National politicians shouldn't ignore the lessons of Detroit’s historic bankruptcy when it comes to the potentially crippling effects of out-of-control debt, writes Nathan Bomey, a former Free Press reporter now at USA Today.
Bomey, author of "Detroit Resurrected: To Bankruptcy and Back" (coming out April 25), writes in a column:
As the Republican presidential candidates hit the Motor City on Thursday for a Fox News debate — and as the two remaining Democratic candidates also campaign there before Tuesday's Michigan primary — it’s critical to understand why Detroit’s financial collapse should be a red flag for America.
Detroit’s remarkable escape from $7 billion in debt finally put the well-being of the city’s 688,000 residents before its 170,000 creditors, as documented in my upcoming book. .
But the city’s debt crisis offers a crucial lesson for presidential candidates on the importance of shoring up the nation’s balance sheet to ensure that, unlike in Detroit, benefits are preserved for American retirees.
For starters, government debt at the local, state and national levels is much higher than you’ve been told.
Bomey notes that Detroit while Detroit owed about $1.1 billion in traditional unsecured bonds — but it owed about 10 times more to its retirees through various obligations.
By comparison, the national debt — at least the figure you usually hear — is about $19.1 trillion. But that number does not include the true cost of benefits politicians have promised to future retirees.
Let’s read the fine print. It turns out the U.S. government has promised an astounding $41.9 trillion in Social Security, Medicare and other retiree benefits over the next 75 years that it cannot pay for under current revenue projections, according to the U.S. Treasury Department’s Sept. 30, 2014, Statements of Social Insurance. Taken together, that means the true national debt is $61 trillion.