Senate Finance Committee Chairman Max Baucus said Tuesday he has
instructed his staff to explore ways that Congress might assist the
city of Detroit in getting through the
largest municipal bankruptcy
in US history.
"I think it's worth exploring, because it's a big problem," Baucus
told The Fiscal Times in an interview. "I've asked my office to
look at it, but they haven't gotten back to me yet. But somebody's
going to look at it."
Until now, lawmakers, the Obama Administration, Republican Michigan
Gov. Rick Snyder, and even the city's emergency financial officer,
Kevyn Orr, have discouraged talk of a
of the Motor City, which formally filed for Chapter 9 federal
bankruptcy protection last Thursday.
Vice President Joe Biden acknowledged last week that "we don't know
at this point" what types of aid can come from Washington. A few
house Republicans were reluctant earlier this year to support a $60
billion Superstorm Sandy bill that was
laden with pork
, so it's unlikely they would endorse aiding a city government
infamous for its corruption and mismanagement.
House Appropriations Committee Chairman Hal Rogers (R-KY) joked
with a reporter yesterday that with a federal debt of over $16
trillion, "We're in worse shape than Detroit.... Maybe we should go
to them for help."
While Baucus was vague as to what -- if any assistance - Congress
could provide, he mentioned Detroit's two troubled pension funds
that he said deserve federal attention. Those funds - one for
general employees and the other for police officers and
firefighters -- together account for $3.5 billion of the city's $18
billion overall debt.
There are 8,200 retired police officers and firefighters but only
about 3,000 others working and contributing to the system, which
has made it very difficult to maintain. Retirees and their union
officials fear that retirement benefits might be reduced or slashed
as part of any debt restructuring agreement that eventually emerges
from the bankruptcy proceedings.
he would retire from the Senate next year, has teamed up with House
Ways and Means Committee Chairman
(R-MI) to try to drum up interest in major individual and corporate
tax reform this year. They are scheduled to speak jointly at two
small businesses in Philadelphia next week.
The Senate Finance Committee's jurisdiction ranges from the federal
tax code and revenue to government insured pensions and Medicare
and health care issues. The committee was a central player in
shaping President Obama's
Affordable Care Act
Whether there is a role for the federal government in dealing with
the historic bankruptcy crisis is hard to predict at this point. In
1975, when New York City was close to bankruptcy and approached the
federal government for help, they were rebuffed. The iconic Daily
News front page, headline, "Ford to City: Drop Dead" summed up the
response. As a result, city officials and union members negotiated
a deal and saved the city from bankruptcy.
Sliding Into Bankruptcy Hell
Detroit's 60-year slide into bankruptcy was caused by trends that
will be difficult to reverse: A shriveling population - down from
1.85 million in 1950 to 700,000 today, the demise of the auto
industry before it underwent a revival, riots, unimaginable urban
blight, poor schools, and a fast dwindling tax base.
Orr said last weekend on
Fox News Sunday
that "We are not expecting the cavalry to come charging in" to help
the city, and that "we have to fix it because we dug the hole."
But some lawmakers and budget and policy experts think the federal
government could soften the blow on many of Detroit's beleaguered
residents and retirees short of a massive federal bailout like the
one that helped save the auto industry.
Currently, the city receives just 6% of its $2.6 billion in annual
revenue comes from the federal government, according to Detroit's
2013 budget. Most of that money is received in the form of
community development and community services block grants,
transportation funds and other assistance.
But maybe more can be shaken loose. Sen. Carl Levin, D-Mich., a
one-time chairman of the Detroit City Council, said yesterday that
he and others in Washington should be looking closely "at every
single federal program, where there are funds available for various
things -- from removing blighted houses to transportation to
brownfields to education grants, to everything else the federal
government is involved in."
"We should be looking at existing programs to see where there are
funds in those programs and then for the city to make out a case
that, within existing programs, there are things that can be done
without some new bailout."
Levin said that new legislation would not be necessary. Instead, it
would be up to the Obama administration to decide whether to shake
loose additional money for the reeling Motor City.
The Department of Housing and Urban Development alone has 122
separate programs for rehabilitating neighborhoods, building
housing, removing abandoned buildings and forging public-private
Sen. Rob Portman
of Ohio said that the administration could also assist Detroit by
reviewing federal regulations and mandates that are adding to the
city's cost of operating.
"In my own home state of Ohio, we get lots of input from our bigger
cities about Environmental Protection Agency mandates on storm
water for instance, and combined sewer overflow," Portman said.
"I think this is an opening for us to look at some of those
policies and mandates," he said.
Andrew Reamer, a research professor at the George Washington
University Institute of Public Policy, said the White House could,
if it wanted, convene an ad hoc taskforce of agency officials
running all of the programs and decide to organize a coordinated
However, the administration must be cautious in taking action in
the early stages of the highly complex and high-stakes bankruptcy
proceedings, said Reamer, an expert on statistics and regional
economics and innovation.
"If I were in that situation, working for the feds or working for
the White House, I would be loath to do anything publicly until I
understood what the relationship of the federal government should
be to the bankruptcy itself," he said. "Because you don't want the
feds going in there and screwing up the legal process."
Tracy Gordon, a Brookings Institution fellow in state and local
public finance, also cautioned that even if the administration
offered Detroit flexibility on federal programs and mandates,
technical assistance or even additional funds, "I just wonder how
much that helps in the grand scheme of things."
"If the federal government were to really step in and loan them
money, that would be something else," she said. "But giving them
more flexibility around the edges with grants, I don't think will
make a big difference."
Editor's Note: This article by Eric Pianin originally appeared
For more from The Fiscal Times:
Why Detroit Won't Have a Pittsburgh Renaissance
Detroit Bankruptcy Is Big Red Flag for Other
Detroit's 60-Year Decline into Bankruptcy Hell
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