Have a gander at America’s 17 most-bankrupt cities, and consider the party variable: Two Republican mayors, two independents, one city so bankrupt that it is in state receivership — and twelve Democratic mayors, meaning the Democrats lead 70.5 percent of the most-bankrupt cities, by my always-suspect English-major math.
And you thought their record was bad in Congress.
And get a load of the size of these budget shortfalls: Camden, N.J., at 15 percent, Hamtramck, Mich., at 17 percent, Paterson, N.J., at 24 percent, Central Falls, R.I., at 22 percent.
The state of California cannot afford to bail out San Francisco, Los Angeles, San Diego, and San Jose; the state of Illinois cannot afford to bail out Chicago and Joliet; New Jersey cannot afford to bail out Camden, Patterson, and Newark. The outstanding municipal-bond obligations are huge. Vero has some thoughts here, and here’s one sleep-disturbing fact:
But municipal bonds have not yet lost their low-risk reputation. According to the Investment Company Institute, $84 billion went into long-term municipal bond mutual funds in 2010, up from $69 billion in 2009. And the 2009 level represents a 785 percent increase from the 2008 level of $7.8 billion. Artificial incentives have lured investors into thinking that lending cash to bankrupted cities will be profitable.
New Jersey already has been accused of fraud for running what amounts to a muni-bond Ponzi scheme.
Questions: Why do city voters continue to elect these mayoral specimens? And why do the markets continue to lend city councils vast amounts of money? And which one of those trends comes to an end first?
Q: Why do city voters continue to elect these mayoral specimens?
Reply to this commentLinkReport AbuseA: If you are a public employed or an "insider" I am sure you made out like bandits during the "good times" and in these municipalities they run things given a generally ignorant voting public. Corrupt Machine urban politics is a tradition going back to Tammany Hall. Just look to basket cases like Argentina and the like that continue to elect economic illiterates.
Q: And why do the markets continue to lend city councils vast amounts of money?
A: Just looking forward to another round of TARP-like bailouts and/or Helicopter Ben swooping in and monetizing this debt. This strategy has paid off nicely for investors who bought the PIGS debt in Europe.
Currently at another NRO blog (PBC?) there is an article about the EEOC objecting to Kaplan's use of credit rating to screen applicants for educational jobs. Disparate impact, and all that. I agree with EEOC in this case, but opponents note that credit score is a legitimate measure of personal responsibility that an employer ought to be able to take into account when hiring.
Well the, why isn't something similar used when politicians are elected? Like this: "We know you won 56% of the vote, primarily by carrying ethnic activists, but your political credit score is only 480. Next!"
Reply to this commentLinkReport AbuseI worked in San Jose for 30 years, and moved away in 2007. I had no idea it was in such bad shape. I'm not surprised to see many of those cities on the list.
By the way, Kevin, I got your book in the mail yesterday. Yes! But unless you autographed it on page 286 (nope, not there) I must have gotten one of the un-autographed copies. Just started it, looks like a great read!
Reply to this commentLinkReport AbuseQ: Why do city voters continue to elect these mayoral specimens?
In many of these cities the majority of the voters are already wards of the state (free money and services crowd). This is conditioned intergenerational government dependence. It is in their best interest to keep electing Democrats because that's who is promising the gravy. Those awful Conservative types expect them to work for their goods and services.
Reply to this commentLinkReport AbusePublius, drop me an email with your information and I'll get you a signed copy -- apologies for the mix-up.
Reply to this commentLinkReport Abuse"Why do city voters continue to elect these mayoral specimens?"
I am willing to bet that nobody really pays attention to local politics. The only way that a mayor will come under intense scrutiny is if he became involved in a huge scandal. Not enough information is not given by the local media to make a truly informed decision about the performance of the mayor.
"And why do the markets continue to lend city councils vast amounts of money?"
Perhaps it is because the cities are seen as relatively low-risk. Most big cities have a steady stream of property tax revenues - especially businesses - to pull from. On top of this, many also operate with an implied bailout mechanism: Even though California does not have the money to bail out the profligate cities, I am pretty sure that California will figure out a way to bail them out. (Best bet is that the feds will cave and bail out the states).
"And which one of those trends comes to an end first?"
The latter. I don't hold out hope that the former will ever come to pass.
Reply to this commentLinkReport AbuseWhy do city voters continue to elect these mayoral specimens? Why do they continue to vote in favor of massive bond measures?
In the state of California, and many of it's municipalities, the voters authorize massive bond measures time and again. I lived in San Jose the vast majority of my life, and I can't count how many bond measures I voted down over the course of a dozen or so elections. It seemed there was a never ending need for vast funding increases for schools, libraries, parks, roads... you name it.
I could never wrap my brain around it. "Didn't we just issue half-a-billion in park money last year for Santa Clara county alone, and this year they're asking for the balance?" It seems running up municipal debt is just too easy, like running up consumer debt, which Americans have also managed to do in droves.
I left San Jose five years ago for more affordable midwest living. At least here in Minnesota, the voters enact tax increases to pay for their parks and recreation, rather than kicking the day of reckoning down the curb with more borrowing. Now, if we could just get our elected officials to balance the budget...
Reply to this commentLinkReport AbuseVoters do not "connect the dots" of their votes, i.e, that when they vote for bonds or to allow their elected public servants to raise taxes without a vote that it is actually money coming out of their own pockets.
As for cities or any government entity being broke, that is quite debatable and unlikely. Do a search for "CAFR". CAFR is Comprehensive Annual Financial Report enacted in the 1940's. Every entity of the government has one, including schools. There is where the actual and real figures are of actual and real money in that government entity.
States may require a "balanced budget", i.e., they CANNOT hold monies over that is not spent --they must have a zero balance so fiduciary trust fund is set up and those monies not spent at the end of the year go into them. Over years if not used they build through unspent revenue spent in any given year and by interest. Those are taxpayers dollars and potential funds that can be used by the state. Personally, I see them as an extra under the table "slush fund". I have seen it happen in my own state.
Media will NOT touch it. They will not report about it. Public servants [who know about about the CAFR] will not touch it either. They all deny it but it is there in the school's, government's, state's, etc. actual financial records --that comprehensive annual report.
The data is a few years old but you can check this site out: www.cafrman.org.
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