Inconvenient truth: Retirees Should Embrace Bipartisan ‘Grand Bargain’

Page A-1Before and after the Affordable Care Act (ACA) — Obamacare — became law, so many on the progressive spectrum of politics dismissed it as not going far enough. They wanted President Obama to go for a universal single payer and publicly financed system, instead of what they said is a windfall for insurance companies. The extreme right dug in their heels and dismissed the health law as government intrusion, punitive and a disruption to the lives of people. Before the U.S. Supreme Court made ACA the law of the land, this debate was taking place against the backdrop of a fundamental truth: the law stands to aid 30 million uninsured and making preexisting conditions no longer a cause for denial.
What the Obamacare battle showed us is that there are many sides to an issue and the big questions that are debated today. There are merits and demerits to the life and death issues and we cannot dismiss what each debater or political force is bringing to the debate as long as it is factual and rooted in truth, not emotional acrobatics.
Also, the ACA battle reminded us that not everyone will agree with a proposition and that those who are at the negotiating table have a sacred responsibility to ensure that the most vulnerable do not walk away empty-handed but rather with something significant and meaningful from the table of compromise. The essence of compromise is that we can show the power of collaboration, and yet maintain the fundamentals which is key to moving forward. And in the case of the ACA, the fundamentals were making sure those with preexisting conditions were no longer turned away.
Mahatma Ghandi described the power of compromise this way: “All compromise is based on give and take, but there can be no give and take on fundamentals. Any compromise on mere fundamentals is a surrender. For it is all give and no take.”
This brings us to the “Grand Bargain,” the most significant compromise of the moment tied to Detroit’s future that will decide whether we are nearing the final stages of closing the chapter on the first municipal bankruptcy in U.S. history. The Grand Bargain, which won a historic and rare bipartisan vote in both the House and Senate in Lansing allows for $195 million to come to Detroit to help close the bankruptcy deal as well as help retirees.
It is part of the city’s Plan of Adjustment submitted to the bankruptcy court, and with it retirees are protected from very painful, deep cuts.
For example, police and fire retirees under the compromise reached in Lansing will continue to receive 45 percent of pre-bankruptcy cost of living adjustment otherwise known as COLA (Cost of Living Allowance).
In essence, voting yes for the Grand Bargain would make available $816 million in contributions from the foundation community, the Detroit Institute of Arts and the state government.
For those wondering about the potential of creating a perennial underclass, there is a poverty fund being created to prevent retirees from falling below 133 percent of the poverty line because of a settlement with UTGO bonds secured by U.S. District Court Chief Judge Gerald Rosen, the bankruptcy mediator.
To this effect an additional $56 million will be used to create the Income Security Fund to ensure that the most vulnerable retirees are protected from damaging cuts to their benefits.
For the General Retirement System retirees, under the Grand Bargain, their pensions would be reduced starting at 4.5 percent and with a maximum at 20 percent if they support the bargain. Rejecting the compromise would mean their pension cuts would begin at 27 percent and there is no limit on how many cuts could be made to their benefits. That means their pensions could be reduced to zero.
This compromise for retirees was a deal that was fought for on their behalf by AFSCME leadership, the Detroit Retired City Employees Association, trustees of the General Retirement System (GRS) and the mediation team. And if GRS performs well in the future, cuts to benefits can be restored.
But the Grand Bargain remains a deal only if a majority of the two retiree classes — the GRS and the PFRS (Police and Fire Retirement System) — vote to support the city’s plan.
The worst consequences if retirees vote no on the deal would mean that the $816 million will no longer be available and it will not force the sale of the DIA either. Michigan Attorney General Bill Schuette has already indicated that the DIA art is held in trust for the public and cannot be sold as part of this bankruptcy deal.
Even if the art were sold the proceeds would go to the creditors who are wishing they had gotten more out of this bankruptcy process.
Several creditors are engaging in a propaganda battle, encouraging retirees and some labor groups to reject the plan. But what Detroit retirees should realize is that these creditors — Wall Street vultures — couldn’t care less about the future of our seniors and those who have paid their dues to this city.
Let’s remember that when Detroit Emergency Manager Kevyn Orr wanted to take 25 representatives of Wall Street juggernauts on a tour of Detroit to see the condition of the city, they declined the invitation. That was a clear sign that they were not interested in any human perspective about the city, or any attempt to put in humane context the weight the bankruptcy process will have on people who have earned their benefits.
So why should Detroit retirees now think that some of the creditors who are secretly campaigning to change their minds on the Grand Bargain really understand their plight?
Why should retirees believe the creditors who stand to lose hundreds of millions of dollars as a result of this plan think that these fat cows from Wall Street have their interest at heart?
The mediation team led by Judge Rosen and includes U.S. District Judge Victoria Roberts, attorney Eugene Driker and others have struck a deal that is unheard of in bankruptcy court.
Truth be told, if this case was in a different jurisdiction the results of what we are seeing now in the bankruptcy process would potentially be different and carry damaging consequences for retirees.
Because Wall Street creditors are used to marching into court and getting what they want. They have all the money to hire the top lawyers in the nation to guard their financial interests, no matter what happens to the other side.
But in the case of Detroit, it is a different scenario. These creditors have met their match in bankruptcy Judge Stephen Rhodes as well as Rosen and his team of highly competent mediators.The way the bankruptcy process is unfolding is not the kind of bankruptcy jurisprudence the creditors in the Detroit bankruptcy case have long been used to.
But the key here is that Detroit was fortunate that the U.S. Sixth Circuit Court of Appeals chief judge chose a judge from Detroit who in turn selected a mediator from the same area to handle the bankruptcy. If a judge from another district, with no ties to this city’s storied history as well as the region, was flown in here to hear the bankruptcy case we would very likely be telling a different story by now.
Someone without ties to the area would have been more prone to taking a route that carries no consideration or context for the city’s socioeconomic evolution and how the bankruptcy process is central to that. An outside judge could potentially have given creditors all they want: go strictly by precedent as other bankruptcy rulings have shown and nothing else.
But because the creditors are not finding Rhodes and the mediation team favorable, their tactic is to create confusion among retiree groups, exploit the cuts they are facing from the deal as an example of their argument that the deal is bad. All our retirees need to do is to check their actions and see if it matches the propaganda.
It is an undeniable fact that Detroit retirees have earned 100 percent of their benefits. They worked hard for it. They did not create the bankruptcy crisis. All they did was remain loyal to the city and gave their best. They did not rely on the highest connections in society to earn a dollar. They believed that there is dignity in labor and that giving them their entire benefits is assuring them the dignity they deserve. That is a truism we cannot detach from the history of this bankruptcy.
But times have changed, and lack of political and financial accountability is partly what has gotten the city to this point. No one imagined when our retirees began working for the city that Detroit would one day enter into bankruptcy that would now affect their benefits. And with bankruptcy comes tough negotiations, and negotiations beget compromise, the cornerstone of any successful deal.
Yes, the cuts to their benefits under this deal is challenging, especially when they are living on meager incomes. But under the current circumstances and with the proposition in the deal to address the poverty question, this deal is a strong and an acceptable option for retirees compared to the zero option they stand to get if they walk away and opt for an appeal.
The right to appeal is an important democratic tradition, and no one should be stopped from appealing but as the saying goes, “Be careful what you ask for,” because it may be far less pretty than you expect. This is not a scare tactic. Appealing a case is like rolling a pair of dice. You win or lose permanently, and then bear the consequences.
In the case of the bankruptcy, Detroit retirees should look at the entire process, as one that normally benefits the creditors most of the time. But in this instance we are seeing something different emerging out of bankruptcy court. The idea of a “Grand Bargain,” is unheard of and that’s because Michigan’s largest city cannot be allowed to go under. In the same vein, our retirees should also look at this deal as protecting a city they have long protected and gave their best to. Any cut to their benefits is understandably difficult and painful but the alternative could put them in a far more difficult painful situation and untold hardships, while the creditors smile back to Wall Street in sacks of money. Before the creditors do that, retirees should vote yes in their own interest.
Bankole Thompson is the editor of the Michigan Chronicle and author of a forthcoming book on Detroit. His most recent book, “Obama and Christian Loyalty,” deals with the politics of the religious right, Black theology and the president’s faith posture across a myriad of issues with an epilogue written by former White House spokesman Robert S. Weiner. He is a senior political analyst at WDET-101.9FM (Detroit Public Radio) and a member of the weekly “Obama Watch” Sunday roundtable on WLIB-1190AM New York. Email or visit


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