Jul 16, 2012
After the city of Stockton California declared bankruptcy, becoming the largest municipal bankruptcy in U.S. history, city officials announced they were immediately cutting retiree health benefits.
Despite all the propaganda, pension costs did not cause Stockton’s bankruptcy. Debt to the banks did. Less than a decade ago, the city‘s finances went deep in debt to redevelop the downtown river front area. It floated municipal bonds to pay for the construction of a gleaming new 10,000 seat indoor sports arena, a 5,000 seat minor league ballpark, a 650-space parking garage, and a 66-slip marina ... to the great profit of the banks, construction companies, real estate developers, and professional sports teams.
The banks and city officials assured the public that the debt would be financed by growing property tax revenues. After all, wasn’t there a homebuilding boom? That boom was fueled by the very, very profitable subprime mortgages. When the housing bubble collapsed in 2008, it left Stockton with one of the highest foreclosure rates in the country, an unemployment rate that is twice as high as the national average ... and plunging property tax revenues.
To continue to make its debt payments over the last four years, city officials slashed services to the bone, while laying off 43% of most job categories. Now, under bankruptcy, city officials are seeking to take even more.
Stockton is obviously not alone. Since Stockton declared bankruptcy at the end of June, two more California cities, Mammoth Lakes and San Bernardino, also filed for bankruptcy, with similar calls to slash employment and pension benefits. Detroit and Benton Harbor, Michigan, have imposed cuts, threatening bankruptcy.
Municipal governments are using bankruptcy to mount new attacks on their workforce, just like private companies in steel, auto, and airlines have done for decades.
And yet all of these scare mongers give away vast sums of money to the banks and other big owners of capital. The amazing and rotten capitalist system at work!