Fifty years ago, when General Motors, Ford and Chrysler ruled the automotive world and Honda was best known for making portable generators, nobody would have predicted the sad fate of the great city built by the automobile, Detroit.
Now that the city has declared bankruptcy after a spectacular decline decades in the making, few would argue that this is an isolated case of municipal mismanagement, that what happened in Detroit couldn’t possibly happen elsewhere.
Detroit is just an extreme example of a problem that ought to be disturbing the sleep of state and municipal officials around the nation—including those in New York. The Motor City is drowning in debt, in part because it cannot afford generous pensions and health benefits negotiated by public-employee unions. Of the city’s overall debt of $18 billion, unfunded benefits account for about $3.5 billion.
In New York City, the cost of health insurance for current public employees is expected to rise to nearly $7 billion by 2016, according to the Independent Budget Office. Ninety percent of the city’s workers do not contribute to their health care plans. The city spent $1.5 billion on public employee pensions in 2002. It now spends $8 billion.
This is more than unsustainable. This is insanity. And yet New York continues to act as if nothing is wrong. Mayoral candidates, eager to please the unions, avoid the subject. The unions are focused on getting new contracts with retroactive raises. There is precious little talk of the fiscal Armageddon that awaits us if we continue to devote more and more resources to gold-plated pensions and health benefits for city workers.
In Detroit, the policies of candidates who posed as “friends of the unions” have now brought enormous pain and fiscal woe to the very pensioners who trusted them. Killing the goose that laid the golden egg is not being a friend—it’s madness.
New York cannot afford the pensions and benefits of a half-century ago, when people lived shorter lives and health care costs were more manageable. Without comprehensive reform, including an end to defined-benefits pension plans, well, welcome to Detroit.