Motown's Pension Showdown : If benefits can't be cut, bankruptcy will become a new political default.

The Wall Street Journal reports:

Detroit's unions have found an unlikely ally in Michigan's Republican Attorney General Bill Schuette, who has taken up their argument that the state constitution precludes federal bankruptcy court from reducing pension benefits. If this view holds, unions and politicians in financially strapped cities will be able to use Chapter 9 as a new political default to shed their bond debts. Look out below.

The Detroit case is likely to set precedents because it's the first large city that has tried to force haircuts on pensioners in bankruptcy. Politicians in the bankrupt cities of Vallejo and Stockton, California, sidestepped the issue of whether federal bankruptcy law pre-empts state pension protections after the California Public Employees' Retirement System threatened an expensive legal fight. But with $3.5 billion in unfunded pension liabilities, Detroit can't afford to duck.

An editorial well worth your time.