Detroit and the problem of positive rights

Jim Huffman Dean Emeritus, Lewis & Clark Law School
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Nearly a half century ago, the late Frank Michelman argued that the equal protection clause of the U.S. Constitution should be understood to guarantee some minimum welfare to all Americans. Over the intervening decades that theme has inspired many others, including our current president, to insist that Americans should have a right to minimum levels of housing, nutrition, education, health care, and so on. These generally well-intentioned advocates for the less well off would have the courts declare that our constitution protects individual welfare every bit as much as it guarantees free speech.

Ongoing events in federal bankruptcy court in Detroit demonstrate why positive rights claims like those urged by Michelman cannot stand on the same ground as the traditional rights protections of the constitution.

According to federal bankruptcy judge Steven Rhodes, “nothing distinguishes pension debt in a municipal bankruptcy from any other debt.”  That means the court can order a reduction in future pension payments along with adjustments to other financial obligations of the City of Detroit.

Of course this ruling has outraged public employee unions in Detroit and across the country. According to the unions and their pension beneficiaries, failure of the city of Detroit to deliver on promised pension benefits would violate a solemn contract.

The unions have some law on their side. Courts in other states have held that legislative and voter-imposed reductions to promised pension benefits violate the U.S. Constitution as impairments of contract. These courts have apparently assumed that the solution for governments facing escalating pension costs is either to raise more tax revenue or to cut other government expenditures.

But there is a problem with this solution. As pension liabilities have steadily taken up larger portions of their budgets, state and local governments have fewer resources to meet their other constitutional responsibilities. Even basic services (e.g. police protection and street lights in Detroit) cannot be maintained. Could it be that the day would come when the sole function of the City of Detroit is to tax for the purpose of funding the pensions of former employees?

Judge Rhodes held that just like for any private party that cannot satisfy its creditors while meeting its other financial obligations, every contractual obligation of Detroit, including pension contributions, is on the table in bankruptcy. Impairment of contractual obligations is what bankruptcy is all about, observed the judge.

Detroit is America’s Greece – a warning that profligacy in government spending has its consequences, including for those who have chosen to enter into contractual agreements with government. The chickens do come home to roost.

That is why rights theorists have long distinguished between negative and positive rights. In the context of government, negative rights protect individuals from government interference with life, liberty, and property and guarantee that government will behave in acceptable ways. These are things governments can do whether they have financial resources or not.

Positive rights, if rights they be, arise from government promises to deliver future benefits of one type or another. But the reality is that all promises of future benefits might not be kept. It all depends on whether the person or government making the promise has the capacity to deliver when the promise comes due.

This distinction between positive and negative rights warrants our attention more so today than at any time in our history. Many states have accumulated pension liabilities they cannot possibly meet and the federal government continues to expand “entitlements” even though most people agree they cannot be sustained in the long run. The harsh reality is that economics, not law, will determine whether governments have the capacity to pay promised pension benefits and deliver on so-called “entitlements.”

Calling a government-supplied benefit a right does not make it so. Greece is probably too distant to have brought this simple truth home to America. Perhaps Detroit’s confrontation with reality will get our attention before we bankrupt our nation in the name of well-meaning phantom rights.