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The Stockton Bankruptcy: Where Are Obama and Mitt?

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Stockton, California is a regular American city. It's got about 300,000 people, located in the agricultrual heart of the Golden State, with a real mix of people and businesses. Last night it decided to declare bankruptcy, seeking court protection against paying its debts.

Three things pop out. Why? Who else? And what are we going to do?

The "why" is not hard to figure. The precipitous collapse of home values meant less tax revenue; public investments (a marina, etc.) that failed to pay off meant higher loan payments; and expensive government meant large amounts of public employees with economic packages negotiated when things were good.

The "who else" question is a little more difficult, but it's there if you want to look. All over the country municipalities are going broke, and for reasons both the same and different from Stockton's. Rhode Island, Pennsylvania, Alabama, Illinois and lots of other states have municipalities that have already used the bankruptcy laws, and the numbers looking at it are growing exponentially. In New York alone, stop-gap state actions like control boards and loans have been used for dozens of cities and counties that can no longer pay their bills.

There's blame enough to go around. Many municipalities have intentionally avoided the hard choices that arise when recurring revenues are less than recurring expenses. There's been an explosion of borrowing to pay for current expenses, gimmicks like the sale of assets or advances on next years taxes and aid payments, failure to make payments for pension obligations, tax cuts without service reductions, the list goes on. These are choices made by municipal leaders of both parties and now, as we knew would happen, the day of reckoning is at hand.

The state and federal governments pretend there's no problem. It's not just that everyone's been cutting financial assistance to localities, it's that there isn't even a serious inquiry into the extent of the problem and what it means for the daily lives of Americans. And the reductions in aid are not going to stop, no matter who wins in November.

Public employees have been thrust into the spotlight, and understandably so. The expenditure side of the problem has to be part of the discussion. Often, rather than figure out how to get through these messes with the least damage, there's been a stony refusal to come to the table. And in political terms public sector unions have been convenient and frequent targets, with the very notion of collective bargaining for American public workers under challenge.

But, in the end, as is invariably the case in a democracy, there's us. For the past 30 years, Americans have demanded tax reductions and expanded services. It was argued that our federal, state and local taxes should be cut, but we could handle the consequences by getting rid of the fat and waste. And we never got past the slogans. In Washington they wanted to "starve the beast" by cutting taxes and forcing huge deficits that would cause a political reaction. So it did in 2010. But they only beast that's being starved is the city, town, or county where you live. Like Stockton. Or Yonkers.

Look at what Stockton has already done, before bankruptcy. It made $90 million in cuts including reducing the police department by 25%, the fire department by 30%, all other employees by 40% and cutting pay and benefits to all employees. There's still a $26 million budget shortfall and proposals to suspend payments for debts and legal claims; reduce payments for retiree medical benefits; further cut some pay and benefits; and increase revenue through code enforcement and parking citations.

So, "What are we going to do?" There will be massive reductions in fire, police, sanitation, schools and other municipal services. Fewer cops, fewer fireman, larger classes, garbage picked up once a week. Or, there will be massive increases in local taxes to preserve some of all of the services. Or, the federal and state governments will show up with significant amounts of cash. Or, a combination of the above.

That takes us to Obama and Romney. Not a peep.

And I think that the missing conversation is much more likely to occur around kitchen tables than in the halls of power. What kind of public institutions do we want? What sort of schools, and parks, and hospitals? Who should pay? Will it cost me anything? Am I willing to pay? The mechanics of a solution will come, but only after we settle out the more difficult questions that no one wants to talk about. It won't come from Obama or Romney. It better come from us, or there will be Stocktons everywhere we look.

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