Stockton, California, recently became the largest American city in history to declare bankruptcy, having incurred a debt as high as $1 billion. Since 2010, seven U.S. cities, towns, or counties have filed for bankruptcy, while many more teeter on the brink of insolvency. Not since the Great Depression has America witnessed such grand-scale municipal bankruptcies. The Global Debt Crisis looks at this growing crisis and its implications for governance and federalism, both domestically and internationally.
The situation in Stockton is emblematic of other current sovereign and sub-sovereign fiscal solvency crises, from the streets of Vallejo, California, to those of Valencia, Spain. These crises have major consequences for the intergovernmental structure of the United States and the European Union —the largest and most important federations in the world. The people of Stockton may not realize that the group that will bear the burden of budget cuts —public sector employees or bondholders —has massive impacts on the entire federalist structure. Ultimately, as the contributors explain, the option for bailout or the circumvention of creditors has deep implications for competitive federalism as we know it.