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Health & Fitness

Detroit Heads Into Bankruptcy

In a very important ruling today, U.S. Bankruptcy Court Judge Steven Rhodes ruled that government pensions are not different from any other municipal liability and do not require special protection in a local government’s (in this case, Detroit’s) bankruptcy filing.

In other words, to whatever extent — however many cents on the dollar — Detroit is able to pay the claims of any creditors, the city’s retired employees should recoup only that same percentage of their pensions. My guess is this number will be in the 20 percent range, though much depends on the city’s ability to restructure its overall costs and credibly access financial markets.

Many former city workers will suffer from what has happened to Detroit (and some even worse than others because some actually opted out of Social Security), but for everyone else this ruling is a huge victory, an economic blessing (not even in disguise.)

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