Broke: Hardship and Resilience in a City of Broken Promises, by Jodie Adams Kirshner: An Excerpt – The New York Times

But as voters moved to the South, the West, and city suburbs, politics changed. Assistance to cities peaked in 1978, the same year Jimmy Carter said in his State of the Union address, Government cannot eliminate poverty or provide a bountiful economy or reduce inflation or save our cities or cure illiteracy or provide energy. Between 1980 and 1988, during Reagans presidency, total intergovernmental aid to cities fell by half.

Mandatory balanced budget rules forced states to reduce funding to cities. Lacking support from federal and state governments to meet urgent obligations, cities turned to the bond markets, subjecting themselves to market volatility. The recent financial crisis revealed the unsustainable position of cities that resulted from the risk and leverage they acquired. During the crisis governmental support continued to fall, leaving cities without a buffer against the market downturn.

Meanwhile demands for social services in cities increased. In order to maintain solvency cities turned to the limited options available to them: reducing services, raising taxes and user fees, borrowing more money by issuing municipal bonds, and competing for private investment by offering tax deals and incentives to companies. Not all cities had the capacity to stabilize their budgets through these actions.

Bankruptcy offered federal and state governments a way to avoid bailing out the cities that lacked the capacity. Politicians branded municipal budget shortfalls as the fault of entitled municipal workers and retirees and reckless borrowing by municipal leaders. In 2012 Stockton, California, became the then-largest city to file for bankruptcy, and the bankruptcy process rewrote Stocktons union contracts. By the end of 2012 three more California cities had filed for bankruptcy, and nine more had declared financial emergencies.

In 2013 Detroit broke Stocktons record and assumed the mantle of the largest city ever to enter bankruptcy. Detroit became emblematic. The problems Detroit confronted paralleled problems in many other American cities. Though a few unique cities have attracted the optimal industries and population to win the spoils of the modern economy, many cities have failed to manage persistent unemployment, stagnant wages, and rising inequality. Without outside help from their state and local governments, more than 70 American municipalities since 2007 have entered bankruptcy and been forced to write down their debt on their own. Several hundred more cities now struggle on the brink of default and are shrinking public payrolls, cutting services, and selling public lands. Cities have suffered the brunt of mortgage foreclosures and declining property values and have generally been home to the largest numbers of poor and marginalized Americans, those most dependent on public services.

Detroits bankruptcy offered an opportunity to test whether bankruptcy could affect cuts to cities pension obligations. Many states constitutions, including Michigans, protected pension contracts against modifications, but federal bankruptcy law allowed any contract to be changed during bankruptcy. In one of the few rulings in the case the Detroit bankruptcy judge found federal bankruptcy law could supersede state pension protections.

Through bankruptcys exclusive focus on cities culpability for fiscal crisis, its lack of attention to the people affected, and its implicit demand for cities to solve their problems on their own, we have overestimated the ability of cities and their residents to combat powerful forces like automation, suburbanization, the recent financial crisis, and deindustrialization. We have underestimated the resources and tools necessary to change the trajectory of cities and the importance of sustainable cities. We have neglected our fellow citizens, who have been forced to endure reduced services, high taxes, and insufficient human investment.

See the rest here:
Broke: Hardship and Resilience in a City of Broken Promises, by Jodie Adams Kirshner: An Excerpt - The New York Times