Stockton, CA – This city may be the first in California to declare bankruptcy. The city, in spite of cutting police, fire, and anything else it could think of, is still running in the red, and cannot make its bills. Why? Pensions and benefits for retirees have literally taken over the budget to the point where the city has been cutting back on services to residents to meet those bills. And the first ones to scream if Stockton does declare bankruptcy will be the unions. The following clip explains at least in part which city bills will take priority in the case of bankruptcy.
While many businesses have gone down the drain because of pensions and retiree benefits draining their assets, it is not as common as it once was. That probably has something to do with the fact that there aren’t as many unions in the private sector anymore. What we are seeing in Stockton is the future for many cities across the country, primarily because of contracts negotiated by public sector unions. While this is a very basic statement about the impending problem, it isn’t extremely difficult to understand. It is yet another economic issue that is at least an indirect result of the Baby Boomer generation reaching retirement age. But, unlike Social Security, this problem is theoretically negotiable, especially when cities make the decision to declare bankruptcy.
At that point, all contracts with the unions are nullified, and cities are in a position to re-negotiate terms with public sector unions. But, would we have been in this situation in the first place if city leaders had started thinking like business owners years ago? Probably not. Conservatives have been saying for years that spending money without serious plans to repay debts in the future is a mistake. In Stockton, even the leaders have admitted that they spent too much when times were good, and failed to “save for a rainy day.” But, they’re politicians, not business people.
Matt Edelstein, otherwise known as Shoq on Twitter, decided to weigh in on this. Well, he decided it was a good idea to pose what he obviously thought was a difficult question for me. I didn’t respond via Twitter, so maybe he’s deluded into thinking that he stumped me.
If municipalities were run more like big businesses, it is less likely that they would end up like Stockton. As for businesses making the laws of the land, gieven our current economic woes, that is exactly what we need. It has been made abundantly obvious that every level of government in this country is either ill-equipped, or unwilling to do what needs to be done to kick start our economy. More often than not, the fact is that government doesn’t need to do a damn thing – it needs to stop what it’s doing, and get the hell out of the way.