Could Los Angeles Default?

Los Angeles on the Brink of Bankruptcy

Los Angeles is facing a terminal fiscal crisis: Between now and 2014 the city will likely declare bankruptcy. Yet Mayor Antonio Villaraigosa and the City Council have been either unable or unwilling to face this fact.

...The mayor can't control the economy, but he could have chosen to control spending to keep the size of government proportional to the size of the local economy. Instead he's done the opposite: squeezing the city's productive workers to fund the salaries, pensions and other benefits of government workers.

How have city leaders responded to the crisis? Pension officials have played accounting games, like smoothing the investment return over seven years rather than five years. This is designed to dilute the near-term effect of the financial meltdown at the expense of much higher payments later.

...As a result of his delays in responding to the city's fiscal emergency, Mr. Villaraigosa has squandered not just his career, but his relevancy. He continues to insist that bankruptcy is not an option for Los Angeles even as anyone who can count understands there is no other option...

RICHARD RIORDAN AND ALEXANDER RUBALCAVA
Wall Street Journal