Friday, October 18, 2013

How will the the municipal bankruptcies end?

For years, I have been trying to convince Nashville politicians to stop spending more than we are taking in, by fully-funding our pensions. 

Here is an interesting talk about what is likely to happen in places like Detroit, Chicago, Philadelphia, and Nashville.   It is long, so I will summarize:

  • Cities bargain with municipal employees, but since employee unions support policitians, the bargaininig is far from "arms length."
  • It is unlikely that overly generous, unfunded pensions will be restructured, except through bankruptcy.
  • Fortunately, restructuring is likely to be found legal under the bankruptcy laws because funding is like "collateral." 
  • This will fix the balance sheets of city governments, but also give the unions a stake in funding the pensions (fix the income problem)

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