When Detroit filed for the largest municipal bankruptcy in U.S. history this summer, it raised a lot of red flags over what the broader impact could be for cities across the country.
One of those red flags is over public pension debt – promised to workers, but unfunded with a bill of $3.5 billion amounting to about one-sixth of the city’s total debt, according to CNN. It’s the kind of shocking number that caused the situation to be dubbed a “ticking time bomb with potentially catastrophic consequences.” It also fuels questions like, “If Detroit cuts pensions, will your city be next?”
While Detroit’s emergency manager wants to reduce pension benefits for thousands of retired and current city employees, Dean Baker points out an asymmetry he sees in these kind of dealings.
Baker, the co-director for the Center for Economic & Policy Research, argues that contracts with Wall Street draw more respect in Detroit (and other cities as well) than contracts with workers. Baker made the claim in a post titled: “Pinching pensions to keep Wall Street fat and happy.”
Check out the above interview with The Daily Ticker to see him make his case and find out why he thinks this asymmetry exists, and if it’s likely to change anytime soon.
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