The State takes over Nassau County’s Finances . . . So what’s happening to government in America?

Although the county treasurer’s investment strategy was “an accident waiting to happen,” Baldassare points to a two-decade trend of voter initiatives to simultaneously minimize tax increases and control the allocation of state tax funds . . .

Now one might presume that the above excerpt is referring to today’s news courtesy of the New York Times that the State of New York has “seized control of Nassau County’s finances, saying the wealthy and heavily taxed county had nonetheless failed to balance its $2.6 billion budget despite months of increasingly ominous warnings.”

Sadly, it is not the case as it is an excerpt from the 1998 book When Government Fails by Mark Baldassare, in which he reviews the bankruptcy proceedings for Orange County in 1994.

Orange County has the dubious distinction of being the largest US county to ever seek bankruptcy protection, which in conjunction with other factors was the result of questionable investment strategies by its long time treasurer Robert Citron that ultimately left the county with inadequate capital to allow for any raise in interest rates for its trading positions. Citron ended up pleading guilty to six felony charges.

No such malfeasance was at play in the Nassau situation, and it should also be noted that the County has not at this point in time sought bankruptcy protection. However, and similar to Citron’s investing acumen (or lack thereof), Nassau’s County Executive Edward Mangano has been called out for making a series of blunders such as his decision to eliminate a tax on home heating fuel, that worsened an already precarious financial position.

County Executive Edward Mangano

In all fairness to Mangano, he did inherit an already listing ship in which wasteful spending and a broken assessment system that overtaxed residents, and then piled up a massive $1.13 billion taxpayer debt when refund payments were delayed, put him behind the proverbial eight ball out of the gate when he assumed office on January 1st, 2010.

The fact that the county has a history of financial mismanagement, the most recent meltdown prior to this one being in 1999, which required a $100 million bailout by the state, speaks to a much larger question . . . are governments good and reliable stewards of the citizens’ money?

Besides having a negative impact on the services it provides to taxpayers, the possibility of wage freezes and outright defaults on pension fund contributions looms large for many states and municipalities.

So what’s happening to government in America? Are the finances of governments in reality nothing more than houses of cards vulnerable to being blown over by a light to moderate breeze of unfavorable conditions? These problems did not just happen over night as municipalities like Detroit will likely seek bankruptcy protection in 2011 and States such as Illinois, whose Governor admitted that its reputation as a deadbeat state is warranted, demonstrate that the problem is far reaching, spanning years if not decades. Who is minding the store and the interests of the public?

In all fairness, it should be noted that financial meltdowns are not the sole domain of the public sector as a recent inquiry into the 2008 financial crisis found that it was an “avoidable disaster” fueled largely by corporate mismanagement and heedless Wall Street risk-taking. The fact that government regulators failed to provide the necessary checks and balances was also highlighted . . . can you say moderate breeze?

Whether an isolated act by a single culprit or a conspiracy of incompetence and greed both within and external to government itself something has to give, otherwise and in line with Arianna Huffington’s dire prediction, America could over the next 50 years (maybe sooner) become a third-world country. After all, wasn’t the Roman Empire at one time the greatest in the world?

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One response to “The State takes over Nassau County’s Finances . . . So what’s happening to government in America?

  • jimbouchard

    What’s interesting is that local, state and the federal government in the States have largely acted the same as individual citizens when it comes to fiscal responsibility. The problem is that the government, again at all levels, were the self-proclaimed last word and testament when it came to predicting and playing one economic conditions and trends.

    Over the past two decades Americans continually devolved from one of the most prudent and fiscally responsible populations in the world to a culture addicted to instant gratification and easy credit.

    So too did those governing our municipalities, counties, states and of course the nation. For 20 years they’ve spent more than they made, borrowed more than they could repay and promised more than they could deliver.

    When an individual or business operates continually on layers of credit the inevitable result is bankruptcy. So also with our governments, local to national.

    As painful as it is, the first step to recovery is to STOP SPENDING and STOP BORROWING! This means cutting programs, particularly on a federal level that cannot be funded.

    The American Founders foresaw exactly this problem and and opponents of a national bank or federal reserve knew that those who print the money should not also be those in charge of spending it. We’re in the middle of the mess and still can’t see what the Founders saw so clearly.

    If we simply had the courage to eliminate programs that exceed or stretch the limitations of the federal government’s constitutional powers, the federal budget would be in the black within a few short years.

    I doubt we have that courage.

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