A drastic step remains inevitable as an upcoming emergency manager tackles Detroit's financial crisis, in the view of Phil Power, a longtime observer of Michigan politics and economics.
That ultimate solution, he writes in Bridge magazine, "will only gradually become clear as the emergency financial manager plows through his or her work."
Powers predicts "the largest municipal bankruptcy in American history."
He sees the state-appointed manager as "a necessary solution to Detroit’s problems, but it isn’t sufficient."
Phil PowerResolving the city’s operating deficit and cash flow problems isn’t going to deal with the enormous accumulated debt or the structural rigidity in the city charter that practically guarantees the expensive structure of city bureaucracy. And I doubt even an empowered emergency financial manager is going to have the clout to get the city’s bond holders to take a haircut and force a rewrite of the city charter. . . .
The whole Detroit situation today is exhibiting the same strange slow-motion stumble that General Motors displayed just before it went bust in 2009.
I’m sure that’s because nobody -- back then or now -- really wants to face a bankruptcy. But, think, in the case of GM, it turned out a bankruptcy was exactly what the doctor ordered. . . .
If you look at the precedents set by GM and Chrysler, a structured bankruptcy [for Detroit] is conceptually possible, financially sensible and politically acceptable.
Power, a former newspaper publisher and University of Michigan regent, founded the nonprofit Center for Michigan in 2006. It produces Bridge, an online news and commentary site.
