Local Responses to Federal Insolvency
The federal government will default. We don't know when or in what sequential order, program by program. But it will default. The numbers are clear.
No one in power acknowledges what the numbers reveal. The leaders ignore it. The masses assume it can't happen to them. They don't deserve this, they conclude, so it just cannot happen. But it will happen.
When the checks stop coming from Washington, what will local regions do?
COUNTIES
I start with Pareto's law. About 80% of the population resides in 20% of the counties/cities. This means that in 80% of the counties/cities, residents' lifestyles will not change much. There will be no riots. The residents are not rich. Their sense of deprivation will be limited.
These regions will be left alone. The Feds and the states will have their hands full in the cities. Resources will flow where the votes are. This will not be rural counties.
There will be liberty in these counties. The good old boys will face new challenges. They have built their regimes with state and federal money. The locals can challenge them. That's when we will see how strong the Tea Party is.
Inner cities will be cordoned off during violent riots. There are few streets in or out. Police cars will block the outlets. The riots will not spread. They will burn themselves out. Riots do not go on for months. People get tired. They run out of stores to loot.
The ghettos are dependent on those outside. Either the residents of the ghettos cool it, or else they starve. It's simple. The rest of us really don't need them, economically speaking. They need us.
Liberals need these dependents in order to justify their employment in the welfare state's bureaucracies. They also want to feel needed. But when the checks stop coming, liberals will have to get jobs in the private sector. They will run out of other people's money.
I do not think that the voters outside the ghettos will allow themselves to be taxed to support single mothers in the ghettos. Just a guess.
The ZIP codes of the super-rich will have to provide the funding for the inner cities. This source of redistribution will end. Those in the ghettos will be stranded. They will come, hats in hand, for aid. The strategy since 1964 of rioting to get more funding will end. Guilt-manipulation will end when the riots rage. The political capital of the ghettos will be spent in short order.
There will be competition for leadership: working people with guns vs. gangs with guns. Gangs have the organizational structure. The cops will pull out. But the gangs will be limited to what they can coerce from people whose welfare checks have stopped. Working people will gain legitimacy.
The middle class everywhere will muddle through. That's what they always do.
COST-CUTTING
The #1 expense is the public schools. They can all be shut down. Khan Academy can educate the whole nation. The public schools are no longer necessary. If a district wants to supply a few video courses that Khan does not offer, that will take a dozen teachers one year to produce. If the videos are on YouTube, anyone anywhere can use them.
How much would it cost to provide a new Chromebook for every student who cannot afford one? Maybe $150, once. What about high speed internet? Maybe $30/month per household. Let poor families apply for aid at churches and service clubs. Meanwhile, the city fires the teachers and sells the schools for revenue.
The second biggest expense is pensions. The city declares bankruptcy. No more pensions. End of expense. Simple.
Tax-funded hospitals can be sold. They can become profit-seeking. No more public expense.
The police will be funded. Fire departments will be funded. Jails will be funded. Most streets will be kept in repair. Electricity will flow. Water will flow. Garbage will be picked up.
Fire all the teachers. Default on municipal pensions. Default on municipal bonds. Sell the hospitals. Sell the libraries. At least 70% of local government costs are eliminated.
In short, the insolvency of the federal government will lead to a freeing up of the economy. Cities and counties can cut expenses overnight.
WITHDRAWAL, NOT UPRISINGS
There will be no uprisings in most areas. There will be no civil strife. There will be a great awakening: no more handouts from Uncle Sugar. No more handouts from the state government. Local governments will be on their own.
America will become a decentralized system of social-political laboratories. So will China. So will Europe.
This is what happened after the disintegration of the Roman Empire. But the speed of disintegration will be much faster. Insolvency comes very slowly, and then very fast.
There are few local governments today that are monitored by citizen groups. No one pays much attention. This will not be true when Washington's checks stop coming and the state's checks stop coming. The battles will begin, county by county, city by city. Whose oxen will get gored?
Property prices will fall. Property taxes will be cut. Voters will demand this.
Those few people -- probably a few dozen -- who unofficially represent the property owners will gain enormous political clout.
The potential for long-term power locally is tremendous. But people will not pay the price. They must monitor spending. They must monitor taxing. They must report online.
The service clubs and churches will be the places that get out the vote. How informed will the voters be? They will be more focused than they are today. Local government is not even an afterthought today. This will not be true when the checks stop coming from Washington.
I do not see social turmoil outside of the ghettos, and even there only briefly and sporadically. Rioters will come to their senses when the welfare checks really do stop coming.
No more food stamps. No more SNAP cards. People will re-think their behavior.
No more entitlements. "You want help? Be polite. Be ready to work. Got it? Clear?"
"Yes, sir."
People learn. They are not stupid. Change the incentives, and people change their behavior. This is a fundamental teaching of economic science. If this is not true, economics is not true.
CONCLUSIONS
I see 3,000 points of light: the counties. Some may flicker. I don't think any of them will go out.
Most people are resourceful. They will adjust. They did in the Great Depression. They will again.
"Root, hog, or die."
What we need is a restoration of the old world order . . . with the Internet. We are going to get it.