Cash Strapped IG’s

The “no tax increases ever, for anything, shrink government” forces, epitomized by Grover Norquist of Americans For Tax Reform and its “Taxpayer Protection Pledge,” are getting what they wished for — debilitated, declining government. Witness the inspector general function, where less money to investigate means more problems festering for anti-government types to decry.  Or cut the state motor vehicle registry to the bone, as I just saw first hand in Massachusetts, to produce three to four hour waits for the simplest transaction causing angry motorists to glare non-stop, mutter epithets and game the clerks who, in response to this perpetual onslaught, work even slower and deploy an arsenal of stock retorts and blank stares to fend off livid customers. This only provides more fodder for government critics, calls for more tax and budget cuts and a greater likelihood of a performance death spiral that further alienates the public and delegitimizes government. As a result, fewer care when bankruptcy comes to cities such as Detroit, major counties such as Jefferson in Alabama, with even states, such as Illinois, find themselves in the fiscal ICU, a trend nicely chronicled last year in the Daily Kos. Defund schools, demoralize teachers, diminish education. Go after public safety pensions so police who feel their pockets being picked compensate by backing off our protection. The tax scolds are happily sowing what they have reaped and, as doctrinaire true believers, don’t see the mess being created for everyone, including them.

Detroit Files for Bankruptcy

Detroit’s critical fiscal condition represents a structural cancer growing in a number of U.S. jurisdictions, including states such as Illinois. The bankruptcy court may well sign off on radical surgery that will fracture existing notions of what’s due bondholders, civil service pensioners and current employees.  So it is not surprising that Detroit’s story will be closely watched by those involved, both directly and, in other jurisdictions, by proxy.

Shell Games All Around

More on the flirtation with bankruptcy by Jefferson County, Alabama (which includes the state capital, Birmingham).  Officials there had bedazzled bond-buying investors for years with rosy financial projections of the county’s water/sewer operations; Wall Street firms, in turn, bedazzled county officials with prospects of lower interest rates achieved though interconnected financial instruments of almost unfathomable complexity, instead of the straightforward long term bonds the county had been issuing.  Knowingly or not, everyone dove right in to what appeared to be fine water, now turned into a sludge-filled money pit.

PA Capitol Charged by SEC

We’ve been following Harrisburg, Pennsylvania’s flirtation with bankruptcy and state takeover thanks to a high-priced municipal incinerator that once promised a bonanza of fees from trash carted in from beyond the city limits.  But few customers came and the incinerator’s exotic financing boomeranged in the fiscal crisis. The SEC now contends that things were dire earlier, but Harrisburg found ways not to let on.