Michael Lewis in Vanity Fair – California and Bust:
At that point, if not before, [San Jose] would be nothing more than a vehicle to pay the retirement costs of its former workers. The only clear solution was if former city workers up and died, soon. But former city workers were, blessedly, living longer than ever.
This wasn’t a hypothetical scary situation, said Reed. “It’s a mathematical inevitability.” In spirit it reminded me of Bernard Madoff’s investment business. Anyone who looked at Madoff’s returns and understood them could see he was running a Ponzi scheme; only one person who had understood them bothered to blow the whistle, and no one listened to him. (See No One Would Listen: A True Financial Thriller, by Harry Markopolos.)
I ask [the San Jose mayor] what the chances are that, in this pinch, he could raise taxes. He holds up a thumb and index finger: zero. He’s recently coined a phrase, he says: “service-level insolvency.” Service-level insolvency means that the expensive community center that has been built and named cannot be opened. It means closing libraries three days a week. It isn’t financial bankruptcy; it’s cultural bankruptcy.
“How on earth did this happen?” I ask him.
“The only way I can explain it,” he says, “is that they got the money because it was there.” But he has another way to explain it, and in a moment he offers it up. “I think we’ve suffered from a series of mass delusions,” he says.
I didn’t completely understand what he meant, and said so.
“We’re all going to be rich,” he says. “We’re all going to live forever. All the forces in the state are lined up to preserve the status quo. To preserve the delusion. And here—this place—is where the reality hits.”
The stories from bankrupt Vallejo, California ain’t pretty. It’s like a scene from a zombie movie minus the zombies.
Welcome to vallejo, city of opportunity, reads the sign on the way in, but the shops that remain open display signs that say, we accept food stamps. Weeds surround abandoned businesses, and all traffic lights are set to permanently blink, which is a formality, as there are no longer any cops to police the streets. Vallejo is the one city in the Bay Area where you can park anywhere and not worry about getting a ticket, because there are no meter maids either. The windows of city hall are dark, but its front porch is a hive of activity. A young man in a backward baseball cap, sunglasses, and a new pair of Nike sneakers stands on a low wall and calls out an address:
“Nine hundred Cambridge Drive,” he says. “In Benicia.” The people in the crowd below instantly begin bidding. From 2006 to 2010 the value of Vallejo real estate fell 66 percent. One in 16 homes in the city is in foreclosure. This is apparently the fire sale, but the characters involved are so shady and furtive that I can hardly believe it.
The lobby of city hall is completely empty. There’s a receptionist’s desk but no receptionist. Instead, there’s a sign: to foreclosure auctioneers and foreclosure bidders: please do not conduct business in the city hall lobby.
Like Glenn Reynolds says, government cheerleaders like to pretend that all of your tax money goes to teachers, police, and firefighters. The reality is that cities like San Jose and Vallejo are paying so much to retired government workers of all kinds that they’ve had to lay off teachers, police, and firefighters.
That’s what happens when government becomes a pension fund that serves the unions instead of a civil agency that serves the taxpayers. The retired government workers become the zombies that terrorize the city.