Saving Detroit from itself

In one sense, Detroit has already received a rolling bailout that it squandered. Last year the city received $228 million in federal grants and $137 million from the state. It has also borrowed $1.6 billion to finance pensions over the last decade. Under emergency manager Kevyn Orr’s restructuring plan, the capital market creditors who bailed out the unions would be repaid pennies on the dollar. That should teach investors a lesson about enabling deadbeat cities.

Mr. Orr has also proposed slashing unfunded retirement liabilities by 90% and dropping retirees onto Medicare and the ObamaCare exchanges—thus kicking $5.7 billion in liabilities to national taxpayers. He also wants to shift workers to defined-contribution plans, which is what state workers receive.

Unions protest that it’s unfair to put pensions under the knife in bankruptcy since pay and other benefits have already been nipped at the bargaining table. But these concessions were cosmetic: a 10% wage cut, reduction in vacation accruals, a pension cost-of-living freeze and elimination of retiree dental care and future sick pay.

In any event, retirees aren’t about to be thrown out on the crime-ridden streets. The city’s pension funds are between 60% to 85% funded depending on the actuarial assumptions, and Mr. Orr’s proposed haircut would affect only the unfunded portion, meaning most accrued benefits will be protected.

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