In the software world, the concept behind beta-testing is an external pilot-test of a product before commercial quantity production for public consumption. During the beta test stage, a product has already passed an internal pilot-test where glaring defects have been removed, but since the product may still have some minor problems that require user participation, it is released to selected customers to test under normal, everyday conditions to spot and correct remaining flaws. Republicans have long sought to privatize government, and they have given indications that their penchant for restricting revenue sources and creating phony debt crises is part of their anti-government agenda to manufacture a scenario where the government is bankrupt to give corporations the opportunity to buy-out government assets and programs for a profit. On Thursday, the first beta-test of selling off a city to corporations began in earnest when an emergency manager in Detroit filed for bankruptcy, and it is a harbinger of the Republicans’ plan for the federal government.
Republicans have long sought to sell off government assets they claim are prohibitively expensive to private, for-profit enterprises they claim are better equipped to administer them because they will base operations on sound corporate business models. What Detroit is experiencing is the Bain Capital vulture capitalist tactic of taking over a company, leveraging it with debt, declaring bankruptcy, and selling off assets and firing union employees all while turning a profit. Michigan governor Rick Snyder followed Bain’s tactics in appointing his cohort to lead the city, disband the government, and create conditions allowing the emergency manager to declare the city bankrupt to sell off assets allegedly to satisfy creditors.
It is not common for a municipality to declare Chapter 9 bankruptcy according to U.S. Courts, and the purpose is to “provide a financially distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, or refinancing the debt by obtaining a new loan.” It may not be typical for municipalities, but it follows the Bain model right down to “refinancing the debt to obtain a new loan” that is part and parcel of leveraging a company, or in Detroit’s case, a city, with more debt it will never be able to repay without selling off all its assets.
In Detroit’s case, the city was leveraged to the hilt with state-backed bond money to allow it to meet payroll for its employees, and by feigning resistance by creditors, unions, and pension boards to take pennies on the dollar for their assets to assist in restructuring the city’s finances, the bankruptcy gives the emergency manager power to liquidate city assets, including public employee pensions, to satisfy demands for payment. Willard Romney would be proud of emergency city manager Kevyn Orr’s adherence to the Bain tactics; especially because as city employees and residents suffer like hundreds-of-thousands of employees Bain companies ruined, corporations will buy government assets for a pittance.
Everything emergency city manager Orr has done is in line with Bain tactics including misrepresenting the city’s financial situation to create the necessity for cutting expenses, services, and finally declaring bankruptcy not unlike Bain Capital did to companies they took over. An attorney for Detroit, Krystal Crittendon, criticized a recent financial report filed by Orr and said the numbers do not accurately represent the city’s fiscal woes, and it follows typical Republican rhetoric regarding the federal debt. She said, “The whole foundation that brings him here is false. We do not have a $15 billion or a $20 billion debt problem. We have less than a $2 billion short-term debt problem that we could manage if we just went out and collected revenues that are owed to the city; stop giving tax abatement to people who can actually afford to pay taxes.” Republicans have resisted raising taxes, or even funding the IRS to collect taxes, from corporations and the wealthy while they complain social programs like Social Security and Medicare are driving the country into bankruptcy as a reason to cut spending and turn over operations like Medicare to privatization.
What Detroit suffered is a microcosm of the federal government leveraged with debt from Bush-Republicans’ tax cuts for the rich, bailouts to Wall Street and banks designated as “too big to fail,” a Medicare prescription plan, and two unnecessary wars that were all unfunded and put on the nation’s credit card. To make it nearly impossible for the federal government to meet its debt obligations, Republicans refused to bring in more revenue, and spent four years driving up debt with extensions on tax cuts for the rich, overfunding the already bloated defense budget, and nearly causing the government to default on its debts during the 2011 debt ceiling crisis. Along the way, Republicans have attempted cutting Medicare and Social Security spending they claim is driving the debt and deficit, as well as using the sequester to starve domestic programs into oblivion not unlike Detroit’s city manager withholding funding for education, city maintenance, and social programs as prohibitively expensive while giving tax breaks to the rich.
The city of Detroit’s emergency manager followed Bain Capital’s recipe for eviscerating a company, sending it into bankruptcy, and reorganizing to sell off assets to wealthy Wall Street investors to settle debts, and it is the Republican version of beta-testing their intention to privatize the federal government. Republicans have long-panted to sell off government assets and operations to private corporations whether it is public education, Social Security, Medicare, or federal buildings and national parks. Because those programs are successful and popular with the people, and to portray them as creating the nation’s debt woes, they have systematically underfunded them while pushing privatization as the only means of their salvation. Over the past four years Republican leaders have complained “America is broke” and decried domestic programs driving it into bankruptcy at the same time they resisted new revenue and fought to give greater tax breaks and subsidies to the rich and corporations.
Michigan Governor Snyder telegraphed his intent when he appointed Orr, a “turnaround specialist,” saying, “Creditors and public servants deserve to know what promises the city can and will keep, and the only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.” The victims of Snyder and Orr’s machinations are schools, city workers, and their pension plans that were given the option of taking 10-cents on the dollar or lose everything in Chapter 9 bankruptcy reorganization, and like Bain companies, employees will lose their jobs, pensions, and schools are sold off to for-profit corporations.
Doubtless, Republicans at the federal level are closely monitoring the devastation in Detroit to spot any remaining flaws in the bankruptcy to privatization strategy, and carefully scheming to convince Washington that Social Security, Medicare, public education, and domestic programs have to be radically restructured without the burden of impossible obligations. For Republicans, impossible obligations are Social Security, Medicare, and public education, and lacking total control of Congress and the White House, they will continue rejecting new revenue, create a phony debt crisis, underfund critical domestic programs, and if possible, declare America is bankrupt and sell off the government to privatization.