Detroit files Chapter 9

Likely the first of many to come.

The root cause is????  drum roll please....  Pension liabilities?  Unions?

Collective bargaining has absolutely no place in government.  Back in the 30's, 40's, and 50's even the Dem's who were pushing for Unions were adamantly against public sector unions because they recognized that it wouldn't work.

“It is impossible to bargain collectively with the government.” - George Meany -- the former president of the A.F.L.-C.I.O -- in 1955

"The process of collective bargaining, as usually understood, cannot be transplanted into the public service," President Roosevelt wrote in 1937 to the National Federation of Federal Employees. Yes, public workers may demand fair treatment, wrote Roosevelt. But, he wrote, "I want to emphasize my conviction that militant tactics have no place" in the public sector. "A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government."

What bothers me most is no one will learn anything from this.  The government gets a do over.  Citizens see things get better.  Employees will see only a little change until they retire.  And through all this will probably blame the gov. for screwing them out of their money, rather than understanding that it was their fault.  Ultimately only some employees will be hurt and no one is ever held accountable.  

Sad...

I obviously don't know all the details on this, but from what I'm reading I suspect the employees will be hurt a lot on this.  I'm guessing people who are currently retired will have a massive cut of their pension to the point of having to go back to work.  There will likely be heavy layoffs that were not possible due to contracts in place outside of BK and  the benefits packages will likely be slashed heavily as well for the same reason.

I do agree with you that nobody will be held accountable and that all the people who are truly at fault will successfully blame everyone else for the issues.

Here's an article form yesterday discussing these very cuts:

Detroit's workers and retirees face big cuts

All the perks of a selfish society in moral decline.

From what I understand they didn't even pay into Social Security because they were on the government pension.  So, they are flat out hosed.

I worked for MCI about 15 years ago and had a great job.  They had great benefits, a retirement plan, and pretty good stock option programs.
I knew a lot of people there that had their entire retirement wrapped into the company and ultimately lost everything when they went under.

I was still young enough that I didn't really have much of anything invested, but after the Worldcom acquisition and ultimate company demise I realized that as a responsible individual I cannot rely on ANY company or entity to provide for my retirement. 

I feel horrible for the people in Detroit who are affected by this, and I don't in any way blame them.  If my boss said, hey I want to give you twice the benefits and twice the pay I would have taken it every time.  I blame the corrupt politicians and Union bosses who pushed for these unsustainable contracts that ultimately led to everyone's demise.

I myself love to throw out blanket statements about stuff I do not know... but this one is tricky for me. I am a non-union municipal worker. I do not pay SS and have a defined benefit retirement. As usual, folks around here love to take shots at the lavish retirement I have and it is a usual target. I will agree it is "lavish" in the sense it is a defined benefit plan which most in America no longer have.

I pay 8% for it and my employer matches it. Yet, I am underpaid compared to my counter parts right down the road. That is the sacrifice... lower pay, for a better retirement. I can quite today and work down the road and make at least 10% more. And, unlike most pension plans, mine is very well managed, and very well funded. During the down turn benefits were cut and cost were increased and it was solvent the entire time, and still is today.

So where I am going with this is it is once again under attack by a conservative Mayor, and the usual talking points are thrown out, and they are 100% false. I usually will talk bad about unions and their unrealistic retirements and benefits. I myself do not expect, or want, something for nothing... pay me my market value, and I will make my decision from there. And I have made mine, I will sacrifice money today, for better retirement later.

But when folks have made that decision, and they have an agreement with an employer... then that is what it is. You can't just take it from them. I have no idea what Detroit's retirement plan is and how realistic the unions benefits were.... but this is a fine example for me of where all this conservative/liberal, capitalist/union stuff clashes... and it is not always cut and dried.

hah, sorry. 

True that

You relying on your self for your retirement is putting money under your mattress. If your retirement is based on investments in real estate, stock market, or bonds... you most certainly are relying on some one else for your retirement.

Excellent post.  I too believe people should get what they're promised and on the flip side I think governments should be able to adjust things when things don't work out as planned.  I think what you described is exactly that, where the city/state has had the flexibility to change things around to keep them solvent.  I chuckle when I read about the Unions wanting to sue the city because they "can't" reduce their benefits due to agreed upon contracts and laws that were put in place to protect them.  /facepalm   Seriously dudes, what part of they don't have any money do you not understand?

I know here in Omaha we have had a lot of issues with the Police/Fire union contracts because former Mayors and City Councils had rewarded them heavily for their political support.  There were many rank and file cops who were "spiking" their pay the final year working 60-80 hour weeks to make their pay that year be something like $200k.  Then their retirement package was based on a multiple of their highest paid year.  So the net effect was all these cops retiring after 20 years (in their early 40's) getting retirement pay of six figures which was well above what they ever made as a cop.

The new mayor is trying to fix it and there have been some changes put in place to stop the spiking and such, but the sad part is the city budget as a whole suffers primarily due to these two specific unions.  The teachers union didn't get any of those benefits, but they're still city employees.  If Omaha were to hypothetically go Bankrupt because of the abuse with the police/fire contracts all city workers and pensions would suffer even though they had nothing to do with the situation.

So, I agree with you that it's not as cut and dry as it seems.  I genuinely feel for the people who are drawing a pension in Detroit right now.

It's a comfy mattress. 

What I mean by that is I'm not putting my eggs in one company basket that's out of my control.  You will never catch me buying stock in a single company either.  I only buy ETF's from a market standpoint and most of my net worth is tied up in my business that I own and control.  I know ETF's are managed by a single company and there's still a chance it could go bye bye and I know my company could fail, but I try to minimize my exposure as much as possible.  I more importantly try to maintain as much control over my retirement as possible because if it goes south I want to see it coming.

Originally posted by switch

Originally posted by powerman

Originally posted by tuwood

Originally posted by switch  I hope none of them are counting on social security...yikes!

From what I understand they didn't even pay into Social Security because they were on the government pension.  So, they are flat out hosed.

 

I worked for MCI about 15 years ago and had a great job.  They had great benefits, a retirement plan, and pretty good stock option programs.
I knew a lot of people there that had their entire retirement wrapped into the company and ultimately lost everything when they went under.

I was still young enough that I didn't really have much of anything invested, but after the Worldcom acquisition and ultimate company demise I realized that as a responsible individual I cannot rely on ANY company or entity to provide for my retirement. 

I feel horrible for the people in Detroit who are affected by this, and I don't in any way blame them.  If my boss said, hey I want to give you twice the benefits and twice the pay I would have taken it every time.  I blame the corrupt politicians and Union bosses who pushed for these unsustainable contracts that ultimately led to everyone's demise.

You relying on your self for your retirement is putting money under your mattress. If your retirement is based on investments in real estate, stock market, or bonds... you most certainly are relying on some one else for your retirement.

To a point, but there are some investments that have less risk than others. If we are at a point where all the investment strategies in your list fail investors, that paper money under the mattress will be worthless too. Guns and ammo, bro

Now that's what I'm talking about.  I knew I liked you for some reason.  ;-)

Originally posted by switch

Originally posted by tuwood

Originally posted by switch

Originally posted by powerman

Originally posted by tuwood

Originally posted by switch  I hope none of them are counting on social security...yikes!

From what I understand they didn't even pay into Social Security because they were on the government pension.  So, they are flat out hosed.

 

I worked for MCI about 15 years ago and had a great job.  They had great benefits, a retirement plan, and pretty good stock option programs.
I knew a lot of people there that had their entire retirement wrapped into the company and ultimately lost everything when they went under.

I was still young enough that I didn't really have much of anything invested, but after the Worldcom acquisition and ultimate company demise I realized that as a responsible individual I cannot rely on ANY company or entity to provide for my retirement. 

I feel horrible for the people in Detroit who are affected by this, and I don't in any way blame them.  If my boss said, hey I want to give you twice the benefits and twice the pay I would have taken it every time.  I blame the corrupt politicians and Union bosses who pushed for these unsustainable contracts that ultimately led to everyone's demise.

You relying on your self for your retirement is putting money under your mattress. If your retirement is based on investments in real estate, stock market, or bonds... you most certainly are relying on some one else for your retirement.

To a point, but there are some investments that have less risk than others. If we are at a point where all the investment strategies in your list fail investors, that paper money under the mattress will be worthless too. Guns and ammo, bro

Now that's what I'm talking about.  I knew I liked you for some reason.  ;-)

I'm no gun "nut," but I think guns and ammo are a reasonable investment and should at least be considered as part of a plan--just like land (especially with water access), bonds, stocks and cold hard cash. Many would add gold to that list, but I haven't yet.

Aren't you supposed to have some cans of green beans too....and a bug-out bag....and lots of tin foil?