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The Real Economic Crisis: America's Cities Are on Life Support


The WSJ has begun a series that everyone should start following: documenting the fiscal health of America’s 250 biggest cities. The first installment came out today, and it isn’t pretty. A deadly combination of static revenue and big (and growing) liabilities is keeping many American cities from achieving the kind of recovery seen in other sectors of the economy. Cities are trying everything to cut costs or boost revenue—from cutting the number of public employees to “taxes on soda and taxi rides and a square-footage levy on billboards” to asking employees to contribute more to their pension plans. Few have  found the magic formula:

Of the 250 cities, more than half still have reserves below their 2007 levels. They also have taken on more debt: 114 cities saw overall debt loads increase from 2007 to 2012. The real-estate markets in 100 cities are still worse than they were in 2007, an acute problem for governments that rely on property taxes as a top source of revenue.

In Allentown, Pa., weak property values are starving the city of a primary source of cash. Springfield, Ill., has seen pension costs nearly triple in the past decade. Providence, R.I., raised taxes and fees and cut benefits to offset losses in state aid. Fresno, Calif., has so little available cash that officials worry one unforeseen event could reverse nascent improvements. […]

The risks have increased for investors. “More local governments today are facing heightened long-term fundamental credit challenges than at any time in the recent past,” Moody’s said in a September research report.

One thing is clear: City officials around the country will have to dig deep for years to come. Some will have to ask residents for tax increases even as they cut services. All will have to figure out how to inch toward fiscal solvency without overburdening low- and middle-income families with taxes or scrapping the services that the poor rely on.

The WSJ is doing a real service by diverting some of its reporting resources away from the soap opera on Capitol Hill. Elite discourse is usually too focused on what Washington should or should not be doing to fix our economy. (Conservative pundits are as guilty of this as liberals.) But partly because of how our federal government is set up, partly because of how our economy functions, and partly because of the incompetence of the current crop of national political leadership, our nation’s future will be determined at the local level much more than it will be determined in Washington.

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  • Jacksonian_Libertarian

    Cities are going to be forced to cut back workers pay and benefits to something comparable to that received by workers for private businesses. Cuts in services will also be needed if growth rates are ever to be restored.

  • Pete

    “Cities are trying everything to cut costs or boost revenue—”


    The public sector is still grossly over compensated and over staffed.

    City officials fear the unions too much to cut to the degree appropriate — and that includes the absurd pensions handed out for the last 30-years.

  • Anthony

    The future of cities as you imply WRM lies with its people and the confluence of factors (economic stagnation, declining tax bases, legacy costs, etc.) forcing attention to fiscal unsustainability. However, everybody seems to acknowledge the basic fiscal difficulties but few exhibit the inclination to start the task of fixing it (Manhattan Institute held conference titled “Save Our Cities” supplementing Quick Take’s view).

  • stan

    The news media doesn’t cover the governance disaster of the big cities because the big cities are predominantly governed by Democrats. The corrupt big city machine is the heart and soul of the Democratic Party all across the country. The news media isn’t going to expose the true extent of their corruption and incompetence. Voters might notice.

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