The Onset of the Great Recession in 2008

The onset of the Great Recession in 2008 ushered in an era of fiscal and economic crises worldwide. As the world’s economy suffered, so did its smaller subunits—including cities. In a time of economic hardship, city residents—virtually the sole financers of cities—move from the expensive downtown areas into more affordable suburbs, taking their property taxes with them. When coupled with raised taxes in order to supply the city budget, such a scenario forces a seemingly endless cycle: High taxes result in residents leaving the city, shrinking the tax base. In response to this, cities must raise taxes to meet their needs, in turn driving more residents out of the city. Once again, the tax base shrinks and the cycle continues (Harvard Law Review, 1997). As unique as these circumstances may seem, many cities experienced a very similar phenomenon in the late twentieth century.

Rise of Municipal Debt

Beginning in the 1970s cities were plagued with unforeseen circumstances, which directly resulted in deficits similar to those thirty years later during the Great Recession. Metropolitan areas were growing more expensive, and highways were subsidized by the federal government; consequently, white Americans were leaving the city for the suburbs (Mitchell & Beckett, 2008). This period of suburbanization drew industry out of the city and into the suburbs—full of wide stretches of land that were perfect for industry. Though businesses left for purely economic reasons, white, middle-class Americans left in search of more affluent, homogenous neighborhoods that would support their lifestyles. Left behind was population, abandoned through this “white flight” phenomenon, that needed the manufacturing jobs that once inhabited the city. Mostly lowe...

... middle of paper ...

...risis. One such strategy is the financial control board. Lauded by city officials and government committees, control boards appear to bring a level of stability to cities that they would otherwise not have. The evidence from some studies argues that financial control boards allow cities to make difficult political decisions to achieve a balanced budget (Harvard Law Review, 1997). However, the evidence is not completely conclusive: While some data reflects significant efficiency, others claim that the gains made by cities are not entirely accurate—that cuts made to various departments do not necessarily result in increased growth rates within those departments (Glassberg, 1981). Nonetheless, cities continue to turn to control boards with hope that they can achieve in their city that which was achieved in others, such as New York City or Cleveland (U.S. House, 1997).