SPRIGGS: Trying to Understand What Makes Sense
7/22/2014, 4:34 p.m.
Last month, a United Nations panel held that cutting off water to Detroit residents suffering from high unemployment rates and low incomes, leaving them unable to afford their water bills, was a violation of basic human rights. This past weekend, actor Mark Ruffalo and Rep. John Conyers (D-Mich.) joined close to a thousand protesters in a march organized by National Nurses United from Detroit's Cobo Center to Hart Plaza. The chants of the crowd included "We got sold out, banks got bailed out." And there were renewed calls for a financial transaction tax, commonly referred to as a "Robin Hood tax."
It was announced this week that the water shutoffs would be temporarily suspended for 15 days.
During the Great Depression there was a stock market bubble that burst on Black Tuesday, Oct. 29, 1929. But there also was massive land speculation that collapsed the local economies of Texas, Florida and California, leading to more than 2,000 municipalities and municipal corporations being in default. The uncertainty of resolving the issue led Congress in 1934 to create a special chapter of the federal bankruptcy law to handle municipal bankruptcies.
Chapter 9 bankruptcies have spiked in each of the last three recessions. They have not reached the heights of the Great Depression. This has allowed room to treat each bankruptcy as a unique case-but the trend clearly suggests these are not independent events.
In the case of water and sewage bonds and the city of Detroit, the hike in water rates involves the perverse logic Chapter 9 was intended to avoid. A rash of foreclosures from the housing crisis helped escalate a depopulation of Detroit, while the largest drop in automobile demand in U.S. history that was part of the Great Recession meant a loss of employment in Detroit. The result of depopulation and less economic activity of course meant less revenue for the water authority-but the bonds still needed to be paid. So that means a hike in water bills for an unemployed and poor population.
The full costs of the Great Recession still are being tallied. Regrettably, distant from the free fall of 2008, the stories have been pointing blame at Detroit, Flint, Puerto Rico, Sacramento and the hundreds of other local government authorities that still need to meet basic government functions-like the provision of clean water-but with big drops in revenue.
In fact, while the number of payroll positions have reached their 2008 peak, public employment still is down, and state and local governments continue to shrink their budgets. But we still have children to educate, roads that must be repaired and in cities like Chicago, public order and safety to maintain.
So, how does it make sense that President George W. Bush and Treasury Secretary Hank Paulsen could bum rush Congress into a huge, multibillion-dollar deal to create the Troubled Asset Relief Program, but there is no national outcry when a city the size of Detroit can't provide affordable water to its citizens? If banks are too big to fail, don't we have cities too big to fail? Where Hurricane Katrina caused too much water that drowned New Orleans, isn't it also a catastrophe when thousands of households surrounded by potable water can't afford a drink? Doesn't the plight of Detroit at least warrant a White House convening?