Terminal
Call it a failure of democracy. Stephen Reed, who began his political career in the Democratic Party as a teenager, heading the Teenage Democrats of Pennsylvania was the very definition of a popular politician.
Re-elected to the state house in 1976 and 1978, Reed was elected Dauphin County, Pennsylvania Commissioner in 1979 and Mayor of Harrisburg in 1981. He has won re-election as Mayor in 1985, 1989, 1993, 1997, 2001 and 2005. During the 2000s, he was considered “Pennsylvania’s most popular and successful mayor.” …
As late as January 2009, he was called “Mayor-for-life.”
Today, Reed is remembered as the man who borrowed Harrisburg, PA into so deep a hole they have to pipe the sunshine in. But during the good times, nobody thought the party would stop. The question is whether democracy has an Achilles’ Heel, in that politicians can always find a way to bribe voters with their own money, or in other cases, money borrowed in their name?
The WSJ looks back at how it all happened.
Under seven-term Mayor Stephen Reed, who governed from 1982 to 2010, Harrisburg had a long love affair with borrowed money, using it to spur projects of dubious value. The city invested millions of dollars in a stadium in the late 1980s to attract a minor league baseball team. When the Harrisburg Senators threatened to leave in 1995, the city bought the team with borrowed money. In 2009, even as the fiscal clouds darkened, it sank another $45 million, including $18 million in new debt, into upgrading the stadium. The team was attracting 2,488 fans per game.
Then there are those historical artifacts. Mr. Reed, once described by a local newspaper as a man who “never met a municipal bond he didn’t like,” wanted to borrow to open a network of museums. He spent some $39 million on a National Civil War Museum that opened in 2001. It has struggled for years to attract crowds. Undeterred, the mayor borrowed some $8 million to buy artifacts—including a Gatling gun, a Wells Fargo coach and a document signed by Wyatt Earp—for a proposed Wild West museum, though most of the purchases were made without the knowledge and consent of the city council. Plans for a Wild West museum and a National Sports Hall of Fame, financed by a $30 million bond offering, mercifully fell through.
The Harrisburg Authority, a city agency controlled by the mayor, floated much of the city’s debt, including millions on an ill-fated incinerator. …
Well you get the picture. This was Hope and Change before they invented the term. You know, about picking winners and losers. Brilliant ad hocracy, etc, etc.
My how they hoped. My how things changed. The party stopped only when the caterers finally refused to deliver; when the liquor store found the credit purchase rejected. Until that moment things looked like they could go on forever. That the can could keep being kicked down the road. Didn’t Reed know that it would all have to end?
No. Or it seems that way at least. So the question is what is different about the United States as a whole or Europe as a whole that exempts it from the falling into debt traps that Harrisburg or Greece plunged into? The answer is that the last two are “too big to fail”. They can print money. So rest easy then, it can only happen elsewhere.
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Born in New Jersey, I migrated to Pennsylvania as soon as I heard about it. Philadelphis is just a short hop on the Turnpike from Harrisburg, and I confess I never heard the name Stephen Reed, which leads me to wonder how many other Stephen Reeds are out there, driving larger cities than Harrisburg into the ground. In 1942 the U-boats had what they called the Happy Times, but when the Happy Times were over they all got sunk. And right now I have a sinking feeling that is what is about to happen to all of us. The Republican Party does not know how to win, and when they do it is almost entirely by an accident of history. They future of the country is at stake, and they field the second team. They should be slamming Obama and the Democrats on the economy, on the pipeline, on five dollar gas, on stimulus money thrown down the green rat hole to cronies. They should be screaming that the election is about the choice to remain a free capitalist society or an unfree socialist one. Instead they hammer each other about contraception. It’s enough to make you cry in utter despair.
But how is this unique?
The state of California and every major municipality therein have done the same, and I daresay right around the country and in much of the world.
It’s human nature.
Never read the bible, I guess, heard about those seven lean cows.
Many individuals live paycheck to paycheck, even up to moderately high levels of income. Look at the celebrities or lottery winners who makes millions and blow (sic) it all in weeks or months.
It’s not unique. People get themselves into fixes all the time. They climb out and they do it again. Or their kids do. It’s the story of mankind.
Even Reed eventually came a-cropper when the money absolutely ran out. That’s a guarantee that God or at least, arithmetic, exists. Eventually the sums overwhelm even the teleprompter man.
But nobody wants to be in that hole. And life is all about staying out of that pit if we can. So you can conclude from the episode of Greece (which has probably survived greater follies than joining the Euro) that the sun will shine tomorrow. It may shine on a somewhat down at heel version of the men we used to be. But it will shine all the same.
Of course it’s still important to get out of the fix, to fatten them seven lean cows till they’re all shiny again. That too is the story of mankind. Things are never so bad as to be hopeless. But things are so never so good the Hope and Change people make them out to be.
#1 Walt
I grew up in Lancaster, just an hour’s drive from Harrisburg. I remember when Lancaster, York, and Harrisburg were collectively referred to as the Golden Triangle because the three cities formed a roughly equilateral triangle about 35 miles on each side, and the area as a whole was considered prosperous– at least compared to some other parts of Pennsylvania. My Scout troop’s annual trip to the state capital was enjoyable back in the day because the city was well kept up then– sad to see how it’s changed.
One nice thing about the upcoming national bankruptcies is that we won’t have to hear about government funded contraceptives or abortions or “safe injection sites” or safe drinking sites or rent controls or human rights commissions or anything of the like.
I guess there’s an upside to being broke.
PA Cat/4
And the Lancaster Red Roses and the York White Roses played some pretty good minor league ball. I doubt many school kids in the US today would recognize the significance of those names, would know they refer back to the English Civil Wars between Lancaster and York, The Wars of the Roses. But then, they could not be expected to. What did the Plantagenets have to do with self esteem?
Harrisburg reminds me of a story I heard of a family back in the late 80′s. They got one of those “You’re a Winner!” things in the mail from Publishers Clearinghouse or someplace like that. They took the mail to the bank, showed them, and got a loan rather than having to wait for the mere formality of the million bucks being delivered. The wife quit her job and started her own church and her husband bought some stuff he had always wanted. And then they saw where someone else had won the prize and wondered how that could be – and you can imagine the rest.
And after all of this their attitude was, tearfully, “Well, we just HAVE to win the prize now!”
Reed was just dropping quarters in the one-armed bandit, looking for a jackpot. “Sure, a Gattling gun! That’ll pack em in! And we can sell Espresso and snow cones!”
A guy I worked with at the Pentagon had in-laws that owned a timeshare condominium in Harrisburg. I thought, “A timeshare in Harrisburg? WTF?” I’m sure it’s a wonderful area, but I still think that.
Anyone ever see the movie “Lucky Numbers”? That took place in Harrisburg. Seems appropriate now.
#6 Walt
The Red Roses are now the Lancaster Barnstormers and the White Roses are the York Revolution, although the teams still have an annual War of the Roses event, which may help keep the historical reference alive. Losing team has to plant some rose bushes in the winner’s color in the winner’s ballpark. Lancaster is ahead so far.
And the red rose of the House of Lancaster is still on the city seal, as well as “Lan-castra Britannia” around the top of the circle, with “Lancaster, Pennsylvania” around the bottom.
The bump we are now seeing in the economy, mainly in the stock markets is nothing more than the leading edge of the staggering inflation that is coming. Corporate balance sheets are full of the fedreasury’s script minus the massive headcount cuts of the recession. Notice that wages have bee stagnant and actual employment keeps dropping even as the bogus rate that the regime publishes declines.
We are on a totally unsustainable course and whatever cannot be sustained will not be sustained. It is really time for our best thinkers to start reimagining America and considering what our next constitution needs to look like to avoid the pitfalls this one has led us into.
jh @ 9: The bump we are now seeing in the economy, mainly in the stock markets is nothing more than the leading edge of the staggering inflation that is coming. Corporate balance sheets are full of the fedreasury’s script minus the massive headcount cuts of the recession. Notice that wages have been stagnant and actual employment keeps dropping even as the bogus rate that the regime publishes declines.
Agree. These stock market levels are insane, buoyed up by trillions in printed dollars and more trillions chased out of zero-yield bills and into stocks. Yet, I’d rather own stock than cash, when the big inflation hits, if inflation is going to come with ZERO yield on bonds! Usually bond interest at least tries to keep up, but not in Bernankecare.
But when WILL the big inflation hit? I dunno. It’s way overdue. The small inflation is overdue. Maybe … maybe the current situation is sustainable. Have to rewrite all the textbooks, but that seems clearly necessary in any case.
Maybe we NEED more of a bust, to clear out the public employees unions and pensions and bad habits and all.
Joe…
You are ENTIRELY misreading this as inflation.
This is HYPERINFLATION.
Please review the Belmont Club’s prior musings on the issue.
Google is your friend.
The phenomenon is ENTIRELY different.
I find it weirdly coincidental that my posting just the other day…
Has been followed by robust break-outs in Gold and WTI…
So many lurkers, so little credit.
[ Google Syn CDO ]
Take pick number one.
The BC made it to the top 1 out of 1,350,000 results…
Guess why…
Cheers.
( This club is the cutting edge of — apparently — the meme-wave.)
Gary Indiana blazed a path that others follow.
Stephen Reed gets the blame because he was mayor for life. There are a lot of those people in towns throughout the country. The reason they get re-elected is because they are able to build coalitions of votes in the community and on the town councils. These votes then form the rising tide of government spending that either benefits the coalition directly in cash through business deals or provides them with the legal tender of propelling their social agenda. Either way, Stephen Reed had plenty of help and support to move his and other proposals forward. The sad part is that many in Harrisburg will be paying for his leadership and their decisions for years to come.
When I graduated from CD in 76’ my first job was with the Democratic Information office at the House of Representatives in PA. I had a good friend, Mary whose father was connected and got her a job with Stephen Reed. I was 18 at the time and it was cool to occasionally hang out with Mary and Stephen at a local bar far from downtown and drink beer with a state rep. He was “cool”, nice guy…we all were. The Republicans were swept out of office a couple of years before and the Democrats had the place pretty much to themselves. It was cool to walk up the Capitol steps, across the rotunda and up the first flight of stairs and straight through door the offices on the left by the journalists. I left PA in 78’ when I joined the Army, went to Germany and had a road to Damascus moment on an Army trip to the East German border where I got to see real Communism in all its glory. Been a Republican ever since.
I’ve often wondered how Stephen went from a seriously nice guy to mayor for life spending millions of tax payer money on Civil war and western artifacts. How does one make that trip and can we as Americans ever stop that ship from sailing again?
It is really a very simple solution. Both sides of this debate make the same basic error assuming that once the government has our money, it IS their money to do with as they see fit. Wage slaves get their W-2 for their free market efforts. Contractors and investors get their 1099-MISC. Government takes our monies at the point of a gun and then christens it ‘income, redistributed’ and hands it out all over. Welfare, food stamps, Pell grants, section 8 housing, AC in summer and heat in the winter, and all of it without one 1099-GOV. When the working people of this country realize that a non-working individual has a safety net as strong as their own back, in fact, it IS their back…then there will be drastic changes. I think forcing the government to issue 1099-GOV for all their safety net would be simpler, calmer, and effective at controlling government.
Inflation is a phenomenon that really has to be studied in its various forms, as it does not act uniformly across asset classes. As Blert mentions above, inflation seems to be playing out now across the oil and precious metal asset classes. Real estate, probably more in a deflationary mode in general although there is definitely RE inflation going on in markets like NYC, London, Hong Kong, etc… where foreign money can find a safe haven. Agriculture has had a good run, although it seems to be pulling back some currently. Wages generally seem to be deflating. So it’s a mix bag.
If hyperinflation appears, I would suspect that it would be a more macro phenomenon. But not having lived through it (thankfully), I can’t be sure.
So my main point is that I think that we have to be careful when we use the word inflation, and focus more on where the “too much money chasing too few goods” segments of the economy are as that’s where the inflating will occur.
Perhaps the more learned economists on this site can explain better than my poor attempt.
But Wikipedia says things are swell:
“In 1981, following contractions in the steel and dairy industries, Harrisburg was declared the second most distressed city in the nation.[8] The city subsequently experienced a resurgence under its former mayor Stephen R. Reed,[9] with nearly $3 billion in new investment realized during his lengthy tenure”
Hmmm, something else pops up about Harrisburg as well. A Democratic Mayor has run a city into the ground over the course of multiple decades, while at the same time Whites have fled the city and now Blacks are 56% of the population and whites are less than 34%. The remaining cohort mostly Hispanic.
I’m sure these changing demographics have nothing to do with the bankruptcy and budget shortfalls, Detroit! (Cough Cough), Baltimore! (Cough Cough), Atlanta! (Cough Cough), Birmingham! (Cough Cough), Memphis! (Cough Cough), Killa-Delphia, um Philadelphia! (Cough Cough). Sorry, don’t know what got into me to start this crazy talk.
After all, there are extremely liberal/progressive cities with almost entirely White populations which are in just as bad shape: Take lily-White Portland OR, (Oops, bad example.) Well what about hyper-liberal and 90% White Madison WI, they are going bankrupt? (Oh, guess not). Well then, super-liberal Boulder CO, crime and poverty must be off the charts there …. Oh never mind.
Nothing to see here folks, now just move along.
#16 bell curve
Madison, WI isn’t going bankrupt? Well, they may not be filing soon, but if current practices prevail, they will eventually. City of Madison’s debt as of January 1, 2012: $434,665,000. That’s nearly double what they collect in revenue on an annual basis.
Whitney…
Watch out.
Under the principles of crony capitalism the local government should always be used to market private / commercial debt as municipal debt.
You’d be STUNNED as to how much debt is of this character.
Whereas classic municipal debt is a GO — General Obligation — and paid off with General Fund taxes ( think real estate taxes and parking revenues ) Wall Street has, over time, conspired to engineer countless “Authorities.”
Hence:
Port Authority
Airport Authority
Bridge and Tunnel Authority
and
Power Administration
Transit District
Power District
Municipal District
Tomorrow, some word smith will come up with some neologism for yet another scheme.
—–
Unlike GO bonds, debt issued by these entities is solely backed by the receipts/ revenues of the various projects. Bridge tolls and landing fees come quickly to mind.
IIRC, Harrisburg managed to obligate itself to Wall Street ( the bond indenture ) in a way that exceeded project revenue.
We now know ( because of criminal convictions ) that the worst-case communities were defrauded by bid-rigging, price-fixing and bribery in big figures as their politicians sold them down the river.
——-
If, and only if, Madison’s debt is a General Obligation can you draw conclusions from such a sole statistic.
( That’s an awful lot of debt for streets, parks and parking meters — if that’s what it is. )
Senator @ 14 – I do not quite take your meaning yet. What good will this paperwork (1099-GOV) do?
Bell Curve @ 16
“In 1981, following contractions in the steel and dairy industries, Harrisburg was declared the second most distressed city in the nation.”
And you can walk to Three Mile Island from Harrisburg! That is not a coincidence. Jimmy Carter destroyed much of the nuclear power industry and TMI was ground zero in 1979. What you see is not that much different than if Carter had exploded a neutron bomb in the center of the city. Dairy industry? Are you nuts, milk loaded with Strontium 90??
And the big government types are still at it! The chairman of the Nuclear Regulatory Commission went nuts trying to panic the Japanese during the Fukushima accident. He got so out of line all four other commissioners testified under oath before Congress that he was out of control! The legacy? The Japanese still have not re-started any of their nukes and at last count 70 out 73 were in cold shutdown. Meanwhile the country is going broke buying oil to generate electric power, forcing the price of oil to record heights for this time of year. What is different this year? Last year the Japanese nukes were running! And the Greens have managed to shut down Germany’s nukes too, so Europe is going broke.
The remedy, re-start the Japanese and German nukes!
NOW THAT’S NOT SO HARD IS IT?????????????????????????
Look at the “achievements” of our Democrat presidents.
Carter made the USA a paper tiger internationally, instituted a hyperinflation that shifted wealth from those with private wealth to those in unions and government with COLAs and he put back the nuclear industry 40 years.
Clinton created an ethical standard where lying (see Stolen Valor Law) was the norm and telling the truth was passe, as was respect from girls and women who were reduced to Lewinskis.
Obama has tried to convert the economy to a socialist, totalitarian model.
Quite a record of destruction isn’t it!!
Harrisburg turned a viable trash-to-steam plant into a pile of rubbish. Their mismanagement completely destroyed it.
Their Civil War museum was built as a palace for entertaining VIPs.
I’m glad someone is naming names and tracing the bad decisions. Keep it up, and don’t stop with the actual politicians – who put them on the ballot? Who failed to report on the financial trajectory?
Step 2 – Kick Assad’s ass and then turn to Iran! Now Putin is the one in a panic and needs to flood the market with oil to make up in volume what he is losing in price!!!
KAMRA IS A BITCH ISN’T IT, PUTIE BABY?
The lower price for oil translates into lower prices for wheat and cooking oil thereby winning us friends and influence in the Arab Spring nations.
Gorby lost the Cold War and Putin will lose the Arab Spring Campaign.
Have you noticed how Hillary is manning up with “Greek balls”? She can taste her Nobel Peace Prize!!!
This is going to be funnnnnnnnnnnnnnnnnnnn!
Most cities are struggling to keep businesses in town. But Pennsylvania state government isn’t going anywhere. The city can therefore thrive on incompetence with no fear of losing their cash cow.
steeple@15 – Inflation will show up across the economy but not all at once. Some sectors will see it first and that is what we are seeing now. Food prices have been on the move for a while and now it is gasoline prices and the equities markets.
How full of worthless assets is Ben bernanke’s vault? We will find out when inflation sets in and he starts looking around for stuff to sell to soak the cash back out of the economy.
Wr, this one is right on! Bribing people with their own money in order to get them to vote for you. This has been purchased intimacy between USG and The-Reserve. It’s a win-win for them, as they sell our souls for their affair.
There really are big people who have been waiting for the day the music dies. Why? They have big people goals for a big new future for big and small.
Slowly, in plain sight they slip another $100K bill into USG’s cup. The rush helps deaden any thought of eventual pain for the overall short and possible long term game. Who you gonna turn to for another hit?
[misfire, sorry!]
I’m an engineer. I can fix it. It’s a structural problem, a design flaw.
See, you elect a bunch of legislators, and give ‘em the right to legislate AND tax. Greatest moneymaking scheme ever invented, and on down the road a bit, you wind up where Harrisburg or Vallejo or Greece are now.
Fix it this way. Two separately elected legislatures. One to legislate, but can’t tax. Another – separately elected, remember – taxes, but can’t legislate.
That’s a fundamental re-alignment of politicians’ motives. Nobody gets to climb up on the stump and yell “Elect me and I’ll tax the other guy to featherbed you”. Doesn’t work that way anymore. It’s “Elect me, and I’ll make sure those legislators only get responsible legislation funded” on one side, and “Vote for me, but I can only legislate as irresponsibly as the Taxers will allow me to. And I can’t help you with your tax, so don’t ask” on the other.
Think about it.