Sen. Rand Paul (R-KY) said he will use every resource he has at his disposal to stop President Barack Obama from bailing out newly-bankrupt Detroit because he believes the city can and must save itself and learn from its fiscal mistakes. “I basically say he [Obama] is bailing them out over my dead body because we don’t have any money in Washington.”
“There’s some good things that come out of bankruptcy,” Paul said in a phone interview from Iowa. “One is you get to start over. Bankruptcy lets you be forgiven of your debt. And you do so by getting new management, better management, and by getting rid of unwieldy contracts, contracts that give you where public employees are getting paid twice what private employees are and things come back more to normal. That’s the way cities and businesses can recover.
“I basically say he [Obama] is bailing them out over my dead body because we don’t have any money in Washington.”
The White House said it is monitoring the situation in Detroit, but has not made any official moves towards a bailout yet. But Obama’s former auto czar Steven Rattner said on MSNBC on Friday that he is calling on Obama to bail out Detroit. Paul said that “apparently” Obama is “making indications that Detroit can be expected to be bailed out.”
Paul said the reason he is going to fight to stop any efforts to bail out Detroit is that if the president succeeds in bailing it out, that will send a signal to the rest of cities and states nationwide that the federal government will bail them out to if they conduct reckless spending.
“Those who don’t have their house in order, who are teetering on disaster, will continue to make bad decisions. And by the way these [local and state budget choices] are tough decisions. I’m not saying they are all prescient and that it will be easy on everybody who works for the city or the state, but you need to make these decisions and the sooner you make them the better. If you wait to make them, it’s even harder on people.”
Detroit is just the latest in the long line of cities that have found themselves in financial trouble lately. Stockton, Calif., is another example of a major city that needed to file for bankruptcy. Paul said that any federal bailout would only make those problems worse.
“You don’t set up an implicit promise from the federal government that everybody is getting bailed out,” Paul said. “It’s sort of like too big to fail for banks. If you have too big to fail for cities or for states and they believe they’ll be bailed out they’ll continue to make unwise decisions.
“So, really, the answer is, just like the federal government, live within your means and spend what you have but don’t spend money you don’t have. The problem is so many of our state governments, the politicians are being elected by the public service unions. If the public service unions want to be paid twice as much as what private sector employees make, they want twice as good benefits and twice as good a pension.
“I mean the statistics in California are staggering. I think there’s over 100,000 people there getting over $100,000 a year in retirement. You got police chiefs in medium-sized cities getting $350,000 a year for a salary. It’s become untenable. But the main thing is we cannot send a signal from the federal government that cities and states are going to be too big to fail.”
Ultimately, Paul said, if Detroit had been more fiscally responsible before, this process would not have needed to happen. “Bankruptcy in Detroit is going to much harder than if ten years ago, they had started downsizing and making their pensions and salaries more commensurate with the private sector,” he said.