San Bernardino is a smallish city to the east of Los Angeles but a judge's ruling yesterday that it is, indeed, insolvent will reverberate loudly across the country in all those jurisdictions where political power was bought by promises of future benefits that are now coming due and cannot be financed. The biggest marker took the form of pension and health care benefits for retiring municipal employees. The bankruptcy ruling makes it likely that they will get a haircut.
As Tim Reid of Reuters wrties, the judge's ruling paves:
... the way for a precedent-setting battle between bondholders and ... the California Public Employees' Retirement System, or Calpers. The $260 billion pension fund is the city's biggest creditor and America's largest pension fund.
Today, it is a city in California. Tomorrow, Detroit. And then ... on to all those cities where votes were bought and paid for with checks that could not be covered.
One suspects that they are hearing footsteps in Chicago.