When is a Contract a Contract?

Dean Baker complains about AIG bonuses being honored because they’re contracts, whereas Detroit and, possibly, Chicago city employees pensions are in line to be slashed despite being contracts.

Such is life in a plutocracy.

This really ought not surprise anyone. The rules for the elite are, and have always been, different. A contract to pay the CEO of a large financial company that had to be saved by taxpayers and whose activities contributes mightily to the enormous economic crisis we are still trying to leave behind is considered sacrosanct. After all it is a contract. And we know what that means. Well it means we have to pay up even though its morally repugnant, smacks of corruption, and is just plain daft. The contract has to stay.

But those workers out in Detroit, they contributed to the problems Detroit had. They pretty much drove it into bankruptcy because of their padded employee benefits and wages. Chicago looks like it’s going down the same road. Those contracts are the cause of the problem. The city has every right to break the contract as part of its bankruptcy proceedings. In this case the contract is repugnant, possibly corrupted by unions influence, and is just plain daft. It has to go.

It used to be comforting to think that the saying “one rule for the rich, another for the poor” was just that: a saying. We could all pretend that America was a land of equal laws, even though we all knew deep down that rich folk can always get away with stuff we can’t.

Now, in these years of crisis, we are exposed to the ugly truth far too frequently. Big business and rich people have one set of laws. The rest of us another. In their laws a contract is inviolate. To break it you have to have extreme extenuating circumstances and/or a well paid lawyer. In our laws a contract is a suggestion. To break it you have to be a creditor who has friends amongst the elite and/or a well paid lawyer.

We are hearing a great deal lately about how those onerous public employee pensions are breaking that back of our cities. A line is forming as cities compete to break longstanding agreements with workers. Rich suburbs are trying to separate themselves from less well off inner cities in order to pay lower taxes and avoid supporting the old infrastructure that many commuters complain about as they go to work each day. The media is writing screeds about how old union contracts are now hopelessly expensive, and about how much of each year’s operating revenue is shelled out to support retirees as opposed to fixing today’s potholes.

Yes, perhaps, those contracts were a bad deal. But they were negotiated in good faith. They were, and still are contracts.

And, yes, I get that sometimes a contract is worthless if there’s no means to honor it. Perhaps that’s where Detroit actually is. Yet again, that’s exactly where AIG was.

So I wonder, why is it acceptable to honor one and not the other? And if we can bail out GM, why can’t we bail out Detroit? After all they used to be one and the same, back in the day when a contract was contract.

Before the plutocracy, that is.