The Next Bubble

Detroit:  The city liberalism destroyed

Are Cities and States Too Big to Fail?  We're about to find out

The socialists of all parties in the federal government created the housing bubble and the ensuing, inevitable crash, by encouraging lenders to abandon prudent, time testing lending practices. Low interest rates ushered in an era of easy money, and Freddie and Fannie backed everything mortgage companies could shovel their way, regardless of the stench.

Wall Street gambled and the taxpayer lost
Dirty Hank and his gang of pirates blew a hole in the side of the US Treasury and made it all good. Wall Street is back to record profits and bonuses, while working people despair of ever again finding a job, and the big banks are still too big to fail. 

Muni-Bombs
Blissfully ignorant and unencumbered by any capacity to learn from experience, the federal government has turned on the money spigot to our fiscally incontinent states and cities. It’s stimulus, dontcha know. See how stimulated everybody is and how the job market is booming?

Since 2000 the total outstanding state and municipal bond debt, adjusted for inflation, has soared from $1.5 trillion to $2.8 trillion (see chart). The recession didn’t slow the spending. (Reason)

So the drunks are teetering on the brink of the train platform with a high speed locomotive bearing down, and good ol' Uncle Sam hands them another bottle of hooch...

The Build America Bonds program, part of the American Recovery and Reinvestment Act of 2009, was aimed at subsidizing bonds for infrastructure projects. Under this program, the Treasury Department pays 35 percent of bond interest to the issuing government. 

If a state or local government issued a bond at a high rate to make it appealing to investors—10 percent, say—the Treasury would make a 3.5 percent direct payment to the issuer. [...] It’s no surprise that, starting in 2008, states and cities increased their debt dramatically, while investors enabled this overspending. (Reason)

Our federal government encouraged irresponsible state and local government to be even more irresponsible by backing their bonds and even paying part of the interest collected by investors.  All funded by We The Taxpayer, and money borrowed from China.

This wouldn't be so bad if cities were using this federal largess to pay down debt and put themselves on sound fiscal footing, but they are doing just the opposite.  In his informative article, State Budget Bunk, Steven Malanga catalogs the cheap tricks that are putting cities and states deeper in hock.

Write your elected officials and preemptively tell them "NO" to any state or city bailouts.  Tell them these failed states and cities must file for bankruptcy like other financially irresponsible people are forced to do.
 
Further Reading:

Muni bond Prices Drop

State Budget Bunk