Jul 25 2013

Yellowhammer: Shelby Opposes Detroit Bailout

Republicans Move to Prevent Taxpayer-Funded Bailout of Detroit

Detroit filed the largest municipal bankruptcy in U.S. history last week — $18 billion in debt with thousands upon thousands of creditors. The filing dwarfed Jefferson County, Alabama’s historic $4.3 billion bankruptcy, which was the largest in U.S. history before Detroit came along.

Although Michigan Gov. Rick Snyder said on CBS’s Face The Nation that he’s not expecting a federal bailout for Detroit, and the Obama Administration has not offered them one, many people recall that only four years ago, president Obama swooped in with a giant $80 billion bailout for General Motors and Chrysler Group. They now worry he may do the same for the city of Detroit.

Public opinion is strongly against taxpayer dollars being used to bailout cities like Detroit. Only 25% of Americans favor the idea of bailouts for bankrupt cities according to a Rasmussen survey conducted earlier this week.

Republicans in Washington, D.C. are also expressing their opposition to the possibility of a bailout for Detroit, which Sen. Ron Johnson of Wisconsin called the “national poster-child of what can result when politicians enter into an unholy alliance with powerful unions at the expense of the local economy and the people who live there.”

Johnson and fellow Republican Senators Orrin Hatch of Utah and David Vitter of Louisiana on Wednesday submitted an amendment to the Transportation, Housing and Urban Development appropriations bill that would prohibit money appropriated to those federal agencies from being used to prevent a state government from defaulting on its obligations.

That amendment did not receive a vote, but an amendment to prohibit municipal bailouts submitted by Sen. Lindsay Graham during today’s Appropriations Committee mark up did. It failed along a Party line vote with all Republicans voting in favor and all Democrats voting against.

Sen. Richard Shelby, who voted in favor of today’s amendment, has been one of the leading voices against bailouts of any kind since the late 1970s. Shelby voted against the Chrysler bailout in 1979 as a freshman member of the House and was the top Republican on the Senate Banking Committee during the 2008/2009 Wall Street and Detroit bailouts, which he also opposed.

“Bailouts reward failure,” Shelby told Yellowhammer today. “The federal government has no business using taxpayer dollars to bail out any entity, be it a company, city, state – you name it. Americans pay too many taxes as it is; they should never have to pick up the tab for other cities.”

Most objective observers view Detroit as a case study on what happens when government spending skyrockets and is allowed to continue unchecked.

But not everyone agrees with that assessment of what happened to Detroit — a city which once boasted a population of almost 2 million but has now shrunk to about 700,000, the same size it was in 1910.

In spite of the city having been under Democrat control for the last half century, MSNBC’s Ed Shultz — defying all logic — said over the weekend that conservative policies led to Detroit’s downfall.

“Detroit, Michigan, used to be really a symbol of industrial strength and manufacturing in this country. But, thanks to a lot of Republican policies, the city is now filing for bankruptcy,” Schultz said. To Shultz’s right, MSNBC flashed a graphic featuring Mitt Romney, Ronald Reagan and Michigan Gov. Rick Snyder with the accompanying headline, “Conservative Utopia.”