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Koch brothers targeting fair bankruptcy deal in Detroit

An empty house sits in Detroit with the GM building in the background.

ASsociated press

An empty house sits in Detroit with the GM building in the background.

After months of painful negotiations, the City of Detroit and many of its creditors stand on the verge of a “grand bargain” that would help the city climb out of bankruptcy. But a new roadblock has emerged: a powerful national conservative group, which seems bent on wrecking the deal to make an ideological point. It’s an irresponsible action.

As tends to happen in compromises, almost nobody in Michigan is completely happy with the emerging bargain. Pensioners will take a cut. The insurers who covered the city’s bonds will suffer. The city government will cede some fiscal autonomy to a state control board for at least 13 years. Even the deal’s silver linings come with clouds: Detroit won’t lose its cherished art museum, but control of the collection will pass to a private foundation.

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The conservative group Americans for Prosperity, though, insists on unconditional surrender by the city. In urging Michigan legislators to reject the deal, the Koch-brothers-backed group is demanding the city liquidate the art collection and seek more pension reforms. Although Republican leaders and the state’s GOP governor, Rick Snyder, back the deal, and the parts that need legislative approval have passed the Michigan House, their future in the Senate remains unclear.

The group has threatened to run ads in Republican primaries against any Michigan legislators who vote for the package, which would shift $195 million from one state fund into aid to Detroit. “Detroit has behaved like this for 30 years,” said a spokesman for the group. “Politicians there won’t change their behavior if they keep getting bailouts from the hardworking taxpayers of Michigan.”

“Bailout” is a somewhat misleading term in the context; Snyder argues that the state could be on the hook for even more if pension cuts were too Draconian, since impoverishing retirees could force them onto public assistance. But it fits the storyline some have tried to impose on Detroit’s woes. Indeed, it’s proven irresistible for outside groups from across the political spectrum to make ideological grist out of Detroit’s collapse. Depending on whom you ask, Detroit’s woes are a morality tale about the evils of globalization, white flight, banks, unions, overregulation, or corrupt politicians.

Detroit’s many problems do indeed hold many warnings for other cities, and if Americans for Prosperity were seeking ways to prevent future Detroits it might be doing a public service. But sabotaging the bankruptcy deal now would only raise the likelihood of more misery in America’s once-great industrial powerhouse.

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