GLOBAL RESEARCH
By Jerry White
12/04/2013
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It is no accident that only hours after Rhodes issued his ruling, both chambers of the Illinois legislature voted to impose a pension “reform” that will rob Illinois state workers of thousands of dollars in retirement income.
Rhodes’ ruling signals a new stage in the ruling class offensive, in which pensions, medical benefits, safety and health regulations—in short, every limitation on the exploitation of the working class—will be eliminated. This nationwide assault has the explicit backing of the Obama administration, which filed a brief supporting the bankruptcy process.
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After the ruling, Orr told reporters that “some very hard decisions regarding pensions” would be included in the adjustment plan he will release in early January. He added that Christie’s auction house would finish its appraisal of the “500 or so highest value pieces of art” at the Detroit Institute of Arts over the next two weeks. He reiterated his intention to “monetize” (i.e., sell off) the publicly owned art collection “in some fashion.”
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In his ruling, the judge did not attempt to explain how gutting pensions and throwing tens of thousands of city residents into destitution, or privatizing city services and selling off its cultural treasures, will improve the health and safety of Detroiters.
Rhodes acknowledged that Detroit was entangled in “complex and confusing” financial arrangements pushed by the banks in previous years. While noting that, as a result of these arrangements and the economic crisis, debt servicing could rise from 28 percent to 65 percent of the city’s annual budget, Rhodes never suggested that the Wall Street institutions be made to pay for the disaster they created. Instead, he insisted that the chief source of the city’s financial woes was “legacy costs,” i.e., the pensions and health benefits of retired workers.
Rhodes ignored all such evidence, accepting uncritically and completely Orr’s politically motivated presentation of the city’s financial position.
His ruling was not an exercise in objective jurisprudence. It was a political and class decision made on behalf of the corporate-financial elite. The judge strung together a series of sophistic arguments to distort the facts, circumvent the law, and arrive at a previously determined conclusion.
In common with the US Supreme Court ruling that countermanded the Florida Supreme Court and halted the counting of votes in order to hand the 2000 presidential election to Bush, Rhodes’s decision asserted federal supremacy to ride roughshod over the Michigan State Constitution and its guarantee of public pensions.
In finding the city eligible for bankruptcy, the judge brushed aside the legal arguments of retirees and others who filed lawsuits challenging Orr’s bankruptcy filing and Michigan’s anti-democratic emergency manager law. Dismissing the plain language of the Michigan Constitution’s ban on “impairing or diminishing” public employee pensions, Rhodes argued that there was no such ban and that the federal courts could sanction an attack on workers’ benefits.
The judge also ruled that the state’s emergency manager law, Public Act 436, was constitutional, even though it was essentially the same law that was repealed by Michigan voters in December 2012.
The judge went through contortions to claim that the bankruptcy filing was carried out in “good faith” even though he acknowledged that Orr had not conducted “good faith” negotiations with retiree groups, unions, and other creditors—one of the requirements under the bankruptcy law. Rhodes ruled that further negotiations were “impracticable” because there were more than 100,000 creditors and the city was running out of time and could not pay its bills.
In his concluding remarks, Rhodes gave an extraordinary account of what he called the “composite narrative” of the objectors’ argument that the filing had been in bad faith.
Rhodes said: “The city’s filing was the consequence of a long-term strategic plan whose goal was the impairment of pension rights through a bankruptcy filing by the city. Its genesis, the narrative says, was hatched by a law review article that two Jones Day attorneys wrote. This is significant because Jones Day did not just become the city’s attorneys, but the law firm from which the emergency manager was hired.”
The “narrative,” he said, included the city engaging the creditors only in the minimum so it could later assert in bankruptcy court that it attempted to negotiate in good faith.
Rhodes acknowledged that not only the objectors, but “many people in Detroit hold to this narrative or at least substantial parts of it.” He added that the “Court does find, in some particulars, the record does support the objectors’ view of the reality that led up to this bankruptcy filing.”
Despite these damning acknowledgments—pointing to a political conspiracy against the people of Detroit—Rhodes insisted that there was “not nearly enough particulars for this Court to find that the filing was in bad faith.”
In essence, Rhodes ruled that no matter how fraudulent the proceedings leading up to the bankruptcy, it could still go forward. He thereby opened, no doubt intentionally, a very wide door for other cities to declare bankruptcy and proceed with their own attacks on the jobs and benefits of the working class.
This ruling underscores the fact that the entire political system—from the White House, to the Democratic and Republican parties, to Congress, to the courts—is an instrument of the financial aristocracy and is carrying out a social counterrevolution against the working class.
The corporate and financial elite is able to proceed with such brazen contempt for social and democratic rights because of the cowardice and complicity of the trade unions. As was made clear in a filing last week, the unions accept the entire framework of the bankruptcy, demanding that the city proceed even more aggressively in selling off art from the DIA. (See,“The unions and the Detroit bankruptcy”).
The mobilization of the working class against this attack requires the exposure of the entire criminal operation and the financial interests that stand to benefit from the looting of pensions and public assets. For this purpose, the Socialist Equality Party is organizing the February 15 Workers Inquiry into the Attack on the DIA and the Bankruptcy of Detroit.
For more information on the Workers Inquiry, visit detroitinquiry.org.