For the last three decades, cities and towns across the United States have grappled with a severe reduction in public funding which has weakened municipalities’ ability to provide basic services. As a result, municipal governments are increasingly financed by debt. Public Authorities (PA), such as New York’s Empire State Development Corporation, are authorized to issue debt backed by tax dollars. There are tens of thousands of such entities across the United States, a “shadow government” not accountable to voters. PAs operate based on a corporate model in which overleveraged holdings are hidden in subsidiary corporations. Such entities have proved so profitable to the investor class that a new brand of PAs has been created for the sole purpose of issuing “phantom bonds,” money that never reaches the public but is instead siphoned off by investors and bond insurers. The transformation of PAs from vehicles of reform to tools of exploitation illustrates that the solution to the debt crisis is a new economy in which our debts are to our families and our communities, not Wall Street.

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