Expect more U.S. cities to face bankruptcy like Detroit, former New York Lieutenant Gov. Richard Ravitch told CNBC’s “Street Signs” Thursday. “There are many more [cities] that are facing enormous fiscal squeezes… who are cutting education, cutting infrastructure investments and borrowing as long as the bond market permits,” he said.
Ravitch, who is advising Detroit’s bankruptcy judge, wrote about his prediction in an op-ed in the Wall Street Journal last week. “We can expect to see more Detroits,” he wrote.
Detroit became the nation’s largest city to file for bankruptcy protection last July after being crushed by $18 billion in debt. Ravitch said retirement obligations and health-care costs that are rising faster than inflation are putting enormous pressure on state budgets. That in turn puts pressure on city budgets. Additionally, there has been a reduction in federal aid to states and cities.