Cost cutting is the key.

It looks like Greece is not the only government in dire fiscal strait. The financial downturn in 2008 continues to erode the economic condition in the United States. At present, America, once the greatest nation on earth, is under tremendous pressure of high unemployment and low consumer confidence. Evidently, the effects of the overly stretched economy have now trickled down onto the municipal level.

After Jefferson County in Alabama averted its bankruptcy, a week so ago, Harrisbury, Pennsylvania, where the capital of the State of Pennsylvania is, had earned itself another distinguished honor of being the first American city ever filed for bankruptcy.

Because this historical city of 50,000 residents was not able to find funds to make a scheduled repayment on nearly $300 millions of the money borrowed to refurbish a couple of moth-balled incinerators, its civic leaders decided bankruptcy was the way to sort out the city's imminent financial troubles. It does seem ominous to me that a city of this size would burn that much cash just to reignite a couple of old furnaces. Obviously, the City of Harrisbury has got itself into something which has become too “big” for it to manage.

In the past, I often thought municipalities must live within their receipts from property taxes. But from what has transpired in Harrisbury, Pennsylvania, it looks like this local government has been endowed with borrowing power that is beyond its tax bases.

From the saga of the Harrisbury's bankruptcy, I noticed there is another worrisome trend in government finances. On money matters, governments today do not operate like their constituents. Taxpayers cut their expenses when their purse strings are tight. But whenever our governments face a budget shortfall, invariably they seek out new avenues to raise taxes. Somehow they never think of looking for ways to cut their operating costs. - Ayee