Stockton Stares Headlong Into the Abyss

Shock doctrine comes home to Central Valley

by Brian Leubitz

In many ways, it is hard to fault the current City leadership.  Sure, some of them have been around a while and had a hand in some bad decisions.  However, while Stockton over leveraged in search of the growth gods, they were doing what they thought was the American way. They were building a community based upon construction and growth. And when the bubble burst, they were out on the edge. And now they are going through an “orderly mediation”

The City Council is expected to approve an eight-point plan this evening that calls for the city to suspend approximately $2 million in bond payments through the end of the current fiscal year. The plan also calls for the city to embark on two months of private discussions with its bond holders, city employee unions and any other creditors with at least $5 million in claims against the city to determine if parties can reach accommodations that will allow Stockton to avoid bankruptcy.

If the council agrees – and it really has no other viable option – Stockton will become the first city in the state to undergo the AB 506 process, a formalized mediation period designed to help jurisdictions restructure their debts and avoid municipal bankruptcy.(Modesto Bee)

At this point, Stockton is in a corner. Under state law, they have few viable choices. Labor will have to take a big cut, whether through this mediation process or through bankruptcy.  But this is about more than some bond holders.  Stockton made a deal with its employees. In exchange for taking lower salaries, they would get better long term benefits and stability.  Turns out that they are going to fail on both accounts.

I doubt this process will make many on Wall Street happy, but even if they are going to lose a few bucks, they do get to continue their attacks on the middle class and organized labor. And so far, they seem to be winning even when they lose.

13 thoughts on “Stockton Stares Headlong Into the Abyss”

  1. I’m just afraid that San Francisco is heading down this path

    Our politicians are ADDICTED to spending

    They made the down payment and some mortgage payments to the LGBT Center building on Market Street

    A few years ago, the LGBT Center couldn’t afford to make mortgage payments

    So, our Supervisors agreed to make ‘a few’ mortgage payments for them

    (wife Beater) Ross Mirikirimi wanted to give businesses a $10,000 Tax credit for HIRING FELONS !!!

    Great Idea !! It’ll let Felons know they a friendly environment in San Francisco

    One Joker wants to make SF Muni FREE for school age children

    He wants Muni to study how to pay for this

    To say nothing of the money wasted in  ‘matching campaign funds’ for dozens of wannabes running for Mayor

    Apparently, many couldn’t drop out without forfeiting their matching funds

    So they just stayed in the race and cleaned up on matching funds

    Maybe conservatives are right about big spending (fiscally irresponsible) Liberals

  2. “Stockton made a deal with its employees. In exchange for taking lower salaries, they would get better long term benefits and stability.  Turns out that they are going to fail on both accounts.”

    I cannot comprehend the inability of those on the economic left to understand the fundamentals of business cycles and the necessity of failures.  Capitalism cannot function with losses.  All investment and contracts involve risk.  If the union was looking out for the interests of their employees they would stress to them that while they can negotiate some safety nets NO ONE can guarantee them perpetual employment at a specific wage, or to be perpetually employed for that matter.

    The left so often rails against capitalism without realizing (willful ignorance???) that ignoring the market disciplines that capitalism requires creates many of the injustices you seek to remedy.  Whether through legislative corporatism or big government public sector mismanagement, attempts to avoid market consequences inevitably exacerbate the problems that Stockton is now experiencing.

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