Muni Abuses Weigh Down States, Cities

RealClearMarkets ^ | 02/24/10 | Steven Malanga

[TigerLikesRooster]

February 24, 2010

Muni Abuses Weigh Down States, Cities

By Steven Malanga

Speaking to the Wall Street Journal last week, the comptroller of Harrisburg, Pa., sounded downright glum as he explained his city's diminishing prospects of meeting a big upcoming bond payment. Harrisburg has just $1.2 million cash on hand and faces payroll costs alone of about $3 million a month. Even worse, it has about $17 million in debt payments coming due, a result of a series of "dizzying debt deals" according to a local newspaper. "We can't raise taxes; they're already very high," the comptroller explained. "If we did, people would just leave."

At least Harrisburg can take comfort in that it is not alone. A decade of exuberant, oftentimes unnecessary and occasionally barely legal borrowing by states and municipalities on top of rising employee costs have prompted increasing talk of a wave of defaults on municipal debt unlike anything since the Great Depression. So heated has the talk become, in fact, that the California legislature is considering a bill that would make it harder for its municipalities to declare bankruptcy because of worries that many will want to do just that (this is the same legislature whose own state government had to issue IOUs last year to pay its bills).

Increasingly, public officials have blamed their debt woes on the sharp drop in tax revenues from the recession, and so a clamor for bailouts has been growing. But as the debt crisis intensifies we should look more closely at its causes.

[TigerLikesRooster]

Business usual in still-crashing U.S.

[TigerLikesRooster]

P!

[Erik Latranyi]

When businesses make mistakes, liberals are there to point fingers.

When gov’t makes mistakes, liberals sit quietly and look for ways to coverup the problems.

[TigerLikesRooster]

This time the hole is too big. Sure, they can cover it up for several months at a cost of trillions dollars. Covering it up for additional several months would cost order of magnitude higher.:-(

[Red Badger]

"We can't raise taxes; they're already very high," the comptroller explained. "If we did, people would just leave."

Ayn Rand told ya'll years ago.....................

[Buckeye McFrog]

I know how the Canadians are dealing with this.

Ottawa is able to more or less by fiat impose municipal mergers. So in that way they can force the five or six wealthiest suburbs of a struggling city to be absorbed by it. Hence their wealth can then be tapped to keep the scam rolling. (this also ends the flight from high taxes, because you can spend a lot of money moving only to risk being absorbed again in the future)

Coming soon to a Harrisburg near you...