Harrisburg Pennsylvania’s capital city bankruptcy

[Medic Kane]

http://www.pennlive.com/midstate/index.ssf/2010/11/harrisburg_might_shine_as_a_be.html

 

 

What am I thankful for on this holiday that predates the New Deal, the Civil War, the Boston Tea Party — a holiday that sends us back to when pilgrims on the shores of this new land found hardship but also bounty?

I’m thankful for Harrisburg.

After months of covering the political upheaval and de facto bankruptcy of Pennsylvania’s capital city, it occurs to me that Harrisburg is no punch line for Wall Street jokers. Harrisburg is no buzz word for politicians and elected officials who purchased their power on the backs and tax base of an unsuspecting electorate.

On this Thanksgiving, as Harrisburg appears headed for distressed-city status and Chapter 9 bankruptcy to work out its monstrous debt, the city must be seen in a new light. Harrisburg is at the epicenter of a new American revolution about the role, meaning and scope of self-government in an Age of Diminishing Abundance.

To take it one step further, given Harrisburg’s move out of chaos into a controlled arena free from politics and Ponzi schemes, it’s possible that one day America might have to say something equally shocking:

Thank you, Harrisburg.

Harrisburg has taken necessary steps to set aside everyday politics for a seemingly revolutionary tool to solve its overwhelming debt problem. The people realized that the protection of the federal bankruptcy court system was required and have taken the steps necessary to go there.

How did Harrisburg manage its urban center in the past? With bloated, unionized social-service bureaucracies that outweigh the local tax base. In this case, the specific “management†technique used by former Mayor Stephen R. Reed was to use cash from an incinerator reconstruction project whose financing was riddled with malfeasance.

What principle was ignored, or flaunted? Debt should only be used by government when the life of the funded project is equal to the length of the term of the debt. Derivatives, swaps and other devices used to squeeze cash out of long-term financing caused this fiscal mess.

The country, like Harrisburg, is sinking under abuses such as this. States like New York and California and Pennsylvania are billions in debt. Cities and towns and school districts are struggling. If Harrisburg’s failure — complete with Wild West artifacts — is spectacular, it only helps illustrate the similarities to all of the schemes.

Still, even with its massive debt, Harrisburg itself is not broken. The citizens who fought for a sane remedy are committed to its future. It was the government that was broken.

Likewise, America isn’t broken. The government is.

What Harrisburg has undertaken in seeking a solution outside government, outside Wall Street, can be instructive for the rest of the country. Instead of exploring new frontiers and opening new markets, our American “exceptionalism†will now be measured by our ability to manage public challenges.

If Harrisburg has taught us anything, it’s that we can’t afford any more leaders who merely exploit these challenges for rhetorical, political or financial advantage at the expense of the rest of us. That’s why the country is engaged in an increasingly agitated, violent debate about what’s gone wrong.

Politics, government and finance have been knit into a knot so tight, so tangled, the people are willing to consider Sarah Palin as presidential successor to Barack Obama. The rising tide of voter frustration is causing voters to pull the lever for anyone who isn’t the person already in office.

That’s what the best elements of the tea party movement have focused attention on: the corruption of the political-debt-making system that has used voter anger to further divide and conquer. How do we stop the yelling, name-calling, suspicion, ideology and governmental stalemates and find solution?

As a microcosm of this unnatural disaster, there’s Harrisburg. Here, a former mayor built a fiscal house of cards. The new mayor, elected because she wasn’t the old mayor, floundered for a political and fiscal solution.

In the void, as the house of cards fell, a flummoxed City Council and controller wobbled to their feet. The people stood up. The evidence was clear. The problem was beyond political or other standard solutions. The crisis required triage. It required a suspension of normal practices and rules.

As it pushes itself toward bankruptcy court — a step Wall Street and elected officials have been desperately afraid of — Harrisburg is turning the story of its demise inside out. Harrisburg is turning into the place that won’t sink. The debt makers and politicians here, like other places, launched the devastating wave with utopian flourishes and polished oratory.

But in exposing the truth, by admitting the problem was bigger than it could handle, by asking for help, Harrisburg has turned into the place where a revolution was being born.

[Thoracic]

Unfortunately I think it could be the beginning, last week a warning bell rang out for California muni bond holders that there could be fallout from some of their holdings due to shortfalls of cash throughout the state.