

Broke Town, U.S.A. - cwan
http://www.nytimes.com/2011/03/06/magazine/06Muni-t.html?seid=auto&smid=tw-nytimesbusiness&pagewanted=all

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TomOfTTB
This is what makes me think we're only in phase 1 of the financial meltdown.
The article tries to paint a rosy picture saying we just need the "political
will" to make changes. But we're a nation where the national debt's risen from
8 Trillion in Oct. 2005 to 14 Trillion a mere 5 years later yet we've chosen
to run up a projected 1.6 trillion deficit this year. So where's that
political will?

And if cities and states start declaring bankruptcy it will impact the country
in two important ways:

1\. All the state workers will see their pensions evaporate to the bare
minimum which will cause them to cut their spending to the bare minimum.

2\. All the 401(k) plans that are filled with supposedly safe muni bonds are
going to see their investments evaporate which will cause the holders of those
401(k) plans to cut their spending to the bare minimum.

My argument is the net effect of this is all those people are essentially
unemployed as far as the economy's concerned. Because unemployed people are
provided the bare minimum by the state so a person who is working but living
on a bare minimum budget has the same economic impact.

Suddenly you have a society that consists of people who don't have money and
people who have money but put it all in savings which does next to nothing to
spur the economy.

Meaning the nation is going to be faced with a scenario that mimics an
unemployment rate of 60% or more and I can't imagine what will happen then.

------
forgotAgain
I thought it was a good article until the last sentence:

 _Until voters can agree on what government services they want and will pay
for, it is possible that bondholders will bank the profits while taxpayers,
employees and citizens share the losses._

I don't understand the need to take a shot at the bondholders here. This isn't
a case where investment bankers took advantage of overmatched finance people.
The cities and states offered bonds for sale. The bonds were purchased by
average people in return for an agreed to interest payment.

~~~
warfangle
It was fairly good, but it completely mischaracterized what's going on in WI.
Walker approved $140m in corporate tax breaks - just before announcing a $138m
deficit. If he hadn't given corporate tax breaks, the government would have
been in the black.

I haven't researched, but I'm willing to bet the Koch family company
benefited.

~~~
TomOfTTB
I don't expect research but at least do a search on Wisconsin Budget Deficit.
That's what I did and I came up with this
(<http://www.jsonline.com/news/statepolitics/109275069.html>)...

 _Democratic Gov. Jim Doyle's administration on Friday told Republican
Governor-elect Scott Walker that he would have to cope with a $2.2 billion
deficit in the state's upcoming two-year budget, but this brighter-than-
expected forecast contained more than $1 billion in hidden pain.

To arrive at the favorable estimate, the Doyle administration's estimate
assumed that Walker and lawmakers would make spending cuts that have yet to
actually happen - two more years of state employee furloughs, no pay raises, a
virtual hiring freeze and belt tightening in state health programs. Without
that $1.1 billion in savings, the state's projected shortfall rises to $3.3
billion - a significant increase over previous estimates that put the gap at
between $2.7 billion and $3.1 billion._

Even liberal blogger Ezra Klein backed off the claim you're making
([http://voices.washingtonpost.com/ezra-
klein/2011/02/wisconsi...](http://voices.washingtonpost.com/ezra-
klein/2011/02/wisconsins_fiscal_condition.html))...

 _As I wrote in the update to my original post on Wisconsin, my initial
understanding of the way Gov. Scott Walker's tax cuts had changed his state's
budget picture was wrong: They didn't add to this year's deficit, but to the
2011-13 deficit. That doesn't make them any more fiscally responsible, but it
does mean they're not behind the deterioration in Wisconsin's 2011 budget
projections. They're behind part of the deterioration in their 2011-2013
budget projections._

~~~
warfangle
Hadn't seen that that'd been backed off from. Thanks for updating me.

------
fourspace
I find it hilarious that the caption under the right side image reads: “You
could see 50 to 100 sizable defaults,” Meredith Whitney, a prominent
doomsayer, said on “60 Minutes.”

How does one rise through the ranks of the doomsaying profession?

~~~
DanielBMarkham
The doomsaying profession isn't what it used to be. Tragic hard times are
coming, and by the end of the decade most doomsayers will be covered in puss
begging for pennies down by the local Wal-Mart. If they're lucky.

Seriously, though, this article had a lot of random details strewn about, but
not enough thread to connect them. Can cites and states declare bankruptcy?
Yes. No. Well kinda, but it doesn't help. Are structural issues like union
contracts for future payments in terms of benefits a problem? Yes, but not
really: the author just makes a passing reference to "political will" as being
a problem, whatever that means.

All I got from the article was the unsaid conclusion that governments can
simply not pay their debts without defaulting. I wonder if this will be a
viable strategy?

~~~
jbooth
At the municipal level, things have been stretched since the boom days in
2004, 2005. Most of them have laws that make it very hard to raise taxes, a
pay structure that historically has slanted towards better benefits in
exchange for lower pay, and a 10-year run of health insurance cost increases
at 10-15% a year. So in many places, they've already cut to the bone, (and did
so during the "boom years", to boot).

Basically the best thing we can do for municipalities and states is to bend
that healthcare cost curve. Unless we do, it's going to be lay people off,
raise taxes or both every single year.

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JonnieCache
Google referer link so you can read the article:

[http://www.google.com/url?q=http://www.nytimes.com/2011/03/0...](http://www.google.com/url?q=http://www.nytimes.com/2011/03/06/magazine/06Muni-t.html?pagewanted=all)

------
enjo
_Calls for any but the most serious crimes go unanswered. Residents who
complain about prostitutes or vandals are told to fill out a form._

My god that needs a citation.

------
sudont
Be prepared for Roman fire brigades.

~~~
gyardley
Or possibly just an annual fee, paid in advance, to ensure service. Not
unknown in rural areas already, where people in unincorporated areas without
fire departments can elect to pay out-of-area coverage to nearby
municipalities.

I remember some sort of controversy about that late last year, when a man who
didn't pay the annual fee for firefighting service ended up losing his house.

~~~
_delirium
Some version of that is occasionally proposed for forest fires in California,
but it's never managed to get enacted. Even if we accept that putting out the
fire overall is the state's responsibility, a significant portion of the cost
of fighting a forest fire is in saving clusters of houses (or occasionally
individual houses) that are pretty close to the fire, but seem saveable. In
terms of just containing the fire, it's much more efficient to put up a fairly
wide perimeter and let everything within it burn, rather than sending in units
to spray foam on individual houses.

So it's occasionally proposed that that gets reformed somehow: either be less
aggressive in trying to save houses overall; or do so but bill the owners; or
stop doing it unless owners buy some sort of supplemental insurance in
advance; etc. Not a very popular proposal, though. An alternate one is to
assess some kind of "you live in a high-risk area" supplemental property tax,
which would be more or less like a mandatory version of the insurance option.

