Quote Originally Posted by mwilbert View Post
This doesn't make any sense to me either. Do you really think there are leaders, or voters for that matter, in other municipalities in the area that look at Detroit and say to themselves, "We should be more like Detroit. Let's spend lots of money [[or cut lots of taxes), even if we destroy our town's finances; bankruptcy isn't so bad."? If nothing else, you seem to be neglecting all the bad stuff that happens before you get to bankruptcy--the part where you lay off lots of city employees, and cut services and get an EM. I don't think this is an attractive package at all, even with a relatively easy bankruptcy.

And, if it were, how much would making Detroit's bankruptcy less easy help?
Remember that the chickens don't come home to roost that quickly--if I were a mayor and wanted to be irresponsible chances are I could serve a couple of terms and retire before the consequences became evident. Voters do not pay attention to or understand things like assumed rates of return on pensions, or the terms of asset privatizations, and these can easily be manipulated to make the current books better and the future books horrible. The correct assumptions to make about these kinds of transactions aren't even agreed among professionals.

Here is a concrete example. How many people were really paying attention when Detroit made that horrendous debt swap related to the POCs? Note that the reason that the debt swap was horrendous wasn't primarily that the interest rate bet embedded in the swap turned out to be a bad bet, although it was in fact completely wrong, but because even if it had been correct Detroit was virtually certain to violate the associated covenants, resulting in large and needless penalties. How many people know what a debt swap is? How many people, knowing what a debt swap is, are going to look at the covenants and understand their implications? Do the News or the Free Press have writers who could even write such a story, assuming they were assigned to do so? How exactly are people supposed to evaluate whether their elected officials are behaving appropriately?

Both the theoretical problem and the theoretical cure are implausible.
you are totally off my original topic, all I did was give my opinion on the article and how i don't believe the OP was correct in his views. You are going into some whole other debate and I'm not even sure how we got there.