Who Are The Real Economic “Terrorists”?

Just a few days ago, columnist Froma Harrop was busy attacking Tea party activists and House Republicans associated with them in, shall we say, rather harsh terms:

The tea party Republicans have engaged in economic terrorism against the United States–threatening to blow up the economy if they don’t get what they want. And like the al-Qaida bombers, what they want is delusional: the dream of restoring some fantasy caliphate. . . .  That the Republican leadership couldn’t control a small group of ignoramuses in its ranks has brought disgrace on their party.

Today, Ms. Harrop laments the bankruptcy of a small town back East:

CENTRAL FALLS, R.I. — The stock market plunged over 500 points last Thursday, but no one seemed very perturbed about it in this tiny factory town. Three days before, Central Falls had filed for a Chapter 9 bankruptcy. These working-class folk see bottoms fall out on a regular basis.

* * *

If any U.S. city was destined to go bankrupt, it was this one — though Vallejo, Calif., beat it by three years. Like Vallejo, ruinous public-employee contracts sent Central Falls over the edge. Unlike the San Francisco suburb, Central Falls has a smaller, less economically diverse tax base. (The median household income is under $33,520 a year.) Its local government at the time of the bankruptcy filing was far more corrupt than Vallejo’s.

On this thin tax base, Central Falls faced an annual deficit of $5 million and unfunded pension obligations of $80 million. For a long time, its police and firefighters could retire on full pensions after only 20 years of service. So even though their monthly payouts were not princely, workers could start collecting them — and free health coverage for life — while in their 40s. Bankruptcy lets a city tear up union contracts and start over.

* * *

Being able to erase foolish spending decisions made in more prosperous times is a tempting proposition. Very few cities have tried bankruptcy so far, but many are considering it.

The experience of Vallejo offers some warnings on the dangers of going the bankruptcy route, however. Harrisburg, Pa., and others on the brink, take note.

Vallejo’s bankruptcy resulted in a $9.5 million legal bill and a black eye to its reputation. Bankruptcy is a booming announcement that the local government is dysfunctional. For some businesses, having the city’s name on the letterhead becomes an embarrassment. A lawyer and real estate broker recently moved out of Central Falls, not because he didn’t like the city, but because its name has become a stigma associated with failure.

But like other depressed factory towns, Central Falls retains its reputation as a nice place filled with nice working people. Less than an hour from Boston and loaded with some lovely housing now selling super-cheap, the city will rise. Its next generation, meanwhile, is playing soccer while the sun shines.

Central Falls may be a nice place full of nice people, but they spent too much money, made promises they could not keep, drove out businesses, and went broke.  Who are the “terrorists” — the ones who desroyed the economic viability of their own communities or the ones trying to clean it up?  It is amazing that people such as Harrop choose to attack the latter while giving the former a complete pass.

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Published in: on August 9, 2011 at 11:41 am  Leave a Comment  

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