News Column

For Now, Obama Sidesteps Detroit Bankruptcy

July 21, 2013
Obama, Detroit Bankruptcy

President Obama will travel to the Midwest this week to talk about economic revival, literally bypassing bankrupt Detroit, where he so far has resisted pleas for a federal bailout.

The president will fly on Wednesday to Galesburg, Ill., and Warrensburg, Mo., to promote his domestic agenda. But it's the plight of the Motor City, more than $18 billion in debt, that has dominated the economic news of the past week.

SEE ALSO: Judge orders Gov. Snyder to withdraw Detroit's bankruptcy petition

Detroit filed for Chapter 9 bankruptcy protection on Thursday, facing huge unfunded pension obligations of its unionized employees and other fiscal challenges. Mr. Obama's former "car czar," Steven Rattner, is among those calling for the federal government to intervene.

Some of the president's top aides, including Valerie Jarrett and economic adviser Gene Sperling, have held discussions with officials from Detroit and Michigan. But White House press secretary Jay Carney said the administration is not planning to provide the city with financial aid.

"On the issue of insolvency and on those matters, that's something that local leaders and creditors are going to have to resolve," Mr. Carney said Friday. "But we will be partners in an effort to assist the city and the state as they move forward."

Vice President Joseph R. Biden expressed less certainty, telling reporters that "we don't know at this point" if the administration can help Detroit. He said aides are studying the details.

In April, Detroit's emergency manager, Kevyn Orr, met with senior White House officials, including Ms. Jarrett. Orr spokesperson Bill Nowling said that Mr. Orr never formally requested a bailout from the president's staff, and the administration never put an offer on the table.

Republican Gov. Rick Snyder approved the bankruptcy filing last week, but a judge in Michigan said Friday the bankruptcy filing violates the state constitution and must be withdrawn.

State Attorney General Bill Schuette is appealing the ruling. Ingham County Circuit Judge Rosemary Aquilina, a Democrat, ordered that a copy of her ruling be sent to Mr. Obama, saying he "bailed out Detroit" and may want to look into the pension issue.

During his re-election campaign last year, Mr. Obama hammered home the theme in battleground states such as Ohio and Michigan that he saved Detroit's auto industry with an $80 billion federal bailout in 2009.

"We refused to throw in the towel and do nothing. We refused to let Detroit go bankrupt," Mr. Obama said in a weekly address last October. "We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way."

During the campaign, Mr. Obama portrayed Republican opponent Mitt Romney as favoring bankruptcy for Detroit automakers. Mr. Romney said he favored a managed bankruptcy process from which the car companies could emerge leaner by shedding burdensome union contracts, real-estate costs and other obligations.

Although city leaders have pleaded with the president for help, Michigan's congressional delegation hasn't pushed for a federal bailout.

"We just need to step back and think about it," said Rep. Sander M. Levin, Michigan Democrat.

Mr. Obama will use the stops in Illinois and Missouri to make his case for spending on infrastructure and for universal preschool programs. He also is expected to highlight the economic benefits of comprehensive immigration reform.


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