(States Continue to Feel Recession’s Impact,
Center for Budget and Policy Priorities, June 27, 2012)
In 2001, a gentleman by the name of Grover Norquist (the titular head of Americans for Tax Reform) once (in)famously quipped that his quarter-century goal, which he described as “reasonable,” was to “get government down to the size where [conservatives could] drown it in the bathtub.” In furtherance of that (ig)noble goal, ATF sponsors and, to date, nearly 500 legislators holding federal office in the United States, have signed the “Taxpayer Protection Pledge.” This pledge commits them to refuse under all circumstances to vote for any tax increase of any kind unless it is offset by an equal tax cut. Ever.
Since Norquist let us all in on his destitute government wet dream in 2001, folks have at least tried to be vigilant in documenting the shrinking boundaries of the federal government’s fisc. Unfortunately, by focusing on the feds, we missed the Norquist ball soaring over our heads into the net, scoring (if something dramatic does not change pretty damned soon) the game-winning goal of drowning “the government”—by destroying the ability of state and local governments to provide for their citizenry.
Few, however, have noticed.
Three years ago, when the first celebratory news about the “end of the recession” was being touted by pundit and blogger alike, this quiet little news from a quiet little Alabama county (actually, the state’s largest county) called Jefferson might have caught your eye:
It is hardly unusual these days for a government building to forgo a fresh paint job or regular lawn care to cut costs. But last week, the director of the Jefferson County public nursing home was told that the county could no longer afford to bury indigent patients.Across town at the juvenile detention center, the man in charge was trying to figure out how to feed the 28 children in his custody when the entire cafeteria staff is let go. [...]
In July, the county asked Gov. Bob Riley, a Republican, to declare a state of emergency. Mr. Riley declined, delicately explaining that his authority extended to tornadoes but not to tsunamis of red ink.
Fast forward three years—to find the name “Jefferson County, Alabama” on the short list of municipal bankrupts. And to find the name “The Honorable Governor Robert Bentley” of the great state of Alabama (the state that ranks dead lastin terms of state and local tax revenue collections) on the roster of those who signed ATF’s “Taxpayer Protection Pledge.” Don’t let the media spin fool you: While pundits have been happy to chalk up Jefferson County’s bankruptcy to malfeasance relating to public works, those who actually pay attention to what goes on in Alabama (Alabamians) are quite honest about the impact of basement level public (tax) revenues on the ability of Jefferson County to provide even basic services on an ongoing basis.
Basic services like burying our dead elders when there is no family who can afford to pay.
All Republican bleating about how much the federal government is supposedly paying for all our needs to the detriment of America aside, the vast majority of services to the American people are provided at the state and local level. And paid for with funds (fees and taxes) generated at the state and local level. Yet increasingly, cities, counties and states find themselves with no money to pay for those local and state services. This fiscal crisis is not just because federal money is drying up. It is because state and local money is drying up too. States facing increasing costs in the face of decreasing local revenue and decreasing federal assistance have been forced to balance their budgets (as is required by law in 49 states) by slashing the services they provide.
It’s unclear whether this is an accident—or by design.
Recall the “Taxpayer Protection Pledge” that I mentioned above? Did you know that more than 1,200 state officer holders have ALSO made the same promise?
It does make you wonder. Since the most recent recession began in 2007, the following US cities and counties have filed for bankruptcy under Chapter 9:
Gould, Arkansas (April 2008)
Vallejo, California (May 2008)
Westfall Township, Pennsylvania (April 2009)
Village of Washington Park, Illinois (July 2009)
Town of Moffett, Oklahoma (October 2009)
Prichard, Alabama (October 2009)
Boise County, Idaho (March 2011)
Central Falls, Rhode Island (August 2011)
Harrisburg, Pennsylvania (October 2011)
County of Jefferson, Alabama (November 2011)
Stockton, California (June 2012)
This is a depressingly impressive list. These 11 governments stand out because there have only been 33 municipal or county bankruptcies filed since 1988. Put another way: Within the past five years, there have been half of the number of municipal bankruptcy filings from the preceding 19 years.
Two of the last three of these have state and local governmental officials at least partially responsible for their fiscal health (Alabama’s Gov. Robert Bentley and Pennsylvania’s Gov. Tom Corbett) that are signatories of ATR’s taxpayer protection pledge for fiscal year 2012.
Yet this list is also deceptively short. Perhaps this is because municipal bankruptcy is, by all accounts, a “last resort.” Private businesses routinely seek Chapter 11 bankruptcy reorganization, almost as a business strategy, given that it allows them to escape their debts while restructuring their business to account for their latest and greatest market strategies as “debtors in possession.” In contrast, governmental bankruptcy is chosen only after all avenues of cost-cutting and revenue generation to stave off the reaper have been exhausted.
Certainly, that was the case for Jefferson County, Alabama, which was having trouble burying its indigent dead a full three years before it finally gave in to the inevitable.
And the case for Stockton, California, which had to engage in mandatory mediation with its public and private creditors as a precondition of having access to the bankruptcy courts.
Stockton’s current title as the largest municipality to file for bankruptcy protections may not last long, however, given what is on the horizon: more and more cities being forced to take a similar route to save themselves, financially. For example, one of the nation’s great metropolises, the City and County of Los Angeles, having staved off the wolf for years now, may be on its last finger hold before slipping over the precipice.
This is consistent with what is being reported nationwide. In a recent white paper,“States Continue to Feel the Recession’s Impact”, the Center for Budget Policy and Priorities (CBPP) noted that there is increasing financial distress in our nation’s states even as the recession is officially over. With somewhat obvious consequences.
Largest State Budget Shortfalls on Record
(States Continue to Feel Recession’s Impact,
Center for Budget and Policy Priorities, June 27, 2012)
In states facing budget gaps, the consequences are severe in many cases — for residents as well as the economy. To date, budget difficulties have led at least 46 states to reduce services for their residents, including some of their most vulnerable families and individuals. More than 30 states have raised taxes to at least some degree, in some cases quite significantly.If revenues remain depressed, as is expected in many states, additional spending and service cuts are likely. . . While data are not yet available that would show the mix of state actions to resolve their budget gaps for 2013, the data through 2012 show that states have enacted more and more spending cuts every year since 2008. Federal aid and state tax increases have played diminishing roles in addressing the gaps, as the emergency federal aid ended and the elections of 2010 changed the political leadership in a number of states.
Spending cuts are problematic during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy.
Tax increases also remove demand from the economy by reducing the amount of money people have to spend. However, to the extent these increases are on upper-income residents, that effect is minimized. This is because these residents tend to save a larger share of their income, and thus much of the money generated by a tax increase on upper income residents comes from savings and so does not diminish economic activity.
Things are so bad that we are at the point where it is surmised that even if nothing gets worse, it will be at least until the year 2019 before things will get better at the state level where their budgets for services are concerned.
Why haven’t we noticed? Well, perhaps because most of us are not economists or economy wonks. Most do not follow stock and bond news with baited breath each day. So perhaps that is why we may never have heard of a woman named Meredith Whitney. Ms. Whitney is, to hear it told, one of the best financial analysts in the game. Now, Ms. Whitney doesn’t usually write for the 99 percent—her raison d’etre always been providing investment analysis and advice for those who actually have disposable money to invest. Apparently, Ms. Whitney predicted a municipal bond crisis last year that never came to pass, so she has a bit of egg on her face these days where many of the movers and shakers of capital are concerned. Yet, it appears that Ms. Whitney may yet be vindicated—because she was in the vanguard when it came to raising (quiet) hell about the increasing weakness of state and local government budgets and a looming crisis. Today, more than three years after she first raised the alarm in 2009 about the long-term impact of the recession on state and local governments (and the fallout that would accrue to actual people were that to come to pass), folks who took a bit of a piss at Ms. Whitney’s expense last year are nonetheless admitting as they watch the Jefferson County, Harrisburg and Stockton bankruptcies that the other shoe that Ms. Whitney said was going to crush state and local governments might till yet drop. “She got the analysis of the situation right, in terms of budgets and the fiscal stress on local governments.”
A strong case could be made that this is all part of the plan, the true end game of Grover Norquist’s fantasy. After all, the elimination of the ability of state and local government to provide services to a citizenry that cannot afford to pay for them means that only those who can afford to pay for them actually get served. That’s just another step along the way of securing what appears to be a return to the age of peonage. But to get most of America there, it’s not enough to take the jobs, take the housing, take the sense of security and prosperity. The movers and shakers must also make the inability to pay for anything meaningful enough to truly frighten the average person. Arguably, this is done by eliminating the government structures created in large measure to cushion the fall when individual lives fall victim to circumstance. Perhaps this is why, despite the obvious answer to our problems of “taxes are too low”, the one percent have made sure that the American dog of public opinion is laser focused on only a few squirrels. Squirrels such as the remaining pensions of every American public worker, the 401K boondoggle having already left most American workers with any savings breathless on a regular basis watching the vagaries of the investor class playing with their money.
Public pension reform has thus now become the battle cry. As the media whose mission focus is on the financial health of the investor class have gleefully told us with increasing repetition this past six months, what really needs to go if local and state budgets have any hope at all is the last bastion of public worker security in retirement. After all, how can local government survive when it is on the hook for $2 trillion in unfunded liabilities?
The bondholders (aka the “investors in government”) say this is so.
The really depressing part is that regular folk believe this: “Public pensions have become a flashpoint in elections around the country.” Hell, even those supposedly on our side report the situation in terms that reinforce the narrative of “greedy rich public employees are killing our country,” unquestioningly providing a platform of quotes for people who refer to things such as healthcare for retired firefighters (you know, those folks who go out and risk getting burned up to keep YOU from burning up in a wildfire or house fire) as a “Ponzi scheme.”
And, just to make sure we can’t figure out what is happening even if given enough time to think, those who set the narrative are now considering changing the definitions so that it is crystal clear precisely how much public pension funds owed to those who served the public are really the reason that local and state government is going broke (as opposed to all those crap investment strategies that were supposed to make everyone rich):
Moody’s is seeking public comment through the end of August on four major changes it plans to make in how it treats pension liabilities. The negative impact of the modifications – which will start taking effect in the fall – will hit local governments such as counties, cities and towns, as well as school districts, most heavily- unless Moody’s significantly alters them after reviewing the public comments.”Moody’s expects the proposed pension adjustments to result in rating actions for local governments where the effect is outsized relative to their rating category, but no state rating changes are expected solely as a result of pursuing the adjustments now under consideration,” it said.
Cities and counties are likely to see downgrades, Blake said.
It seems that if things continue unabated, it will not be long before local and state governments—the ones closestto their citizenry and on the front lines of providing basic services such as fire, police, medical and housing services—will be unable to do what governments do: issue bonds to balance their own fiscal houses.
So, as goes Stockton so perhaps goes LA, and the rest of the nation, becoming the paradigm for our struggling cities, breaking the promises to its workers and its retirees so that it can satisfy the investor class, the “new normalcy,” much the way that suddenly five percent unemployment became structural, instead of the really bad news it used to be back in the day when the promise of the American Dream, with an honest job at its core, actually still meant something.
With the result that Colorado is on fire, the appellate courthouses are shuttered unless you have money to pay for your own court reporters down below, and if you’re a victim of domestic violence even in a state that gives a damn about you, good luck hiding out from your batterer on the run sleeping in your car because there is no shelter to take you and your kids to any more.
Oh, and there may not be any public library either.
If that happens? Just don’t forget to turn off the (public street) lights to half the city, like they planned to do just a few weeks ago in Detroit, Michigan. Yes, that Detroit, Michigan. The Detroit, Michigan that was once the wealthiest city in America, the crown jewel in American manufacturing but today has only 60 percent of its fire trucks operational because it can’t afford to fix them. That Detroit’s local government is in such dire straits that its governing body was willing to plunge half the city into darkness to save money lends a frightening significance to the right-wing meme du jour that only 50 percent of Americans should be entitled to services because only 50 percent are really “taxpayers.”
If the news is to be believed, places like Detroit and Stockton are just the beginning of the possible end—the drowning death—of many of America’s cities.
Places like Detroit, Michigan (which has too many “we’re fuckin’ broke” problems to list; but it’s just 1 of 100 cities in Michigan that are broke, and therefore subject to the Emergency Manager Law, which makes the Taxpayer Protection Pledge look like a walk in the park on a sunny day).
Not to mention entire states, like Michigan, Illinois, California and even Wisconsin (with no small assist from Gov. Scott Walker , another signer of the Taxpayer Protection Act), as Grover Norquist proudly announced after Wisconsin’s failed recall election.
The list of struggling localities could go on, inclusive of names familiar and unfamiliar such as Camden, New Jersey (which dismissed half of its police force in 2010); San Diego, California; and Chicago, Illinois.
We are, frighteningly, seeing only the tip of the iceberg if the Meredith Whitneys of the world are to be believed.
Maybe the true end game of the Taxpayer Protection Pledge and those who believe in such nonsense as gospel always was control of the distribution of services at the most grass roots levels of state and local government all along, with the resultant dependency on the largesse of those who believe in things like the Taxpayer Protection Pledge. Maybe the fight for federal government control was just the distraction. Or the enabler. There’s some evidence to support that theory, at least to hear it told by some.
It certainly seems that everything happening to our states and cities is all just as the signers of the Taxpayer Protection Pledge would have it. To hear them tell it, it’s a principled thing, this drowning of government. Only then will we as Americans truly be “free.” Only then.
But in their world, free appears to mean freedom to sleep hungry under the stars. With no government-of-last-resort blanket to shield from the cold. But don’t worry—even when our cities are dead busted broke and we are truly on our own, the bondholders (aka the investors aka the one percent) will still get make sure those truly in charge of the public fisc, the bondholders aka investors in government, get paid. Even if it means that the few lawyers with the skill and knowledge to shepherd the government through the bankruptcy process that tens of thousands of for-profit businesses voluntarily choose as a business strategy (to the applause and increased shareholder returns) don’t get paid and, therefore, don’t help.
But that’s what pro bono lawyers are for. After all, the charity services method works for poor people with legal problems, so it should be good enough for poor governments too, right?
Oh. Wait. It actually doesn’t work all that well for poor people (only 20 percent of poor people can find a lawyer, pro bono or otherwise, when they really need one). Maybe it is because the elite law firms that do things like represent an entire city government pro bono (albeit providing quite thorough advice comparable to that provided to their paying clients—credit where credit is due, after all) are the same ones that represent the private investor class that allows those firms to do pro bono only when it doesn’t conflict with the “mission” of its very corporate, very well-off, paying clients.
And here we all were just worrying about ALEC.
Now, there is some good news: It appears that, like a stopped watch, even a Republican may be right twice a day. If I believe the news, some Republicans seeking national office are actually refusing to sign the Starve the Beast aka the Government Drowning aka the Taxpayer Protection Pledge. And, however feeble rhetorical efforts have been, a couple of national Democratic folks have also tried to highlight the enslavement of all Republican rationality (an oxymoron, some might argue today) by the Taxpayer Protection Pledge.
We even had one media person try to raise the alarm.
Yet comparatively few stories have raised the alarm to the shrillness that is required.
Certainly, none hae examined whether the end game of the right’s normalization of the Taxpayer Protection Pledge as a condition of getting support for running for public office might be part of a larger strategy of starving not just the federal government, but state and local government too.
Certainly, this has not been a campaign theme that I have discerned coming from Democrats in this critical election year.
It may all be moot anyway at this point. The damage to the foundation of our union—the states and cities—may already be over the tipping point, since even without the Taxpayer Protection Pledge the mindset that it evinces is well entrenched. For example, bankrupt Stockton, California is represented partially by State Rep. Bill Berryhill—who isn’t a signatory of the Taxpayer Protection Pledge. But he doesn’t need to be, since his rabid anti-tax bona fides were already well established, and Stockton was doomed anyway from the moment that Gov. Jerry Brown did the will of Republicans who conveniently managed to forget the benefits their wealthy cities had earned abusing redevelopment in the ’70s and ’80s when screaming for its elimination last year and killed the vehicle of redevelopment using local property tax increment funding (and the related local bond financing secured by them) for poor, largely minority, struggling towns like Stockton that had turned to them to, God forbid, actually try to do things like clean up toxic waste and build affordable housing. When a supposedly liberal governor takes a sledgehammer to the only meaningful vehicle available to poor cities to fix their problems (using those cities’ own tax monies) in the name of trying to fix the state‘s economic crisis with NO mention to repealing the one thing that has bankrupted this state, the anti-tax mentality has truly taken hold. Pledge signing or no pledge.
All this is occurring largely without any meaningful discussion of the human cost of our cities and states falling further and further into the financial abyss. Charity is optional. Eating isn’t.
So, the man who 11 years ago envisioned drowning government in a bathtub appears well on his way to accomplishing his end game. (This was really the end game of that great American Saint Ronald Wilson Reagan.) Unfortunately, most of us have been spending so much time obsessing about the least important part of government in Real People’s™ lives—the federal government—that we overlooked the importance of holding the line closer to home. Home where, quietly, our towns and cities and states are being starved to death, with the acquiescence if not enthusiasm of many of those who took oaths to serve the public. It is undeniable that on their watch and largely while our backs were turned, more and more of our cities started drowning. Our states, theoretically charged with jumping in the water to save them, are being pulled below the surface slowly by the undertow themselves. But make no mistake: There is no longer any big rescue boat—no federal government—willing to save either any more. Not when it now costs a billion dollars just to do a decent campaign for president (which simply ain’t going to be raised at local bake sales).
What’s the solution? Who knows what the solution is? But here is an idea about what a solution might be:
Dedicate some of the energy we invest into worrying about whether national politicians (the folks who are the most removed from the day to day needs of Americans) get elected into making sure that representation at the local, regional and state governmental level is not grounded in folks beholden to the investor class, to the “freedom class” (freedom to make money class, that is), but grounded in people who will pay attention to what is being done to life in America for the average American because they themselves are average enough to suffer the consequences themselves. It seems clear that any strategy developed to try and hold the line on a decent standard of living in our American towns and cities is in for a fight of a lifetime if we don’t increase our ground troops on the ground—locally and regionally, where it matters the most:
We’re fighting a vast faction with a mighty war chest bent on taking over this country by making our own government work against us. The proof is out there, practically in neon lights that Republican governors of many of our states have signed up for the takeover.They follow an agenda set out for them by right-wing organizations fully capable of fighting the battle for the states all the way to the end, and they’re determined not to stop there. They’ve forced nearly every single Republican politician to sign a pledge never to raise taxes or their funding will dry up as quick as dung in the desert sun. It’s the Grover Norquist plan, and even though Grover Norquist has no real credentials, he is the front running Republican rule-maker and nobody in his party ever seems to wonder who died and made him king.
The diabolically clever part of the “never raise taxes” plan is that it can be used to effectively kill any program the Republicans are against. Any social program, any essential safety net, can die an unnatural death by defunding, underfunding or outright abolishing, thanks to the new rules set in place by the likes of Norquist, ALEC, the Koch cabal, the Supreme Court Citizens United decision, and various Tea Party newbies in the House who have promised to shed real red blood if necessary in order to honor the edicts of the monied right wing.
So we need to start talking about what to do—and how best to support those, like the fearless local advocates who have risen up and are rising up in Chicago, Detroit, Wisconsin and elsewhere against what they see on the ground every day, without regard to Washington politics. We need to do it now. Before it’s too late. Because, in case you haven’t noticed, those crazy kids (Taxpayer Protection Pledge signers or not) are coming to school boards, state boards of equalization, and other state-based folks who really control the flow of money for the local and county services that you, me and everyone (with the possible exception of Mitt Romney) needs to survive, near you. There is nothing sacred in the face of the absolutism shown by those who would even consider signing something like the Taxpayer Protection Pledge or joining onto its agenda even without signing. If we don’t truly look at what needs to be done in a systematic, nationwide, grassroots effort to save our cities and states (and actually start doing it), the many stories that I could have quoted and linked here about dying cities and towns but didn’t will simply continue, with real people in the end being those who suffer from the loss. And when that happens—whether or not their legislators have signed the Grover Norquist loyalty oath abandoning their sworn duty to legislate in the public interest—the investor class will be the last ones left to turn the lights out in our hometowns when they fold for good.