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By Tom Cushing

The Great American Shake-out

Uploaded: Nov 22, 2011

As the Congressional Super-Committee blunders toward stalemate, one has to wonder what this latest demonstration of the federal government's wretched inability to govern portends. Put another way: must a government of, by and for the lobbies be long endured? I'm guessing that the financial markets, at least, will once again show their impatience in a tangible way – meaning more tax money going into debt service. If Congress was going to deplete the nation's financial good will, couldn't they at least have dissipated it on an issue of immediacy and importance?

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.