Joel Kotkin on the impending, urban, pension crises across the country. The biggest, most Democrat-controlled cities will be the first to fall:
Detroit’s bankruptcy revealed the unsustainable fiscal problems facing most major urban centers, including, most importantly, President Obama’s political base of Chicago. This summer, Moody’s downgraded the Windy City’s credit rating three notches, noting the unsustainable nature of its pension obligations. Some 37 cities have filed for bankruptcy since 2010, most of them small, and as many as 20 others may be on the verge, including larger places like the California cities of Oakland and Fresno, and Providence, R.I.
My hometown of Los Angeles may not be far behind. Perhaps the most union-dominated big city in America, the City of Angels’ pension obligations have gone from 3% of the city budget a decade ago to 18% last year. They are rising at a phenomenal 25% annual rate, according to a recent report by an independent watchdog, California Common Sense.
Given this background, the political tides in New York suggest a worsening of the crisis. Thanks to the Bernanke-inspired Wall Street boom, the New York economy has not suffered the extreme fiscal distress of other big cities. But its fiscal condition is far worse than Mayor Michael Bloomberg and his well-oiled media machine might suggest. Under Bloomberg city spending grew 55% while pension costs have grown 300%.
With de Blasio likely to be the next mayor, we can expect the bleeding to get worse. Many business people rightly fear a de Blasio’s administration will raise taxes in order to meet public employee demands. Faced with financial shortfalls, de Blasio’s response, notes historian Fred Siegel, is likely to be similar to that of his hero, former Mayor David Dinkins, who consistently gave in to public unions and raises taxes.