Stockton US bankrupt, a sign of the times or just bad management?
As a UK national I am interested to see how the riches nation on earth will deal with this situation. the city I live in is $5 Billion in debt and in almost the same circumstances as Stockton, the powers that be in my city (Birmingham seem to be shouting that its all the governments fault but should the managers of such large organisations be subject to scrutiny and if so what penalties should they suffer if they are guilty of mismanagement?
The situation is not being dealt with much better in the USA. The State of California is all but officially bankrupt with more than 200 billion dollars of debt to be repaid downstream. Many cities and municipalities have allowed city officials to pander to unions agreeing to outrageous retirement benefits and pensions which are now coming due with the retirement of the baby boomer generations. There is not enough in the revenue stream to cover the committments yet these elected idiots continue to look for ways to kick the fiscal can down the road until they come to a cliff or abyss to large and too deep for them to cross. At that point...most of them will have abscounded with their own pockets full off of the public dole. There is a common word for it....theft. ~WB
Horrible management! No question here! When you have government employees making 150K in pensions each year what can one expect? Never understood how local govts can vote those kind of numbers when the private business can't afford those numbers? Stockton is the perfect example of liberalism..............nothing but failure!
What will happen in US cities will most likely be insolvency, as opposed to bankruptcy. Here, claiming bankruptcy is an organized process where the entity must declare all of its income and all of its debts and expenses. Governments at every level of our federal republic spend so much money on so many things which offer no return on investment that the obvious solution would be to cancel those superfluous expenses and to start leveling property taxes on churches, mosques, and synagogues, all of which are privately-held and tax exempt. There would be a complete revelation of mismanagement in the government in bankruptcy. I don't see bankruptcy occuring in the US. Instead, we will see insolvency where the governments simply cannot pay their bills and they start laying off thousands of people and cutting tons of programs and cancelling contracts. At worst, it could mean a government "shut-down" for a period. Historically, things that are cut are education and infrastructure. Cuts during insolvency historically lead to localized economic downturn and recession.
There are several factors in going bankrupt. One is the financing being used, like municipal bond. It is possible that the risks had not been thoroughly assessed. Another is leak in the use of budget. Another is the budgeting scheme, like zero based budgeting or incremental budgeting, balanced budgeting or deficit budgeting. If in government organization a penalty may be demotion, or removal, or dismissal.
Municipalities due go bankrupt. But it is a different type of bankruptcy. It is Chapter 9. Which works quite differently than the way an individual files bankruptcy. Under Chapter 9 there is a reorganization of debt that would otherwise not be permitted. It also permits them to adjust unsustainable labor agreements that cannot be supported by their taxing power. Their will be no Federal Bailout. It will be a restructuring.
The crux of your question should probably be how to prevent this in the future. And the sad truth is that effective fiscal management in a gov't entity is dependent on elected political figures telling their constituents the truth about all the benefits that they cannot afford to deliver. How many people get elected by promising to give the masses less and not more ???
We consciously give the reins of a government, of the economy to incompetents that proved us that they know nothing about the economy. They are applying over and over a model that damages it for the benefit of the possessors of capital. And yet, our trust is indelible.
The answer to the problem, it will be like what Italy, Spain, Portugal, Ireland are experiencing. They sell off the country to the rich and the poor dies. Why would England be different because it is/was part of the strong north belt of Europe? Not anymore, I'm afraid so. England will be liquidated too.
Iceland made its bankers paid for their financial "mistakes" (bankers know that their investments are risky don't they?) and, now, they are thriving. Because of the people's reaction to the undermining of their economy, it contributed to save it.
Considering the rest of the world, I guess, we are sheep, afraid to take matter in our own hands. I admire Iceland and its gut.
When an employer makes a consequential mistake what does happen? The person is fired. When it comes to their precious "golden boys" assets, the decision drags why? I thought everybody was disposable? Was I living in another world for years?
Hunger, Anger is growing. I don't recall that the People were smarter in 1775 (the US), 1787 (France), or in 1917 (Russia) than today, and they did it. Given the predicament in which many countries are, I will probably be the actor of a revolution.
Barbados, the country I am from, has a similar size population as Stockton (estimated at 287,000 in 2012).
It is also considered a developed country in its own right, ranking behind only the US and Canada in the United Nations' measurement of human development for countries in the Americas.
However, there are also question marks over the political leaders' commitment to principles of accountability and transparency.
In fact, deceased Prime Minister David Thompson has been disgraced since his death in 2010 as it emerged that he had apparently facilitated a massive fraud by a regional insurance company.
The economy is in a state of crisis but the situation is perhaps not as dire as Stockton's.
Then again, it may be worst. In Barbados it can be hard to separate reality from shadows.
Any time any level of government (local, county, state or national) goes bankrupt it is usually due to bad fiscal management or embezzlement. Years ago Mustang, Oklahoma had someone in their city management attempt to steal city funds; did not get away with it. They were very lucky he did not escape with the amount he was planning; was returned to the city coffers. The city of Mustang is not the only Oklahoman city to catch a shady elected local official or City Planner with their hands crookedly in the city revenue. Something like this could have also contributed to Stockton's financial crisis as well as too high of wages for Mayor and other city officials.
Stockton filing for US Bankruptcy is a warning to those in Stockton that the local city funds were not fiscally responsibly spent (spent more than was coming in as revenue, bad financial management). Those residing in the city should take legal means against those who are running their city for mismanagement of their city revenue. It would not be the first California city to do this and win in the state judicial system.
US government bail-out Stockton? RIDICULOUS! That is local business that should never leave the county, let alone state, level. The Federal government has zero business gifting "bail out" to failing cities, counties or states. It does not have money to give (16 trillion dollar deficit and rising, hello!) Each government level needs to be 100% fiscally responsible, not spend more than what they receive in revenue.
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