Monday, July 23, 2012

Why US Cities Are Declaring Bankruptcy

Fareed Zakaria provides a concise explanation here.

12 comments:

Cory Nissen said...

The fact that state and local governments have 445,000 fewer workers than in 2007 is crazy. If this is just to help save some extra money to pay for the ridiculously high pensions that are owed now, wouldn't the simplest answer be to lower the amount owed to each person for their pension? I realize this would make most of the people receiving the pensions pretty angry, but if the city they live in goes bankrupt they are going to have to renegotiate their pensions and recieve less money anyway right?

James Davies said...

Interesting article. I would love to see more cities, states, and possibly the country declare bankruptcy. I was always under the impression that bankruptcy is sometime the right thing to do, because it is telling others that you want to pay back your debts and take responsibility. These cities need to do exactly this. Be fiscally responsible. I have previously worked for a non-profit company that does nothing on credit. If the money isn't in the bank, then nothing gets purchased and no one got paid. However, it made us employees work harder to advertise, ask for donor contributions, and get more business. Cities need to take a similar approach. Can't give out welfare and pensions if the money doesn't exist. At least that is my opinion.

Jasmine Byrd said...

445,000 less workers??? That's a big difference! The fact that America is "sacrificing its future to pay for its past" is not good at all to me. Maybe bankruptcy is the solution for cities that are running on a deficit. Even though it's not the desired situation to be in, maybe those cities will own up and bounce back.

Isabel said...

I think that if the biggest issue is the pensions and how their benefits are being increased so much, it should be moderated somehow because it's crazy! "America is sacrificing its future to pay for its past", if that is the case then maybe these bankruptcies will help as an incentive to figure out a system where we can have decent pensions without having to keep focusing on paying for our past.

Mackenzie said...

I never would have thought about bankruptcy as a positive action.

James makes a good point that bankruptcy 'tells others your want to pay back your debts and take responsibility'. That's a great way to look at it.

Ian Littlejohn said...

I just feel that if they lowered every police officer and firefighters pay alil maybe the cities wouldnt have had to go into to bankruptcy and the deficit would pay for itself

Trent said...

Exactly. We have been living above our means for decades now. Giving ourselves a false since of "richness" is finally catching up because we have outsourced a decent number of our jobs because people think they are too good to perform a task. Swallow a little bit of pride and take a pay cut or something to get your city out of a jam.

And part of me also thinks it's the governments fault and they need to fix it. ASAP

Jake Pearson said...

Yes, pensions should be cut from here on out. Unfortunately it will be difficult for the national and state governmnets to go back on the promise for those who currently recieve a pension. Just like social security and the increase in health care, these old people are going to live forever!!! I love you grandma and grandpa but you're puttin us in a bind. Last comment was a joke,hope people don't get too offended.

Mason Jones said...

OK. to start with the unions helping out by moving the age of retirement from 50 to 55 is absurd and shows how unions ruin businesses or in this case a town. Also I did not relize the differences in the types of bankruptcy. I also didn't relize how benneficial bankruptcy can be, but at the same time we must remember how harmful they are as well.

Eid Alkhaldi said...

The fact that the state of California is spending too much to the governmental agencies and not investing instead in the private sector contributed to the bankrcupcy. They pay policemen and firefighters too much money. Also they have very expensive retirment plans. What city can afford that?
They do need to reduce govrnmental spending because that is a deadwieght loss.

Pars Tornakian said...

I've heard "America is sacrificing it's future to pay for it's past" for years now and I still haven't heard of any politician or public official try to do something about it. They all complain about it but there are no solutions yet.

Nick Goldman said...

I agree with what Trent said, swallowing your pride and taking a pay cut to benefit the entire city would help tremendously. If bankruptcy happens and then the city has to renegotiate your pay, then your paycut will most likely be more than if everyone had willingly sacrificed a little. And lowering a retirement age when people are living longer and longer just keeps adding salt to the wound. Those pension plans shouldn't be paid out for that long of time (From retirement at 50 to death at roughly 78)