Recently, the city of Detroit filed for bankruptcy, the largest municipal bankruptcy in our history. Such bankruptcies are rare, and Detroit is a special case. The city has lost about one-half of its population in the last 40 years, is overwhelmed with poverty, and may no longer be able to support the basic services of a large city. However, four local governments filed for bankruptcy in California since 2008, and a lot of people are worried that more local and even state governments could fail in the near future, even if the main cause – the worst recession with the sharpest fall in state revenues ever recorded – continues to abate
Why are state/local government likely to continue to operate on the edge? Do taxpayers just not want to pay for the services they get, the tune I sing every week? Or, is something else going on here? Is there any truth to the conservative mantra that greedy government unions are the cause of all these problems? Or, are liberals right to say we only have problem paying for government if we want to have a problem? This topic may sound technical like last week’s Fed discussion. But it’s really just another installment in our group’s long running saga, What do we want government to do and who should pay for it?
On Monday, I’ll start us off with a little background 0n why state and local governments are in this position. (Detroit’s problems are pretty obvious, especially if you read the articles below, so I won’t lecture on those.) Then, I’ll briefly outline ways people say we might shore up local finances in the future.
Discussion Questions –
- What do state and local governments DO with our tax money? What are their sources of revenue?
- How big is the state/local fiscal crises? What caused it? Is it just this unique recession, or are the problems “structural?” or even political?
- What does the future hold? How will governments, especially CA, pay for basic public services if the economy stays slow for years?
- What if the public just does not want to pay for the next generation of public services or for public sector workers to be well-paid?
- If businesses strongly prefer low taxes to high services, how can we nurture them and the broad public at the same time?
- Do you really want a future of a much lower level of state/local government services? Wouldn’t that hit the poor and vulnerable the hardest? Are you okay with that?
- Also, do you really think that would be good for economic development and for our society as a whole?
- What do state governments do? [UPDATE: Pie chart of CA state + local spending. See this if you don’t know the basics of what they spend our money on.]
- Detroit basics.
- Local government fiscal crises mount. (from 2011, so a little better now) Recommended.
- Four CA cities went bankrupt recently, and the rest are scrambling.
NEXT WEEK: Is the Munich appeasement analogy still relevant?