The debt crises in Europe and Washington, D.C., have made for fascinating, if scary, viewing these past few months. Americans were transfixed when our own political leaders flirted with disaster as the August 2 deadline for dealing with the debt ceiling inched ever closer. Summer has been a Euro-American race toward fiscal disaster.
Though upsetting, events in Washington and Europe seemed distant, even a bit surreal. Our daily routines of home and work, our vacations and our personal ups and downs are in the short run unaffected by events across the Atlantic and the Potomac.
That illusion of isolation was punctured this week when Moodys credit agency said it was going to reassess the City of Alexandrias triple-A credit rating.
Moodys re-examination of Alexandrias credit is directly related to the federal debt crisis, as the citys economy depends on federal jobs and dollars. Ironically, this close link to the federal government helped Alexandria weather the recession of 2008 and 2009: because of federal jobs, the citys unemployment rate was consistently lower than either the national or Virginia averages.
City leaders have, not surprisingly, spun the credit reexamination as a non-event. Laura Triggs, the citys acting chief financial officer, and Vice Mayor Kerry Donley have both expressed confidence that Moodys will re-affirm Alexandrias credit worthiness. Theyre probably right, as the city carries less than half a million dollars in debt. Still, future pension obligations are a huge financial burden for most municipalities, and the fact that Alexandrias city council declined to act on that contentious issue this year when so many other states and cities took proactive steps is concerning.
Several important conclusions can be drawn from this localization of the federal debt crisis. The first is that, in our high-tech, interdependent world, no one is truly isolated from what happens elsewhere. When governments spend, or promise, more than they can actually afford as is the case with entitlement and defense spending in Washington and Europe it ultimately comes home to haunt them.
In individual terms, if a person maxes out on credit card spending on things he or she wants, like cars or a nicer house, that person may find they lack the means to deal with a crisis, such as a medical emergency, when it arises.
While a city like Alexandria is protected from runaway annual spending and thus a default like the federal government faced by the requirement that it balance its budget yearly, the current crisis provides an opportunity for reassessment. Are future pension obligations sustainable, and if not, what steps should we take now, before theres a crisis? Can Alexandria weather a significant cutback in federal dollars for social services programs and jobs held by residents?
Budgets of every kind are a reflection of philosophy and priorities. As Councilman Frank Fannon said, going forward, Alexandria is going to have to re-evaluate must-have spending and distinguish it better from like-to-have expenditures. That is not a bad outcome.