The rumor mill in Washington is buzzing about a possible bail out by the Barack Obama administration for the City of Detroit bankruptcy. After Detroit filed for Chapter 9 protection last week Wednesday, a judge put a stay on the bankruptcy Friday afternoon. But an appeals court ruled yesterday to allow the bankruptcy to proceed. Detroit is bankrupt owing some $18.5 Billion dollars to creditors and to Detroit employee pensions. The official statement from the White House so far is that there are discussions though they say that the city and the State of Michigan are responsible for any solution. Meanwhile, the rumor mill indicates that Obama is under pressure by labor unions to take direct action to guarantee that Detroit meets its pension obligations. With about 100 cities and several states also in or close to bankruptcy, can Obama afford to get involved?

obama detroit bankruptcy

Detroit is so far the largest U.S. city to file for bankruptcy. Decades of over-spending, corrupt Democrat management and general urban decay have taken their toll on the once proud city. For much of the 1950s, Detroit rivaled New York City as the most prosperous community in America. Incomes were well above the national average as the U.S. auto industry dominated the world market. But the auto worker unions still wanted more and pushed companies into contracts that would eventually lead to debilitating legacy costs. For example, General Motors currently only employs some 54,000 people, yet is paying pensions and benefits to more than 250,000 retired workers.

As the union workers for private companies made huge financial gains, so too did public employee unions. As the city′s population began to decline, so too did its tax base. Businesses began leaving Detroit by the late 1960s, either moving out to Detroit′s suburbs, or, in many cases, to other states where labor was cheaper. The auto industry began to decline as well as foreign car companies produced more fuel efficient and better quality vehicles. At the same time, during the 1970s, more and more federal regulations on automobiles added to the price of U.S. built cars, as well as reducing quality.

From its peak population of two million in the 1950s, Detroit fell to less than one million in the 1990s. From 2000 to 2012, Detroit went from about 900,000 residents to just 700,000. Only about 47% of work-aged adults have jobs. Only about 7% of Detroit′s 8th grade students are literate, and less than half of all residents are literate. Despite an endless array of federal government programs which began during the Carter years, Detroit continued to slide into mediocrity. Detroit′s crime rate is well above average with ten times more violent crime than the national average. Police response times are about an hour and steadily rising. Some 40% of the city′s streetlights are not working and trash pick-up has become spotty and delayed.

The woes of Detroit are endless, but not unique. Many cities across America are in the same boat. Public employee unions are bankrupting dozens of cities and even states as their workers earn nearly double that of comparable employees in the private sector. In nearly all cases, they share a common denominator of a well entrenched Democrat government largely empowered by labor unions. Detroit, like most large American cities, basically exist with one-party rule. They are the vanguard of Democrat Socialism that is tearing apart the nation.

There seems little doubt that Barack Obama will not orchestrate some sort of bail out for the City of Detroit bankruptcy. The Obama administration is too indebted to public employee unions to allow Detroit pensions to be reduced or cut off. Detroit is bankrupt to the tune of $18.5 Billion dollars. There really is no way for creditors or pensioners to expect any assistance unless the federal government does intervene. The Obama White House may deny any bail out plans for the moment, but if Obama does not do so, he will pay a heavy price as the power of public employee unions begin to implode.