When you think of bankruptcy, you may imagine individuals or companies that are deep in debt, with little prospect of climbing out. At last, they throw in the towel.
But Jefferson County, Ala. -- which has nearly 700,000 people and includes the city of Birmingham -- recently went under, proving that governments, too, pay a price for fiscal recklessness.
Jefferson County's bankruptcy is the largest municipal bankruptcy in American history. We can see why: The county has nearly $4.2 billion worth of debt!
Part of the problem is that it imposed a tax on workers' earnings. The state Supreme Court struck down the tax, on which local officials had unwisely been relying.
Now, residents of the county face painful consequences. They may end up having to pay huge costs to continue basic public services. They are also faced with the possibility of higher taxes and reductions in services and pensions. As if that were not enough, the reputational harm of the bankruptcy might dissuade businesses from considering Jefferson County when they wish to begin or expand operations.
The Alabama county's predicament reminds us that even government cannot forever live beyond its means without dreadful effects.