A must read

If you only read one thing today, you ought to make it this article from New York Times concerning the disaster that is Detroit, Michigan. Here's the part that ought to terrify you:

The big structural imbalance was hard to see building up, because until 2008, when a new accounting rule took effect, cities like Detroit were not required to keep track of their workers’ lifelong health care bills. That is why Mr. Boyle found a $7.2 billion promise that no one knew about. Detroit’s general-obligation debt to its bondholders, by contrast, was a little less than $1 billion that year, safely within the city’s legal debt limit, then $1.4 billion.

But while the numbers are particularly grim here, the basic story line is hardly unique. The same path, long and slow, can be found from Providence, R.I., to Stockton, Calif.

To preserve cash, the city resorted to increasing its workers’ future pensions at contract time, instead of raising their pay. That helped balance the immediate budgets, but set up a time bomb sure to explode as more workers retired.

The cost of the retirees’ pensions also grew because of an inflation-protection feature that compounds every year. Detroit cannot renege on paying the benefits, at least outside of bankruptcy, because the State Constitution makes it unlawful to reduce pensions after public workers earn them.

We are going to find out there are a lot more stories of this sort in the coming years. But here's the punchline:

None of the decisions, experts here say, will be simple, and some wonder whether Detroit can be saved at all. Some 700,000 residents now live in this vast 139-square-mile city that once was home to nearly two million people. That number may fall to close to 600,000 by 2030 before the population begins to rise again, one regional planning group projects. By pushing costs into the future while its population is shrinking, Detroit has left the people least able to pay with the biggest share of its bills.

“Detroit is a microcosm of what’s going on in America, except America can still print money and borrow,” Mr. Boyle said.

For now, at least. But good luck with sustaining that.