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The proposal asserts that the funding gap for Detroit’s pension obligations is five times wider than previously thought, at $3.5 billion rather than the $644 million estimated in 2011. Reuters reporter Cate Long dug into the numbers and came up skeptical: “Orr is going to have to show math that demonstrates the pension funds are so massively underfunded,” Long wrote, calling the pensions “reasonably well-funded according to national standards.”

But regardless of the validity of Orr’s numbers, the proposal appears designed to facilitate a bankruptcy filing. Once in bankruptcy court, Orr would no longer need public workers’ unions to sign off on a plan to renege on pension promises. Michael VanOverbeke, a lawyer for the pension fund, explained the basic unfairness of prioritizing investors over retirees: Where bond investments carry “a certain amount of risk,” he told the New York Times, “[p]lanning for retirement and working for employers was not an investment in the market. These are people who are on a fixed income…they can’t go back to work and start all over again.”

Elsewhere, Orr’s report summarizes the barely-functioning state of the Motor City: 40 percent of its street lights are dark, two-thirds of its ambulances are out of service, and 78,000 buildings stand empty. How did Detroit get here? The fundamentals of the city’s economy declined along with the U.S. auto industry, but ill-considered debt schemes and manipulation by big international banks exacerbated the problem. Convicted former mayor Kwame Kilpatrick oversaw huge loans that went bad, including billions of dollars in the interest rate gambles known as “swaps.” But banks were rigging the rates that determine who wins and who loses on interest rate swaps like Detroit’s, as last year’s LIBOR scandal revealed. The city paid nearly half a billion dollars in fees to Wall Street firms for engineering the swaps and other financing schemes that only deepened Detroit’s debt hole.

The combination of local corruption and bank manipulation, which leaves the public holding the bag, is something of a common feature for troubled American cities these days. But the far-reaching powers Orr has to resolve things in Detroit set it apart.

In 2011, Michigan Governor Rick Snyder (R) signed a law expanding the powers of emergency managers like Orr, who can tear up collective bargaining agreements and sell public holdings. But because the state’s constitution protects public employee pensions, Orr will need either union consent or the help of a federal bankruptcy judge to impose the cuts on Detroit’s 30,000 current and former employees.

On Wednesday, a bankruptcy judge in St. Louis freed a bankrupt coal company from its contractual obligations to retired miners. Judge Kathy Suratt-States explained that Patriot Coal could not be held to its $1.3 billion in pension obligations because the laborers who incurred those obligations shared in the responsibility for the company’s failure: “There is likely some responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity,” she wrote.

Two weeks prior, Judge Suratt-States approved Patriot Coal’s request to pay $6.9 million in retention bonuses, concentrated on “the company’s top 35 officers,” Bloomberg reported.

Patriot Coal was spun off from Peabody Energy in 2007, as part of a wave of spinoffs that the United Mine Workers of America (UMWA) says was designed to get large pension obligations off of Peabody’s books. One retired Peabody miner, Joe T. Brown, summed it up in an interview with Wyoming Public Media: “I depend on them to pay my medical, it was in the contract,” Brown said. “I never worked for Patriot, but Peabody promised this to me, and I earned it. I worked for them for 33 years.”

After just five years of existence, “Patriot wound up with nearly three times as many retirees as active employees,” labor journalist Mike Elk wrote in late 2012. Peabody Energy, “the world’s largest private-sector coal company” according to its site, had nearly a billion dollars in pure profits in 2012. Those profits represented about 12 percent of overall revenues, and Peabody ranked 316 on the Fortune 500 list for that year. The year before spinning off Patriot Coal, Peabody was a substantially less profitable company.

While Judge Suratt-States was not persuaded, the evidence for UMWA’s portrayal of Patriot as an intentional failure to wipe healthcare and pension obligations to miners off Peabody’s books seems strong. A paper by Temple University professor Bruce Rader on the union’s site sums up the evidence, including this slide from a Peabody presentation on the spinoff:

Rader translates from Powerpoint to plain English: “in every way Peabody was enhanced by the spinoff, Patriot was burdened,” including with “low growth, low margin characteristics, and high capital requirements.” From other documents, Rader found that Peabody assigned Patriot “11.10% of their assets to cover 40% of their legacy liabilities,” at substantial gain to shareholders. With the bankruptcy judge’s decision Wednesday, the shareholder gains became the coalminers’ losses.

The UMWA has vowed to appeal.

The middle class has been shrinking since the recession as most of the country’s wealth has traveled upward. But any policy aimed at helping working families that also comes with a hefty price tag has little chance of passing through Congress and becoming law.

That doesn’t mean there’s no hope for trying to bolster the middle class, though. The Center for American Progress’ David Madland and Karla Walter put together a list of six policies that could be enacted now that would have a huge impact on those struggling to get by without costing the government anything. Here are some surprising highlights:

Boost retirement savings: Most Americans don’t have enough saved up for retirement to maintain their standard of living: Nearly 60 percent of middle-class retirees will outlive their savings and about half of all households are at risk of having an insecure retirement.

In response, the government could facilitate the creation of a new hybrid retirement plan that combines a traditional pension and a 401(K), the Secure, Accessible, Flexible, and Efficient (SAFE) Savings Plan, and by opening the federal Thrift Savings Plan (TSP), the 401(K) plan for federal employees, to the public. Neither would cost any federal money. The SAFE plan is estimated to cost about half as much as a 401(K) while providing the same benefit level and being more secure. The TSP would provide more suitable investment options with lower fees.

Reduce housing costs: One in five homeowners are underwater on their mortgage. Given that many middle-class families rely on home value to build wealthy, this is a big financial burden.

To address this problem, investors can provide principal forgiveness — permanently reduce the outstanding principal balance of an underwater loan. This would not just give struggling homeowners a boost, thus helping the economy by increasing their spending, but it would also help ensure the long-term success of mortgage modifications and stabilize the hardest hit housing markets. In order for investors to avoid taking the full loss, they could offer “shared appreciation,” in which the borrower pledges to share a portion of future appreciation when the home is eventually sold or refinanced.

Ensure paid sick days: Given that there are no federal laws that guarantee paid sick days, nearly 40 percent of middle-class workers and 55 percent of low-income workers don’t have access to them. Workers who go to their jobs sick cost the economy $160 billion a year.

The government could guarantee the ability to accrue job-protected, paid sick days, which would provide greater job security and reduce turnover. The Healthy Families Act is one way to do just that.

While the richest Americans have fared well during the sluggish economic recovery, most Americans continue to struggle with falling wages and job uncertainty. According to a new report from the Conference Board, 62 percent of workers between 45 and 60 plan to delay their retirements, a stark jump from 2010 when 42 percent of workers planned a delay.

Job loss, financial loss, and a lower salary caused many workers to reshape their future plans:

Right now, more than half of middle class workers are expected to outlive their retirement savings, as pension plans have declined dramatically. Unfortunately, Republicans’ answer to the financial difficulties for two-thirds of Americans has been to propose raising Social Security and Medicare eligibility to age 70.

The Business Roundtable, a group representing the CEOs of the largest corporations in the nation — including the biggest banks, retailers, and insurance companies — is calling to raise the retirement age to 70. The group argues that Social Security is no longer affordable and plans to lobby Congressional lawmakers and the administration for its plan:

An influential group of business CEOs is pushing a plan to gradually increase the full retirement age to 70 for both Social Security and Medicare and to partially privatize the health insurance program for older Americans. [...]

“America can preserve the health and retirement safety net and rein in long-term spending growth by modernizing Medicare and Social Security in a way that addresses America’s new fiscal and demographic realities,” said Gary Loveman, chairman, president and chief executive of casino giant Caesars Entertainment Corp.

Loveman, who chairs the Business Roundtable’s health and retirement committee, said the business leaders will be meeting with members of Congress and the administration to press them to enact their plan.

CEO’s representing an organization called “Fix the Debt” have made the same argument. But the idea that Social Security is unaffordable for future generations is nonsense. The program can pay full benefits for decades, and nearly full benefits after that, with literally no changes. Minor tweaks — such as raising the payroll tax cap — can render the program solvent for three-quarters of a century. Social Security is also statutorily barred from adding to the federal deficit.

It’s particularly galling for wealthy CEOs to call for raising the retirement age, as they are among those who will be least affected by the change. Average CEO pay for S&P 500 companies is nearly $13 million. Recent increases in life expectancy have only benefited wealthier workers in non-physical jobs. Poorer workers doing physical labor have not seen the same gains and would be most hurt by an increase in the retirement age.

According to a recent survey, workers prefer having retirement security via a pension than a host of other financial benefits that could come along with their job, including higher salaries, longer vacations, or bigger bonuses. However, as this chart from the Bureau of Labor Statistics shows, pensions over the last several decades have been disappearing:

BLS noted that pensions “are becoming rare for workers in private industry. In 2011, only 10 percent of all private sector establishments provided defined benefit plans, covering 18 percent of private industry employees.” Since 1985, 84,000 pensions plans have been eliminated, according to research by Pulitzer Prize-winning authors Donald L. Barlett and James W. Steele. This accelerating demise will result in increased poverty for America’s seniors.

As former White House economist Jared Bernstein noted, “as [defined benefit] private pensions weaken, we need to strengthen public ones. The loss of DB private pensions — and their partial replacement by financial-market-dependent defined contribution plans — represents a shift in the locus of risk of retirement insecurity from employers to workers.” Sen. Tom Harkin (D-IA) has released a proposal to provide a more stable retirement option to American workers.

Two Republican senators want to use the threat of an economic meltdown to raise the retirement age and cut Medicare. Sens. Bob Corker (R-TN) and Lamar Alexander (R-TN) introduced a plan today that would raise the federal debt limit by $1 trillion in exchange for $1 trillion in cuts to Medicare, Medicaid, and Social Security, as The Hill reported:

The Corker-Alexander dollar-for-dollar plan has several components.

It would structurally reform Medicare by creating competing private options giving seniors greater choice of healthcare plans. It would not, however, cap Medicare spending.

The plan would also give states more flexibility to manage Medicaid programs and prevent states from “gaming the federal share of the program with state tax charges.”

It would gradually raise the Social Security retirement age and use the “chained CPI” formula to calculate cost-of-living adjustments, curbing the growing cost of benefits.

In exchange, it would direct the debt limit be increased by the same amount as the savings generated from entitlement reform.

The U.S. will hit its debt limit on or around December 31st. The Treasury Department estimates that, using extraordinary measures, it could avoid default for another two months or so. Allowing the U.S. to default on its debt via not raising the debt ceiling could cause a complete financial meltdown. The 2011 debt ceiling debacle — during which House Republicans nearly pushed the country into a default due to their intransigence on taxes — cost the country about $19 billion in higher interest payments and at least one million jobs.

Corker and Alexander are threatening more economic chaos in order to achieve one of the most regressive potential policy changes. Though lawmakers point to America’s increasing life expectancy in order to justify raising the retirement age, life expectancy is only increasing for wealthier workers in non-physical jobs. As the Center for Economic and Policy Research put it, “there has been a sharp rise in inequality in life expectancy by income over the last three decades that mirrors the growth in inequality in income.”

According to a survey by the benefits consulting firm Towers Watson, workers would rather have retirement security than a vast array of other benefits, including larger salaries, more vacation time, and bigger bonuses:

In several head-to-head questions, researchers asked whether workers would prefer it if their employers offered them a guaranteed retirement benefit (essentially a pension) or other perks. A large plurality – 49% — chose the pension over the opportunity to earn a bigger bonus. (Just 26% picked the bonuses, while the rest didn’t express a preference.) The pension also beat out paid vacation and a better chance at a promotion by similar margins. Guaranteed retirement income was also more popular than bigger salary hikes, although there the outcome was a closer 38% to 33%.

Unfortunately for American workers, retirement benefits are vanishing at a dizzying pace. According to research by Pulitzer Prize-winning authors Donald L. Barlett and James W. Steele, 84,350 pension retirement plans have been eliminated since 1985. In 1998, a majority of Americans over age 60 received pension payments. By 2010, just 43 percent did. In the private sector, 38 percent of workers received pensions in 1979, which fell to 15 percent in 2010.

As ThinkProgress’ Travis Waldron noted, “Estimates show that more than half of middle class workers are likely to outlive their retirement savings, and half of all American workers don’t even have a retirement plan at work.” Pensions are much more likely to keep retirees out of poverty than other retirement plans, including 401(k)s. In fact, the median value of 401(k)s in the U.S. in 2010 was less than $18,000, meaning that, “for most working people, the amount in their 401(k) account would pay them less than $80 a month for life.”