04 February 2015

Another Perspective on Municipal Bankruptcy

I've written a fair amount about Chapter 9 municipal bankruptcy. (Fairness and Risk in Stockton, Who Bears the Cost?, and Who Bears the Burden?.) Each of my articles has addressed the political aspects of municipal bankruptcy. In other words, the reality of the Tenth Amendment and the nature of political legitimacy in a liberal polity creates some fuzzy edges when it comes to implementation of the relatively clear-cut rules of state law in the context of municipal bankruptcy.

For more along this line read The Legislative Structure of Municipal Bankruptcy by Vincent Buccola. As Buccola correctly observes, "The framework Chapter 9 establishes is better likened to a constitution, a legislative structure under which multiple political bodies seek to apportion resources by mutual consent. Political economy rather than contract-enforcement theory supplies the appropriate lens."

Buccola and I differ, however, on the implications of the "politicization" of municipal bankruptcy. While I perceive it as constitutionally and morally justified, Buccola concludes that "it increases the costs of financing city services and impoverishes residents, employees, and retirees." In other words, Buccola lean more economically libertarian than me. (Note, however, that I fully concur with a number of his specific suggestions for reforming current Chapter 9.)

Notwithstanding the differences in our ultimate conclusions, I highly commend Buccola's piece.

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