Hacker News Reader

Comment by heurist | Hacker News Reader

We are about to learn a lot about which local economic policies work and which do not.

Spoilers: the policy of having rich people in your locale will work and the policy of having poor people in your locale will not.

This is not guaranteed. Recall that in the 90’s Orange County - then a relatively affluent region - had to declare bankruptcy. Just because there are people who could foot the bill, does not mean that they will. If the surplus of wealth is in a community consumed by an inefficient urban structure then a financial crisis will arise just the same. In a lot of suburban areas the density is such that the infrastructure costs more and the property value is lower (on a per lot basis). The end result is that a lot of the wealthy suburbs will go broke. https://www.strongtowns.org/journal/2018/9/5/but-rich-people...

In a lot of suburban areas the density is such that the infrastructure costs more and the property value is lower (on a per lot basis). The end result is that a lot of the wealthy suburbs will go broke.

If a suburb or ex-urb's liabilities exceed their assets, weren't they already broke? I'm trying to understand because I don't know a lot about this whole issue. But unless they charge people a whole lot in taxes to live in those areas, I'm not seeing how those places weren't poor in reality from the start? It seems to me those suburbs just managed to have other people pay for their infrastructure and services for so long that they never realized they were broke. But maybe there is some other source of money that they get from somewhere?

Most localities sell bonds, backed up by promise of future tax revenue. Eventually their bonds are downgraded and they have to pay higher and higher interest rates. Finally, the math comes crashing down and the game is over when the market has no more appetite for the bonds and the state and feds won't backstop them.

In some sense yes, but the bill doesn’t come until much later. A city can run a deficit for a long time before its debt payments become its biggest budget item (or second after its police department in many cases). This leads to cuts, austerity and the usual contractions to a more manageable budget. And yes, in many cases the infrastructure for suburban development is initially paid for by someone else. Often some combination of federal and state programs to build roads and other public works projects along with subsidized loans.

If the county is bankrupt but the people in it are enjoying a high standard of living then I would call that "working"

Government's job is to provide for its constituents as prescribed by said constituents, not to collect taxes, sit on cash or build things. Being bankrupt or not doesn't really matter any more than it affects the government's ability to carry out the will of the people and if the will of the people is to do nothing then bankruptcy probably won't be much of an impediment.

I don't think this can be fixed by local economic policies. It will take a national effort, a new New Deal.

"New Deal" thats the old deal.

The new deal is "Don't be poor"

With what money? Printing more would ensure currency debasement. You really think inflation is less than 2%?

The Fed has changed policy, 2% is not a maximum anymore. With as much government debt as we have now, inflating it away is the only realistic way to get rid of it.

Private debt is subject to inflation too.

What does private debt have to do with Fed policy?

Higher inflation reduces debt over time. You take on a mortgage and 10yr later paying it is cake because the debt doesn't track inflation whereas your pay does.

That's only true if inflation is higher than the interest on your debt though, right?

> Printing more would ensure currency debasement.

Lot of countries around the world intentionally debase their currency to stay competitive. It's a valid monetary instrument. In the short term, currency debasement would lower the standard of living of Americans, but it would make their labor competitive.

Agreed

Money is just a mechanism for resource allocation - there are many unemployed people, and there is much infrastructure that needs fixing (not just physical infrastructure, but also social infrastructure). Let's allocate those resources, through government direction if necessary, and sort out the money stuff later.

Reply on news.ycombinator.com