Spare no expense to save money on this one.
-- Samuel Goldwyn (1882 - 1974)
Coming to a bookstore near you?
No, actually, it’s a Bankruptcy Code for Villages, Towns and other Municipal entities that allows for reorganization because they cannot pay their debts. And, if Warren Buffett is right, it’s just around the corner for many local governments. Only $14 Billion has defaulted thus far, but the cost of Credit Default Swap insurance is rising rapidly on these bonds.
It’s a version of Russian Roulette that begets the question: do we bite the bullet now and reign in our expenses and employment structure, or do we throw caution to the wind and hope that Washington will bail us out? The other, more popular option for many local governments, to raise taxes, would create a new housing downdraft and the much-feared'double-dip.' The results of increased property taxes during the tail end of this Great Recession could easily force us into Depression 2.0, which some economists believe will hit this Fall. Housing and employment are shaky and even the now expired tax credit has had limited effects. The mid-range properties (condos in Manhattan and second homes in the Hamptons costing from $750,000 to $1.5 million) are not helped by $8,000.
No one wants to tighten their belt. And, that includes the local governments who would rather pass on the bill for keeping municipal employees at work and continues local building projects.
Watch for the vacant chair once the music stops.