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Wednesday 22 November 2017

Detroit: Bailout hope looks bleak

Political leaders in Washington have not pushed for a bailout of Detroit (AP/Carlos Osorio)
Political leaders in Washington have not pushed for a bailout of Detroit (AP/Carlos Osorio)

During the bleakest days of America's Great Recession, Congress agreed to bail out two of Detroit's biggest businesses, General Motors and Chrysler.

However, there now seems little appetite from either Democrats or Republicans in Washington for a government rescue of the birthplace of the car industry, which is the largest American city to file for bankruptcy protection.

Such a bailout would be huge, perhaps as much as 20 billion dollars (£13 billion). Federal resources are strained, with the national debt at 16.7 trillion dollars (£11 trillion) and the government struggling under the constraints of automatic spending cuts that took effect in March.

President Barack Obama has had a hard enough time getting his present proposals though Congress, where Democrats hold a narrow majority in the Senate and Republicans are in firm control of the House of Representatives. "I think it would be a waste of the president's time to even propose it. His plate is so full and throwing Detroit into the mix is the last thing in the world he'd want," said Ross Baker, a political science professor at Rutgers University who specialises in Congress. "I think the era of big government bailouts is over."

Political leaders in Washington have not pushed for a bailout of Detroit, which was the nation's fourth-largest city in the 1950s, but since has had a declining population, accelerated by hard times for the car industry during and right after the punishing 2008-2009 recession.

Congress is still in near-gridlock territory. Opportunities for spending vast sums of money on a bailout for Detroit seem severely limited. The White House is taking a wait-and-see approach, but clearly exhibiting little enthusiasm for another big bailout.

"Can we help Detroit? We don't know," Vice President Joe Biden said in response to a reporter's question about a possible rescue. Presidential spokesman Jay Carney, when asked directly if a bailout was a possibility, appeared to rule out such assistance. "We will, of course, as we would with any city in this country, work with that city and have policy discussions with leaders in the city, and make suggestions and offer assistance where we can," he said.

"But on the issue of insolvency ... that's something that local leaders and creditors are going to have to resolve. But we will be partners in an effort to assist the city and the state as they move forward."

Local leaders are not pushing for a government bailout after the city filed for Chapter 9 bankruptcy protection on Thursday and neither is Republican governor Rick Snyder. "People should not expect bailouts at either the federal or the state level," Mr Snyder said. "We've been very diligent about this. We want to be a supportive partner at the state level. I believe the federal government does (too)."

Detroit's bankruptcy could last at least through the summer or autumn of 2014, when Mr Snyder is expected to ask voters for another term. "I deeply respect the citizens of Detroit," he said. "They along with the other nine million people in our state hired me to do this job. They're my customers. This was a tough step, a difficult decision, but it's the right decision."

Press Association

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