Many cities across the nation are facing a fiscal crisis. While pandemic-related problems that were self-induced or otherwise play a part, many of these issues have plagued cities for a long time. A serious cultural shift concerning finances among local governments is critical if people want to flourish in cities.
I recently interviewed Mark Moses who is a municipal government expert and author of the recently published book The Municipal Financial Crisis: A Framework for Understanding and Fixing Government Budgeting. He contends that “many local governments are on track for bankruptcy.” And this downward trajectory can be expected to continue as municipalities fail to restrain their spending and overreach, crowding out opportunities for the private sector to work.
We’re seeing this play out in places like New York City, where city-funded expenses have been asked to be cut by 3% and on track to be slashed more in response to their recently reported $10 billion deficit.
Moses says that “there’s a lack of economic understanding in lots of municipalities.” This absence of understanding often results in collecting more taxes to fund more “solutions” as a band-aid to the broken system and struggling local finances. As he puts it, “local governments give up trying to balance budget sheets.”
But failing to assess and address the tangled economic approach that’s led them to a place where more taxes and regulations seem like the only answer leads to long-term issues and a path that’s difficult to leave.