Alabama’s Historic Economic Prize!

Along with this state’s recent headline grabbing immigration policies rearing its ugly head the most populous county in Alabama is destined for the record books as well, in a story of greed and corruption.

Jefferson County, Alabama has filed for Bankruptcy and if the case is allowed to go ahead it will be the Largest Municipal bankruptcy filing in United States History.

When combined the water and sewage rates in this county of 658,466 residents the rates for these must have services has increased 329% over the last 15 years.

As with most of the gut wrenching economic hardships of our recent recession the poor are the unwarranted recipients of most if not all of the consequences. They are now being forced to bathe in bottled water and use portable toilets as they have been cut-off from these basic necessities through no fault of their own.

While disturbing it’s not surprising that local government officials and Wall Street financiers have been implicated again in another case of financial wrongdoing.

All of this stems from the debt the county took on to finance a new sewer system for Jefferson County residents. Initially the cost was to be $300 million dollars however that initial projection soared to $3.1 Billion dollars and the county is drowning in debt.

JP Morgan Securities along with two of its prior directors have already been fined as they were accused of offering bribes to local politicians to guarantee they would win business financing the project. Six former members of Jefferson County’s commissioners have also been found guilty of corruption as well as fifteen other government officials for accepting bribes.

The new local county commission has seen no other alternative other than to file for chapter nine bankruptcy protections in November as the only way to try to bring the county out of this current financial hole.

However the banks and bondholders who stand to lose $4.5 million dollars per month in repayment charges are fighting the commission’s decision and a bankruptcy judge will give the last word on whether the Jefferson County commission can proceed.

The local residents have absorbed rate hikes of 8.2% a year to attempt to deal with repaying the escalating debt. According to John S. Young the court appointed receiver the rates are projected to be 10% per year up to a whopping 25% for the cash poor citizens of the county in the future.

Along with the prospect of bankruptcy filing for the sewage project the country is also projected to have an extra $40 million dollar budget shortfall.

As five hundred county workers were recently laid off and are living off of unemployment insurance the county’s ability to finance local services is further called into question as tax revenues will most certainly fall.

Tony Petelos the new county manager believes it will be years before the county might be able to turn the tide. He stated, “The public has lost confidence in Jefferson County over the last decade and a half, because of the mismanagement, because of the corruption. We have got to rebuild that confidence” and that there is, “light at the end of the tunnel”.

However in regards to any relief the citizens might realize in their water and sewer rates he was quoted as saying, “When you look at the amount of debt, and you  look at the revenue that is produced from the rate payers, there is no way it is going to come down,”.

Mr. Petelos who was the former mayor of Hoover city, Alabama recalls a Wall Street presentation about the same type of bonds that were used to finance the Jefferson County sewage project. After the presentation he recalls talking with his finance director in dismay and how they were both in agreement that they did not want to have anything to do with the type of financing that was presented.

One resident has found it is cheaper for him to pay a portable sanitation company $14 dollars a month to deal with his household sewage. His previous sewer and water bills sometimes reached $300 dollars per month this in a county whose citizens average income was $19,724 dollars per year according to the most recent census figures.

As most of the citizens of Jefferson County live off of meager Social Security income in this predominately poor community it is abundantly clear they cannot afford to pay these rate increases brought upon them by greed and corruption.

As the current Republican mindset in Washington is to gut most if not all of our governments regulation or oversight of the financial sector or corporations. This current situation in Alabama is the poster child for why we Do Need Regulation of banks and corporations that cannot be trusted to conduct themselves in a responsible honest fashion.

The meteoric rise of the debt from $300 million to $3.1 billion has been tied to construction issues and a series of bad bond and derivative deals that went sour during the 2008 financial debacle which has landed us in our current economic recession.

While for now as Jefferson county may be filing the largest Municipal bankruptcy in the history of our country. How many other cities and counties across the country are also reaching the breaking point remains to be seen.

Again Wall Street is being implicated in more financial crimes with few if any of the perpetrators being brought to justice. However as is usually the case the poorest citizens of the U.S. are being asked to suffer the brunt of the damage.

When will the poor citizens of the United States catch a break or at least be treated in a fair and equitable fashion and when if ever will the financial sector be held accountable?

U.S. Income Inequality is Destroying the USA for the rich & Poor

During the 1970 period 15% of American’s lived in either poor or affluent developments. When we look at the data for 2007 a full 35% lived in one of the two neighborhood types. Between the 2000 and 2007 period there was a surge of Income Segregation for black and Hispanic family units while this was not as rapid as the 1970 to present era it was dramatic. This recent phenomenon Income Segregation has been only increasing in the last four decades crossing all racial boundaries without regard or concern it is just a merciless drum. There are those With alongside those Without and in the end we will all suffer for it as it will only greatly contribute to the decline of the United States of America.

While for some, those not having to share their affluent schools and social systems with others this may look promising to them. However it does not look promising for our or other countries poorer citizens or for the USA as a whole in the long run.

Also funding attitudes may change as further segregation continues with the affluent less likely wanting to fund programs that were funded in more segregated communities of times past.

The Brookings institution found that those American’s living in Extreme poverty rose by 1/3 from 2000 to the latter half of the decade. Those in the suburbs did not fare well either as there was a 53% increase in those living in poverty from 2000-2010.

Even those of the affluent classes are showing growing concern for this phenomenon as it will continue to be detrimental to the United States as a whole until it is addressed, yet this is mostly seen in Economists who really have a grasp of the big-picture. In a September 2011 study done by the International Monetary Fund it found that greater income equality positively correlates with a nation’s economic growth.

We are constantly told by our elected officials in Washington that the U.S. must reduce environmental regulation and reduce taxes. This in a country where the effective corporate/business tax rate is 17% not 35% as the thirty-five percent figure does not take into account all of the tax loopholes used by those corporations that do pay taxes. Many corporations pay little if any taxes via the use of offshore tax-havens, the figures estimated to be in the trillion dollar range. The top 1% has seen their income increase by 270% versus 19% for the bottom tier of Americans from 1979-2007.

CBO 2007 data

In the CBO report it was also found that between 2005-2007 that the after tax income of the top 20% of the U.S. population exceeded the remaining after-tax income for the rest of the nation. It was also found that the top 1%’s share of total market income increased from 50-60% while all other income ranges saw a decline.

Two factors were cited as the reason for this inequality one being an increase of each individual source of income; labor, business income, capital gains, capital income etc. The report noted that these sources of income were less evenly distributed in 2007 than in the 1979 period. For instance labor income has been more evenly distributed versus capital and business income with even more of a disparity in regards to capital gains. For the period 1979-2007 the share of income derived from capital gains and business income showed increases while labor income decreased furthering the economic divide which contributed to the greater distribution of wealth inequality in America.

Again our Washington government officials tell us that entitlement programs which benefit the under-classes must be cut while the taxes and regulations which favor the rich must be eliminated or reduced to tackle our $14 trillion dollar deficit.

This chart to the left shows a different picture where the Bush-Era tax cuts which primarily benefited the wealthy are in fact the driving force.

While the current Washington Republican stance that reducing taxes, environmental regulations and reducing or returning banking/investment regulations to per-recession levels totally contradicts the opinions of the World’s leading economists.

The International Monetary Funds 2007 report finds that Income Equality Positively correlates to Stronger economic growth. It was found that a mere 10% decrease in inequality increased the expected duration of economic growth by a full 50%. The comprehensive study using data collected between 1950-2006 found countries with more income equality stayed in or fell into deeper recessions. It was also found that countries with a more equal distribution of wealth, that their economic growth lasted much longer.

It was also found that income equality was of more importance  and corresponded more strongly to sustained economic growth than other economic factors. Restoring or attempting to address income inequality was further shown to be of a much greater importance than the lowering of debt levels.

The study authors stated, “Sustainable economic reform, is possible only when its benefits are widely shared.” The breadth of income inequality in the United States now more closely resembles the economies of Iran and Russia versus other developed countries.

Economists have attempted to explain that stagnant(not rising) wages for the last four decades as a part of the widening income inequality while the upper class have been those who have seen benefits increase over the more the forty year period.

Nobel Prize winning economist Joseph Stiglitz stated, “An economy in which most citizens are doing worse year after year — an economy like America’s — is not likely to do well over the long haul,” in an article he wrote for Vanity Fair.

So as the hard numbers from the most recent data point out along with a Worldwide consensus of economists.

Our Republican Washington legislators and followers of Grover Norquist have all gotten it Very Wrong.

Or is the reality that our politicians are really just bought and paid for by the top 1% who are only interested in one thing Money$$$ and the rest of the United States of America can go straight to hell.

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