Desperate days in small-town America

At a city council meeting last week here in Prichard, Alabama, a 78-year-old retired librarian named Gwendolyn Williams stood at the microphone and suggested a most un-American way to deal with the city's self-inflicted breach of trust.

"I will say the word," she declared. "Pass a tax. Yes, pass a tax, if that means making us whole again financially."

Now, Alabama is a pretty conservative place and the overflow audience behind Williams comprised pretty conservative people — mostly white, religious, flag-saluting, family-values folks. These are people you could easily meet at an anti-tax Tea Party rally.

But Williams's tax proposal elicited not a single gasp or cry of disagreement. In fact, murmurs of assent swept the room.

That is because if anyone understands what needs to happen for a government to pay its bills, it is the 147 retired employees of the city of Prichard, Ala. Nothing like a little self-interest to open your mind.

Prichard, these days, is uglier than most American cities. Its main street is mostly shuttered, its stores barred and out of business.

Pawn shops and payday loan offices thrive in its neighborhoods. Streets are cracked and neglected. It's easy to see just by glancing at the asphalt where Prichard ends and its more prosperous neighbour, the city of Mobile, begins.

But in many respects, Prichard is also a microcosm of the rest of America — a nation where politicians know that fiscally responsible decisions can cost them their jobs and who, instead, "kick the can down the road," to use one of President Barack Obama's favourite terms.

For years, Prichard's civic leaders treated their liabilities as an abstract concept, kicking the can, or just ignoring it altogether. And, like so many homeowners in this country, when the bill finally arrived, Prichard just walked away.

Kicking the can

Call it "strategic default," the euphemism used by financial advisers who counsel homeowners to simply walk away from mortgage debt rather than endure the pain of making big payments in a falling market. Or call it being a deadbeat.

The fact is, Prichard contracted decades ago to pay its retirees pensions based on their earnings over lifetimes of service. Those employees paid five per cent of their salaries into the pension plan, month after month, for their entire careers.

Some time ago, though, a shortfall became apparent. Experts advised the city that if it did not step up its contribution, the pension fund would run out of money. A few years ago, a federal judge actually ordered the city to close the gap.

But the politicians did nothing. They kicked the can down the road. And in late 2009, Prichard simply stopped paying its pensioners.

These retired workers, some of them infirm and feeble, were abruptly yanked out of retirement and handed a nasty choice: Try to survive on the subsistence payments of Social Security, or go back to work.

Some have found work, mostly menial. Others survive on charity from friends or relatives. Still others don't make do at all.

A retired fire marshal was found dead in his home recently, his water and electricity cut off.

Surviving on charity

Eddie Ragland, a Prichard policeman for 25 years, is entitled to a pension of $1,902 a month. In August, he confronted an armed robber in a Prichard car wash and ended up in hospital with his intestines shot to pieces.

Thousands of dollars in medical bills keep arriving, week after week, and had it not been for the donation jars set up in local restaurants and police stations, Ragland thinks he simply wouldn't have recovered.

He moves painfully now, and has found work at Mobile's airport.

"They just don't give a doggone about you," he says of his former employers at the city of Prichard.

But shaming Prichard's politicians has proven pointless. This is, after all, America. Shame left the building a long time ago.

Prichard's politicians are making sure they get paid, as well as current city employees (stopping services could cost votes, after all).

Mayor Ron Davis, in fact, received a 50 per cent raise just about the time the pensions were cut off.  "Every two weeks, each of you expect a paycheque," retiree Cyndy Norwood lectured the councillors last week. "We do, too. The difference is you control the chequebook and make sure you get yours, and we don't."

Not alone

That Prichard is violating state law is academic. Who's going to enforce it? The state of Alabama? Washington? Not a chance.

Everybody has problems these days, and the senior levels of government might someday have to break a few laws, too.

In New Jersey, the city of Camden, with one of the highest crime rates in the country, has just laid off half its police force.

The city of Vallejo, in California, is bankrupt. The state of Illinois, floundering in debt and staring at a huge pension liability, has just raised its income tax 66 per cent. Maryland raised its retirement age. The city of Philadelphia and the state of New Jersey have pension issues that look to rival Prichard's.

Even the federal government has liability locomotives heading full speed its way.

Social Security and Medicare costs are going to balloon by hundreds of trillions of dollars in the years to come, and the money to pay simply isn't there.

So far, most senior governments in this country have closed the gap by issuing bonds, meaning borrowing. Cans are being kicked all over America.

President Obama, in fact, has become something of a big can-kicker himself in that regard.

Cornered by reporters after the Prichard council meeting, Mayor Davis was anxious to point that out.

"If you look at other areas, what they're doing, is they're borrowing their way to pay," he said. "And that's the only difference between us now and other people. We don't have the capacity to borrow our way out."

True enough. And Gwendolyn Williams's tax increase suggestion is about as welcome in Prichard as it is in Washington.

Not going to happen, declared Davis.

But bills have to be paid. And there isn't much question where this is all heading.

Absent significant tax increases, conservatives across America are about to get what they've been demanding for years: smaller government. Though perhaps a lot smaller than they ever dreamed.