The news article about Detroit bankruptcy catches my eye because I am surprised that like a corporation, a city can be exhausted by liabilities and go to bankruptcy. As one of America’s biggest cities, Detroit has $18 billion of liability mountain. According to the news article, there are mainly two causes for this result. The first one is mismanagement, as the article mentioned, the funds raised are given priority to retirees rather than creditors, and the large amount of retirees pension and health-care to be paid are underestimated. Moreover, the ridiculous spending on art protection is another factor. In my opinion, what Detroit case teaches us is like corporations, government are responsible to use the funds raised from investors wisely by making budget based on moderate projections before implement fiscal policies or adding public benefit. The government should add good managerial accounting  practices into their budget calculations so that both the development of  the city and creditors can be benefited. Since creditors and citizens are stakeholders of municipal government, government should be cautious and responsible when make decisions about budget.

Citation: http://www.bloomberg.com/news/2014-11-07/detroit-bankruptcy-taught-muni-investors-painful-lessons.html

Source of picture: “Detroit bankruptcy just what doctor ordered” freedom works.com