The Great American Shake-out
Original post made by Tom Cushing on Nov 22, 2011
As bad as that is, and while I hate to rain on the Macy's parade, there's yet another financial crisis aborning and this one bears the disturbing distinction of being real. Local governments are in deep financial trouble, based on a confluence of declining property tax revenues, state raids on their resources and a flawed system of bargaining with their workers. As usual, California leads the way.
I was dimly aware of Vallejo's bankruptcy, and learned more about the problem accidentally, in the context of the City of Alameda's draconian plan to close its animal shelter, and consign its strays to the not-so-tender mercies of a woefully high-kill shelter, farther down The Nimitz freeway. It was an easy, early target: mutts don't vote, after all, and felines are notoriously cheap with their, well, kitties at least as far as campaign contributing is concerned.
Alameda's plight demonstrates at least two elements of the local funding problem: the bursting real estate bubble has limited their tax revenues to less than they'd planned, and they were paying way too much for their shelter in significant part because it's a line item in a public safety budget that eats up 1/3 of their available fisc. In this case, island residents rallied behind a non-profit and a deal was struck for them to run the facility, on a 50/50 funding basis and a one-dollar annual lease of the City's shelter facility. The City has thus saved up to 2/3 of its sheltering costs, transferred much of a formerly public function to others, and delayed its day of budgetary reckoning.
Alameda's shelter is a small example of a looming crisis. Michael Lewis gets it right, as usual (at least when he's not fawning over his offspring), in an ominous, recent Vanity Fair article. In it, he focuses on the warnings of Meredith Whitney, the financial analyst who first called the 2008 system meltdown. She predicts a wave of municipal failures, starting roughly now, and prominently including localities in our fair state.
Blue-chip city San Jose's budget, for example, is strikingly similar to Alameda's. Police and Fire consume 75%, and the remainder of the City's services like libraries are on life support. Pension costs are particularly ravenous, their appetites spawned by a collective bargaining system that forgot to include a seat at the table for taxpayers (therein lies the fundamental difference between public and private sector bargaining there is no market hand to slap over-reachers at the table). Having cut other staffing to 1980s levels (then serving a much smaller city) Mayor Chuck Reed ruefully foresees a day when his is the City's only paid position everybody else has retired or been laid-off to support the retirees. He's only half kidding, and has the trend lines to prove it.
Which way leads "out" of this coming dilemma? Higher taxes, anathema to many at the federal level, are a suicide potion for any local politician. And now is a particularly bad time to suggest them, with so many constituents suffering their own personal economic travails. There is no clear answer, a disturbing conclusion that gets Mr. Lewis to pondering on The Big Picture: the meaning of culture and community in these United States:
"It's a problem of people taking what they can, just because they can, without regard to the larger social consequences. It's not coincidence that the debts of cities spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans had been conditioned to grab as much as they could, without thinking about the long term consequences. Afterward, Wall Street would privately bemoan the morals of people who walked away from their subprime loans, and people would express outrage at those who paid themselves a fortune to design those bad loans."
The same could be said for collective bargainers and many others we have ignored the Common Good, assuming that other forces like markets or campaign contributions, will define it for us. There is a place for markets but it's not every place, and regular readers have already been subjected to my rant on the campaign finance follies.
The reckoning we face as American communities is the recognition that the era of grab-the-pile has ended. The frontiers have closed; we are raping The Commons and reaping the reward. We will have to pay our way at every level and in every aspect of our nation, our states, and our locales. We will have to more soberly decide what we're willing to pay-for publicly, and what those services are really worth. We can do it consciously, a bit like Alameda did in a minor way, or we can abdicate responsibility and allow other forces to intrude on a partisan, crisis-driven and ridiculous process like the Super-Committee has done.
It remains to be seen whether our sense of real (capital C) Community is up to the task. The Great American Shake-out is under way.
on Nov 22, 2011 at 1:17 pm
Tom's concern is well-placed. We have lost our collective focus on the larger Community -- in our quest for greater material comforts and in our extreme emphasis on individualism.
We see this skewed image daily in our political dialogue and in our popular media. We say that we care about our neighbors. And in small ways, in personal ways, we do care and we show it. We can be very generous with our time and money -- especially when friends or neighbors are in a crisis.
But, we don't express that same concern enough in our politics. We elect leaders whose main focus is in serving and protecting their narrow constituencies -- often lobbyists for corporate or union interests. And the policies that we get from them reflect those narrow interests.
We shouldn't be surprised. Money talks too loudly in elections. We provide the votes. But, our elected officials don't belong to us. They belong to those who are giving them the cash for re-election.
And what kind of political world do we end up with? With the far right's capture of the Republican Party, it would surprise no one if the Republican Party formally changed its motto to, "I've got mine." And we see a Democratic Party far too timid to stand up for its supposed ideals.
We are in a severe and prolonged economic crisis. There is no denying that. And Tom is right -- no amount of blind faith in laissez faire market forces is going to pull us out of it. It is going to take some bold action -- likely by the government -- to turn this ship around.
But, in the meantime, what can we do to ensure that our communities large and small do not collapse and do not give up essential functions?
It seems to me that the larger question that we must grapple with is: "How do we come together as a community to make sure that we can continue to afford those services and features of our towns, our states, and even our country, that made us want to live there in the first place?"
We have to first change the political dialogue to include the notion that we are all in it together. That our collective fate depends more heavily on our shared interests than our separate interests. If we each focus only on our own needs and wants, we will lose those things that make it worthwhile living in a community (a Community) together.
on Nov 23, 2011 at 9:39 am
How much did Obama's recent trip to Indonesia cost the taxpayers? (Enough to run the Alameda animal shelter for.... how many YEARS?)
Start by removing all the perks. Our "representatives" should pay into Soc. Sec.- not their own fund, and on and on.
on Nov 23, 2011 at 2:57 pm
As noted by Tom Cushing in his article, the biggest issues facing state and local governments in California are the cost of the collective bargaining agreements for public employees, with their overly-lucrative pension plans being a major part of the problem. For reasons that are not at all apparent (when judged against the benchmark of "common sense"), it seems to be impossible to reduce or scale back the pension formula and/or benefits for existing public employees, even going forward.
Just to be clear what I am saying: I fully agree that it is inappropriate to reduce benefits already accrued by public employees, for years of service that have already occurred. What we are talking about here is benefits to be accrued IN THE FUTURE, but for existing employees. For whatever reason, at least some courts have ruled that while it is possible to INCREASE benefits going forward, it is impossible to decrease benefits going forward. For some reason, this seems to apply ONLY to public employees, as private companies very frequently cap or curtail the going-forward benefits of their pension holders, even for existing employees. (In the ever-shrinking number of private companies that actually offer pension plans....)
If pension reform is limited only to employees not-yet-hired, then cities, counties, and the state will not be able to dig out from under their bankrupt or near-bankrupt situations.
The inevitable result is continued reduction of services, firings of large numbers of public employees (to make up for the fact that the ones left have to be paid ridiculous benefits), etc.
As Tom said, the collective bargaining process for public employees is fundamentally flawed, when "the payer" (in this case, the taxpayer) is not at the table. Our state and local politicians are in the pocket of the unions (at least as long as the Democratic Party is running things in CA), and so there is no "opposition" to lucrative contracts. At least not until things fall totally apart....