Today a US district court will consider whether Detroit is eligible for chapter 9 bankruptcy protection. If it goes forward, Detroit’s would be the largest municipal bankruptcy in US history.
Unions argue that the public-sector pensions are protected under Michigan’s constitution. The issue could eventually go all the way to the Supreme Court.
The laws regarding municipal bankruptcy vary from state to state. So, as one expert put it, “you can’t compare apples to apples.”
Still, examples of other cities that went bust underscore the challenge for any judge trying to weigh the financial obligations to retirees with the need to keep a city solvent.
Consider the city of Central Falls, Rhode Island. When it declared bankruptcy in 2011, a judge -- acting as receiver for the city – slashed some retiree pensions by half.
Frank Shafroth directs the Center for State and Local Government Leadership at George Mason University.
He spoke with the judge overseeing the Central Falls bankruptcy, who described the experience as the hardest decision of his life. The judge worried that retirees wouldn’t have enough to live on, but protecting basic services had to come first.
“He said, ‘Listen, if someone dials 911 because their house is one fire and the children are on the third floor, [a] retiree doesn’t answer,’” says Shafroth. “Your first responsibility as a receiver in a bankruptcy is to make sure that firemen, and fire trucks, and police officers are available in the event of an emergency that’s critical to saving lives.”
Finding the correct balance will be a challenge for cities like Detroit and San Bernardino, California, which both want bankruptcy protections.
If the cities protect pensions but reduce their current workforces, they cut the amount of money going into funds that ultimately support retiree pensions.
“If the municipality doesn’t develop a recovery plan that will stimulate the economy to create new jobs, then there really isn’t much of a future,” says attorney and municipal bankruptcy specialist James Spiotto.
Companies in the private sector pay into an insurance fund overseen by the Pension Benefit Guarantee Corporation that’s meant to protect retiree benefits.
“That’s been viewed in the private sector as a necessary social benefit. And likewise, it should be viewed in the public sector the same way,” says Spiotto. “So that everyone has a safety net. And that no one fears – which is what you really hear from retirees – that I’ll be left with nothing.”
He suggests that cities try to make any cuts to pension benefits only temporary. So if a city’s finances recover down the road, retirees can get some of their benefits back.
American companies that earned money overseas are looking for ways to spend it so they can avoid paying American taxes. This could be one of the reasons behind Microsoft's recent purchase of much of Nokia of Finland for more than $7 billion. Allan Sloan, senior editor-at-large for Fortune magazine, joins Marketplace Morning Report host David Brancaccio to discuss.
Stephen Hawking's new book, "My Brief History," comes out Tuesday, laden with the anticipation of any celebrity memoir. Hawking is famous for putting the universe's big questions into terms the rest of us can understand. Improbably, he has succeeded in turning theoretical physics into the stuff of cocktail parties and water cooler banter.
Hawking's 1983 book, "A Brief History of Time," spent more than 100 weeks on the New York Times bestseller list, it's sold 10 million copies. But the material is hard to digest. Cosmologist Michael Turner, who teaches at the University of Chicago, says, as pop science goes, "Not only is it the most sold book of all time, it's the most unread book of all time."
Not everyone who buys it reads it, and yet, Hawking's ideas have seeped into the popular imagination with unusual force, Turner says, making Hawking, "physicists' rockstar."
"Questions that he addresses in his work," Turner says, "are ones that just capture anyone's imagination, like the arrow of time: can you change the direction time moves?" Or baby universes: "Is it possible for our universe to spawn other universes?"
Dave Mosher, projects editor at Popular Science Magazine, compares Hawking's fame to Einstein's or Newton's. "Even though they're unlikely, in terms of celebrity status," he says, "they stick around because they have described an essential part of what it means to be human, through the lens of science and mathematics."
Almost completely paralyzed by a rare motor neuron disease, Hawking has used a wheelchair for decades, and he uses his cheek muscles to communicate through a computer, at about one word a minute. Michael Moyer, physics editor at Scientific American, credits Hawking for pushing theoretical physics in a direction it wouldn't have gone without his contributions. Yet his ideas have resonated all the more, Moyer says, because of his unusual personal story.
"In the public's eye," Moyer says, "him being who he is and having the identity he does, really makes it simple for us to understand this great mind trapped in a body that doesn't work."
Mosher says that contrast is at the core of Hawking's "brand"—bold, difficult, ideas, paired with an incredible physical challenge.
After decades of both declining numbers and political clout, the nation’s biggest labor federation is branching out.
At the AFL-CIO convention in Los Angeles Monday, leaders opened the doors to millions of non-union workers with an invitation:
“The AFL-CIO hereby invites every worker in the United States to join the labor movement”
That’s right-- the federation has opened the representation door for the first time to millions of non-union workers.
But there’s a catch. Collective bargaining isn’t a part of the new deal.
So will this “diet” version give labor back its clout?
“Certainly if they can organize enough workers outside of collective bargaining, they will increase their influence because this is also a political voting block,” says Northeastern University economist Barry Bluestone.
That’s good for the labor movement, but not so great for struggling workers.
“These workers all want collective bargaining, all need collective bargaining,” says Cornell’s Kate Bronfenbrenner.
Without the power of collective bargaining to push companies, it’s not clear how many workers will take up the labor group on its invitation.
American investors are pouring money into European stocks as the Euro crisis seems to be subsiding. And now vital signs in China, like retail sales and factory output, are improving. Shaun Rein, Managing Director of the China Market Research Group, joins Marketplace Morning Report host David Brancaccio to discuss.
An Indian court in New Delhi convicted four men Tuesday in the fatal gang rape of a young woman on a moving New Delhi bus. The attack set off waves of protests and gave voice to years of anger over the treatment of women.