, Belle Island Park, utilities). And it has pension obligations and a sizable public workforce that can be more easily attacked under emergency management and bankruptcy.

Even though the city halved its workforce over the last two decades, about 40,000 Detroiters still work in various state, county and municipal positions. This compares to about 4,600 who work for General Motors, according to Crain's Detroit Business.

Any further attack on Detroit's public sector, carried out under the cover of bankruptcy, will also be an assault on the remaining rampart of the Black working class and middle class of the region.

When the Michigan legislature, with Republican majorities in both houses, pushed through "right-to-work" legislation last year, many said that if this could happen in the one-time stronghold of the United Auto Workers, it could happen just about anywhere. The same could be said about Detroit's bankruptcy. That's why anyone who cares about a decent future for working people throughout the U.S. should pay very close attention to what happens in Detroit.