Deflate the Bubble There’s Only One Way
John Kostrzewa sees municipal deficits as “the next big bubble,” specifically related to municipal bonds. If cities and towns begin to default, then investors will stop considering them so safe and, per those who support public debt, the sky would fall.
In outlining options for Central Falls, Mark Pfeiffer, the state receiver, said bankruptcy should be a last resort because a filing in federal court would ripple across the country, sending a message that Rhode Island is a risky place to do business. Investors would demand more interest on any municipal bonds sold here, or they could pull out and not buy at all.
Investors would also be spooked because the federal courts could change the terms of bond sales, leaving investors with more uncertainty and less safety about what they had purchased.
I say, “good, let it happen.” It’s time that financially incompetent politicians learned to stop treating debt as a revenue source. Those playing with public dollars ought to be the most financially conservative; saving up for investments and improvements, rather than passing bond issues in political blasts and obligating future taxpayers to cover the expense.