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The Great Unraveling: Yonkers, Stockton and Municipal Bankruptcy

The great national battle about the size of government and the level of taxation will be played out in the streets of small cities across America
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Yesterday, the new Mayor of Yonkers, Mike Spano, created a Commission of Inquiry to get to the truth of the City's financial crisis. Yonkers is a city of 200,000 on the Hudson just north of New York City. It's got a budget of about $1 billion and a budget gap in the upcoming year that looks like it can't be bridged. The mayor asked me to serve on the Commission.

At the heart of the crisis is a political disconnect of a kind we see all over the country. People demand, and need, municipal services such as police, fire, sanitation and education. They can not, or will not, pay for them.

There are reasons aplenty. Like many urban centers the Yonkers manufacturing base disappeared, the middle-class moved out and the people simply can't afford the property and sales tax burden that ensued. Anti-tax fervor hit and elected officials refused to raise recurring revenues. Gimmicks, one-shots, borrowing for operating expenses, asset sales and assorted maneuvers "kicked the can down the road" for a couple of years, in Spano's words. The City has now run out of gimmicks.

The State and the Feds, also broke, have turned their backs on Yonkers. The right-wing attempt to "starve the beast" as a way to diminish the Federal Government hasn't worked in Washington, but the municipal beast has been starved into a coma, and the things that we take for granted as we walk the streets of our cities, towns and villages are withering.

Blame is attached to public employees, with allegations of excessive salaries and pensions everywhere. Rarely, such as in Stockton, California, elected officials go beyond attacking public employees and threaten banks and lenders with having to share the pain. Appointed Control Boards are created and municipal bankruptcy becomes a real option as we've just seen in Alabama.

It's as though we stand on the shore and watch a tsunami gather and shrug and hope we'll get through it. Only one presidential candidate, Ron Paul, has been seriously talking about it. That needs to change, and if the list of endangered cities gets larger this will force itself onto the national stage.

But for now the great national battle about the size of government and the level of taxation will be played out in the streets of small cities across America, with school kids, garbage pick-up, fire-protection and safe streets the competing with each other for inadequate resources. It's an ugly way to solve a problem. I've agreed to serve on the Mayor's Commission of Inquiry, and I'll know more as we delve into the specifics of the Yonkers situation. But it's starting to unravel, everywhere.

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