Excerpts from the article:
There’s a basic falsehood in the dominant public narrative around Detroit: that pensions played a key role in driving the city bankrupt. But those who studied the bankruptcy closely know that the reverse is true: The city filed bankruptcy so that it could cut pensions. Detroit’s bankruptcy was not borne out of financial necessity and was not a foregone conclusion. It was a political decision made by state officials. Gov. Rick Snyder and the Michigan Legislature chose to push the distressed city over the edge in order to accomplish two otherwise difficult political goals: slashing pensions and regionalizing the Detroit Water and Sewerage Department. It was disaster capitalism at its finest.
Austerity hawks are now hoping to use the Detroit playbook in other cities to force the public to accept extreme measures to fix budget crises. And the bond markets seem to have finally settled on an answer to that question about which city will be the next Detroit: Chicago. Moody’s Investor Service, one of the three major credit rating agencies, just downgraded Chicago’s credit rating to junk level—the municipal equivalent of a subprime credit score, cautioning potential lenders that the city may not be able to pay them back—making it the lowest-rated major city in the country after Detroit.
But as was the case in Detroit, the talk of a Chicago bankruptcy has little to do with the city’s financial health and much to do with a broader political agenda to obliterate the social safety net and slash pensions. Even though there are numerous reasons why Chicago is not going bankrupt, the fact is that there has been a sustained effort by politicians like Mayor Rahm Emanuel to create a financial crisis and then use the threat of bankruptcy in order to usher in deep and painful cuts, just as the Right was able to do in Detroit.
Chicago is the test case for whether the Detroit playbook can be run in other, more prosperous cities.
The predatory lending crisis no one talks about
Austerity hawks have done a great job of selling budget shortfalls as the result of reckless overspending by incompetent and corrupt government officials. As a result, the solution gets framed as a choice between cutting pensions or slashing the social safety net. Working-class communities lose either way, while the 1% remains untouched. But the real problem with public budgets is that there is not enough revenue coming into public coffers. Since the Reagan Revolution, there has been a sustained effort to delegitimize government and suppress taxes. Tax rates for corporations and top income-earners have declined at precisely the moment that the United States has seen the most explosive population growth, leaving all levels of government unable to afford to pay for the basic services that communities need to function. As a result, government borrowing has skyrocketed. While it is sound public policy to use debt to fund long-term capital projects, it is deeply problematic when governments are forced to borrow money to deal with revenue shortfalls. It is even more problematic when they are doing so as a result of a concerted effort to suppress taxes by the same banks and people they are borrowing from. Banks and the wealthy created a crisis by lobbying hard to suppress taxes, and then they use that crisis to enrich themselves—a page right out of the Detroit playbook.
A progressive playbook
We need to flip the Detroit playbook on its head to create a new class of winners: working class communities. We must reject the paradigm in which Moody’s points a gun to our head and forces us to choose between closing schools and throwing seniors under the bus. We cannot allow austerity hawks to manufacture crises in order to push radically regressive agendas that balance the budgets on the backs of those who can least afford it.
We need to define the “austerity” problem as what it is—a lack of revenue caused by the refusal of Wall Street banks, big corporations and millionaires to pay their fair share in taxes— and put forth solutions to make them pay. This includes progressive revenue measures: We can pass a millionaires tax and a financial transactions tax, close corporate tax loopholes and end subsidies for profitable companies. It also includes policies to stop Wall Street from gouging taxpayers, like renegotiating predatory banking fees and toxic financial deals, and creating public banks to cut out Wall Street altogether.
We must reframe the choice for elected officials as one between the 99% and the 1%. Will Chicago’s Mayor Emanuel close another 50 schools to balance the Chicago Public Schools budget, or will he sue the banks that likely broke federal law by selling the school district predatory interest rate swaps that have cost hundreds of millions of dollars? Will Rauner cut state aid to cities in half and force them to slash essential public services, or will he fight for a millionaires tax? Whose side is he on?
A quick Google search shows that nearly every major city in America has been called “the next Detroit” at some point in the last two years. The Right plans to use the Detroit playbook across the country to force the general public to accept unconscionable cuts to public works while letting the true culprits off the hook. We need to expose the people and corporations who are profiting from the crises that they created, and force them to pay their fair share.