HUNDREDS of US cities are going bust, either destroyed by the banking and property collapse or by the crisis of the major US industries.
The city bosses are choosing between two roads to resolve the crisis. One, as in the Californian city of Stockton, is to declare bankruptcy, and impose huge cuts while trying to avoid having to repay, in full, the huge financial loans that were negotiated on the basis of the boom.
The other road is being taken in Detroit, where the motor car industry has collapsed, and where an unelected official has been appointed with dictatorial powers to put the city finances right by destroying the trade unions and closing the city’s schools, and ending city democracy.
A Federal judge on Monday granted the city of Stockton its request to go bankrupt.
US Bankruptcy Judge Christopher Klein’s declaration means the city of 292,000 can now draft a plan to pay off its creditors for less than it owes.
A feature of the hearing was the judge’s point-by-point recounting of the rise and fall of the city, that explosively expanded as part of the inflationary property boom, then imploded with its collapse.
Encouraged by the tax income from the housing boom of the early 2000s, Stockton approved ‘overly generous’ employment packages for its officials as they pushed through gigantic projects, including a waterfront baseball stadium, a new marina and a presidential palace-style City Hall.
Then, said Judge Klein, came the ‘hit’ – what we now call the ‘Great Recession’ and foreclosures hit the city like a nuclear explosion.
By 2011, unemployment reached 22 per cent, property values collapsed by more than half, homeless people lived on the streets, and the crime rate rocketed.
Klein lambasted the bond creditors who are still owed $167 million for the new City Hall and other municipal buildings and projects, for saying that the city was trying to ruin them by filing for bankruptcy instead of hacking more from its budget to pay them back.
Stockton filed for bankruptcy in June. The city contended it had trimmed every dollar it could from its budget for several years but was unable to erase a $26 million deficit or make any headway on renegotiating its $1 billion in long-term debt.
Officials have been forced to make dramatic spending cuts – roughly $26m (£17m) this year. The city cut a quarter of its police officers, one third of the fire department staff and 40 per cent of all other employees. It also cut wages and medical benefits. Stockton’s unemployment and violent crime rates now rank among the worst in the nation. Its police force is so decimated, he said, that officers ‘during peak activity respond only to crimes in progress’.
The city’s case is being watched closely by hundreds of other US cities and towns that are weighing their options between official bankruptcy or dictatorship – as in Detroit. There, the embattled Detroit Police Department says the city ‘is on the brink’.
Major developments took place during the first official week of emergency management in Detroit. A series of demonstrations against state-appointed bank functionary, Kevyn Orr, highlighted the widespread opposition to the usurpation of local power and the imposition of dictatorship.
On March 25, Detroiters rallied outside the City Hall denouncing the appointment of Orr and his overseer, conservative Republican Governor Rick Snyder. People chanted slogans against the denial of voting rights in the city.
Jerome Goldberg of the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs was invited to address the crowd. Goldberg slammed the banks as the main source of the crisis in Detroit, calling for an immediate halt to the payment of debt-service on the fraudulent $16.9 billion that the financial institutions claim is owed by the working people of the city.
In fact, Public Act 436 creates another form of governance that allows municipalities to be controlled by an unelected official ‘who is vested with broad legislative power and whose orders, appointments, expenditures and other decisions are not reviewable by local voters.’
The Public Act is a bankers’ bill whose purpose is to retrieve the billions of dollars that the banks claim to have loaned to the city.
This story of two cities shows that the American Dream is over and that, whatever road the bourgeoisie takes, it has turned into a nightmare of huge cuts and mass poverty for the workers, with an open dictatorship of the bankers already a reality in Detroit.
There is only one way forward for US workers. This is to break with the Democrats and establish a Labour Party to begin the fight to get rid of the rule of the bosses and bankers and bring in a socialist USA.