Scranton,
Pennsylvania: where even the mayor is on minimum wage
With
shrinking tax revenues, industrial decline and a political stand-off,
the city is a symbol of a nation's crisis – some of it
self-inflicted
14
July, 2012
Scranton
is the setting for the hit American version of the sitcom The
Office. Not many people in this beleaguered city are laughing any
more.
A
former industrial city of 76,000 citizens, nestling amid the rolling
wooded coal country hills of north-eastern Pennsylvania, Scranton is
in crisis.
Its
political system is deadlocked. The city coffers are virtually empty
and its debts are huge. Last week the pay packets of all its
municipal workers – including firemen, police and the mayor –
were slashed to the minimum wage of $7.25 (£4.70) an hour. That
effectively equates a life-saving Scranton fire chief with a
burger-flipper elsewhere in the US. Not surprisingly, many expect
Scranton to go bankrupt soon.
And
Scranton is far from the only American community to face this dismal
prospect. In the past month three Californian cities – San
Bernardino, Stockton and Mammoth Lakes – have all gone bankrupt.
Some experts have warned that a wave of municipal bankruptcies is set
to sweep the United States as towns, cities and counties plunge into
a fiscal black hole, collapsing under the weight of huge debts and
reduced revenues. Last week Michael Coleman, a fiscal policy adviser
to the League of California Cities, warned in the Los Angeles Times
that some smaller cities in his state "may cease to exist".
That
sort of scary talk does not convince everyone. But it certainly rings
a bell with proud Scrantonian Gary Lewis, 26. The financial
consultant, whose family are fifth-generation Scranton residents, saw
his city as a harbinger of a crisis to come elsewhere in America.
"Give
it a couple of months. This is the first domino. This is the leak
that indicates the dam is breaking," he told the Observer. Lewis
runs a respected financial blog on Scranton's fiscal crisis. He has
calculated that on 5 July the city had just $5,000 cash in hand. "If
this city was a private company, they would be liquidating," he
said.
Scranton
is a symbol for an age of economic crisis in America. There is not
one simple factor that has caused Scranton's problems, but it has
instead been hit by a perfect storm of issues that are facing many
similar communities.
The
most obvious is industrial decline. Along with many once proud
factory towns, Scranton has been hit by jobs going abroad and a
collapse in manufacturing. Dubbed "the Electric City" by
hopeful city marketers – it had the first electric trams in America
– Scranton has seen its population almost halve since 1940. Critics
say the city government has not adjusted to its reduced size, keeping
up wage, retirement and healthcare commitments that it no longer has
the revenue to pay off. At the same time, debts have racked up and
policy mistakes have been made that have wasted millions. Yet, like
so many politicians across the US, many on the city council have
refused to approve the raising of taxes that would stave off fiscal
catastrophe.
In
the era of the anti-government Tea Party, talking about tax rises in
America remains politically dangerous, even in the face of
bankruptcy.
So
Scranton finds itself in a fiscal mess with a dysfunctional and
squabbling political system that is struggling to find an answer: a
miniature version of what many believe has happened to America as a
whole. Mayor Chris Doherty no longer attends council meetings, so bad
are relations with the city council. He slashed wages to the minimum
despite a judge ruling that he could not do so. But his action
prompted the municipal unions to sue in court. He is desperate to
raise taxes. The city council refuses.
Whatever
the rights and wrongs, it hardly presents a picture of unity in the
face of adversity. "It seems like they can't just sit down
together and work out a compromise," said JoAnn Fremiotti, a
supply teacher, as she drank coffee in Scranton's grand main square.
The newspaper she was reading bore the headline "We failed".
The reference was to a local college child abuse scandal but it was
not much of a stretch to read it as expressing a more general
despair. Some of Scranton's problems have been farcical and
self-inflicted. For example, a key part of a recent Doherty recovery
plan for the city centred on the $5.4m sale of the city's stormwater
pipes. Yet, as the sale was being readied, it was discovered that the
city had not actually owned them since the 1960s.
Not
all experts are pessimists, however. In the aftermath of the
recession, many American cities have reacted by desperately trying to
get their fiscal houses in order. Richard Ciccarone, managing
director of McDonnell Investments, is a specialist in tracking the
finances of distressed American cities. He maintains a powerful –
and lucrative – database that details their debts. He expects more
city bankruptcies in the coming months, but nothing that will
threaten the economy. "I don't think we are going to see this
become a systemic risk," he said.
Ciccarone
believes that most American cities are on a sounder financial footing
now than two years ago because they have been building cash reserves
to stave off the sort of crisis moments that Scranton, San
Bernardino, Stockton and Mammoth Lakes have been caught up in. "Many
cities have built up their cash reserves and cut their budgets,"
he said.
But
there is a devil in that detail that is already playing out in
Scranton: cutting budgets. Slashing wages and services and government
budgets might save you from bankruptcy but it comes at a social cost.
In
Scranton, fire service and police bosses have complained that their
members have had to cancel holidays and go on food stamps while their
mortgages are at risk of going unpaid because of slashed wages.
Fremiotti sees it too: in the struggling education system where she
teaches and the judicial service where she volunteers. She has also
noticed a more obvious impact in the shape of potholes that can
seriously damage a car. "Last winter I lost four tyres,"
she said.
The
same is true elsewhere in America. In Detroit, which is hit by a deep
crisis but has staved off bankruptcy, the city government is shutting
schools, razing abandoned areas and even turning off streets lights
in whole neighbourhoods in a desperate bid to save cash. In Camden,
New Jersey, which is one of the most blighted cities in America,
almost half the police and a third of firefighters have been laid
off. No one who has seen Camden's rows of burnt-out houses and walked
its dangerous streets can imagine that it is a city that can socially
afford such drastic measures.
Those
sorts of figures add to a growing sense of American economic decline
and worries over a political system unable to cope with growing
inequality, vast debts and an inability to generate more revenue.
Fremiotti sees the debate in Scranton as being one the whole country
needs to have about what people are willing to pay for and that they
must face up to the idea of either accepting higher taxes or a lower
level of help and services. "It is much broader than just
Scranton. It is the whole of America. It is a global issue," she
said.
That
may be true. But there is little sign of a political endgame in
sight, for either Scranton or America. Instead, recovering from an
era of huge borrowing by cities and citizens alike, and the bursting
of one of the biggest bubbles in economic history, it seems easier to
find people to blame rather than face up to some solutions.
Fremiotti
simply feels everyone had their part to play. "Nobody coming in
from a foreign country could have sabotaged our systems as well as we
did ourselves," the teacher said.
No comments:
Post a Comment
Note: only a member of this blog may post a comment.