The Cities Are Going Belly Up
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  • Richard F. Miller

    The Bankruptcy Code was amended in the early ’30s to permit municipal filings.

    What most readers should focus on aren’t municipal but rather state bankruptcies: the Code does not provide for these. Unfortunately, this is where the rubber likely will meet the road. (Got California?)

    During the 1930s, state bankruptcies were unthinkable, mostly due to the wave of state defaults that had been triggered by the Panic of 1837. At that time, states often guaranteed the debts of private industry (by the ’30s, that would have been emerging railroads, inland canal projects, and large land improvement schemes.) The bondholders were mostly Europeans, and it took over a decade for states to be readmitted as borrowers. By that time, some states had amended their constitutions to prohibit state guarantees for private industry. But nearly all states had raised taxes in order to repay their defaulted obligations.

    That may be an option today, and may not be optional in the case of General Obligation bonds where courts have authority to order tax increases for debt service. But the public policy blowbacks would be enormous: bankrupt states, facing higher tax burdens of many orders of magnitude above their peers, would become dysfunctional as competitive economies.

  • Wait till California goes into receivership.

  • J Pritchard

    I wouldn’t write of Birmingham as being apart from the “blue state, rust belt phenomenon.” While Alabama is assuredly a “red” state when it comes to statewide elections, the city (but not the Metro) of Birmingham has been dominated by the “blue model” Democratic Party–and in Birmingham’s case, that did and does not include moderate Southern Democrats–as surely as Detroit or Chicago, for decades. Birmingham also qualifies for failed-rust-belt status, as its now-mostly-closed steel mills once gave it the nickname “Pittsburgh of the South.” The United Steel Workers still have a presence in the city, aiding the thoroughly corrupt and incompetent local government.

  • Mrs. Davis

    Novato is a better poster child for the blue model as the road to bankruptcy. Harrisburg is simply the story of incompetence in the management of the construction of an incinerator compounded by a city council unwilling to do what needed to be done to resolve the problem years ago.

  • The fact of the matter is that redistribution makes everyone poorer and magnifies all social ills.

    It may make people feel good to take my earned money and give it to those who haven’t earned their own. It may make some feel good to lower my standard of living – and that of my kids – to raise the standard of living of those less intelligent or less motivated than I, but it harms society in the long run – ask the USSR, Greece, California, etc.

    There is no reason for people to starve in America. But there is no reason for the slothful to have an unearned Middle Class lifestyle, either. If they are hungry, we should put flour, sugar, coffee at City Hall and encourage them to come and get what they need.

    But it is past obvious the the Blue Model destroys everything it touches.

    Another point on which it’d be nice to hear Dr Mead’s comment would be this: Blue-State demographics rarely are addressed in entitlement discussions. The fact is that entitlements require intergenerational payments; yet the Blues have fertility below 2.1. They are demanding intergenerational wealth transfers but refuse to populate the next generations to pay for them. Only Red States have fertility such that they will be paying these bills – a truly frere lunch: Take now and repay never. This is about as immoral a demand as can be made of another, and another’s unborn progeny. But the Progs are making it.

  • Luke Lea

    Try to hide your schadenfreude Mead.

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