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When policy feedback fails: “collective cooling” in Detroit's municipal bankruptcy

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Abstract

The received wisdom among welfare state scholars is that policy feedbacks render social insurance programs durable. Yet, in the case of Detroit’s municipal bankruptcy, a voting majority of retired city workers accepted a settlement that asked them to waive key legal protections, formally accept gutted medical benefits, trimmed pension benefits, and a new public-private pension financing mechanism. This article synthesizes interactionist theories of loss to introduce the concept of “collective cooling.” I argue that collective cooling helps to establish the limits of policy feedbacks by explaining how a group of retirees’ collective self-understandings were adjusted from that of contractual rights holders to charitable dependents. Key components of this process included: First, seeking to adjust understandings of how pensioners were perceived by powerful outsiders; And, second, seeking to adjust the loss from one that reflected poorly on pensioners to one that did not. Implications are discussed for how people accept unexpected economic losses, especially those imposed by a trusted institution such as an employer or government organization.

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Notes

  1. This included 21,078 retirees, 9,079 active employees with accrued pension benefits, and 2,270 retirees not yet collecting benefits.

  2. National Conference on Public Employee Retirement Systems. (2007, March 15). State constitutional protections for public sector retirement benefits. https://www.ncpers.org/files/STATE%20PROTECTIONS%20FOR%20PUBLIC%20SECTOR%20RETIREMENT%20BENEFITS.pdf.

  3. See for examples AlHajal (2014), Yaccino and Cooper (2013).

  4. All legal documents used in this analysis are part of In re City of Detroit, Michigan, Case No. 13-53846, accessed via http://www.kccllc.net/detroit/document/list/3666. Throughout the article, court documents are referenced by docket number.

  5. In most states, accrued benefits are better protected legally than un-accrued benefits.

  6. Disaggregated data on demographics were inaccessible; however anecdotal estimates by multiple individuals suggest that retired public safety pensioners were majority white and civilian pensioners were more evenly split.

  7. Initially, there was no option to repay the interest in a lump sum, but this option was added later on.

  8. See for examples Rushe (2013), Yaccino and Cooper (2013).

  9. The funding status of the pension funds was in dispute. The governor was quite public in his opinion, however, telling a group of students, for instance, “They [the pension funds] did some crazy things….They [pensioners] became millionaires off these programs that we could only adjust in bankruptcy” (Governor Rick Snyder, Ford School of Public Policy, 11/28/2016).

  10. By contrast, there have been discussions about protecting pension promises through modifications in the governance of pension funds, as well as through novel investment practices that could protect already existing assets (Cummins and Lewis 2003; Mitchell and Smetters 2003).

  11. Whether the foundations would actually have withdrawn in the event that the vote failed is unknown.

  12. In a face-to-face interview, the bankruptcy judge suggested that he would not have done this, though it is impossible to know for sure.

  13. See Bosman and Davey (2016), Helms (2014), and Vlasic (2013b) for examples.

  14. But see Goldeberg (2001, 2007) for a discussion of hybrid policies.

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Acknowledgments

I am grateful to the participants of this research project. In addition, I thank Alex Murphy, Britta Rehdner, Camilo Leslie, Cheyney Dobson, Greta Krippner, Jason Owen-Smith, Jens Beckert, Mark Mizruchi, Rob Mickey, Sidney Rothstein, and Wolfgang Streeck for their helpful feedback and advice. I also wish to thank the Theory & Society reviewers and Editors. This article further benefited from comments provided by participants in the University of Michigan’s Economic & Organizational Sociology Workshop, as well as the Sociology of Markets workshop at the Max Planck Institute for the Study of Societies. Previous versions of this paper were presented at ASA, SSHA, and SASE.

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    Mikell Hyman

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Correspondence to Mikell Hyman.

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This research was supported by the University of Michigan Rackham Graduate School Dissertation Research Grant (U056647) as well as the Department of Sociology Dissertation Research Grant (U055732).

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Hyman, M. When policy feedback fails: “collective cooling” in Detroit's municipal bankruptcy. Theor Soc 49, 633–668 (2020). https://doi.org/10.1007/s11186-020-09387-0

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