For a long time in this country, citizens, businesses, local governments, and most of all, the federal government, have been running up debts as if they're never going to have to pay them back.

So what if the Big 3 car companies pay out pensions they can't afford? So what if the country gets trillions of dollars in debt? So what if millions of people buy homes they can't afford?

The "so what" is that the bill always eventually comes due as they're finding out in Vallejo, California.

When the town of Vallejo, California, declared bankruptcy this spring, Mayor Osby Davis predicted -- and rightly so -- that he'd get an earful from his constituents, employees and retirees. What he didn't anticipate was the chorus of phone calls from mayors outside the city, both close by and clear across the country. They told him they were watching Vallejo's bankruptcy proceedings closely, and some of them, he says, indicated that "they find themselves not too far behind us."

Vallejo, a city of 120,000 about 35 miles northeast of San Francisco, flat-out went broke this year through a combination of generous public-safety salaries, declining property values and fiscal mismanagement. The city is estimating a $17 million deficit for the current fiscal year.

...Reasonable people can -- and do -- disagree about how Vallejo found itself in bankruptcy. There's no doubt, however, that many of the city's problems stem from its inability to recover from the 1996 closure of the Mare Island Naval Shipyard, once the city's largest employer. The city also lost hundreds of thousands dollars per year in sales tax revenue after the closure of a Wal-Mart.

But the largest share of the blame in Vallejo has centered on public-safety salaries and benefits, which make up about 75 percent of the city's general fund budget. Base pay for firefighters is more than $80,000 per year and employees can retire at age 50 with a pension equal to 90 percent of their salary, the result of a retroactive pension increase several years ago.

With the downturn in the housing market hammering revenues, Vallejo is asking the bankruptcy judge to void the collective-bargaining agreements that led to those salary and benefit arrangements. And the possibility of hard-fought union contracts going up in smoke has struck fear in the heart of labor groups.

The California Professional Firefighters union proclaims, "If allowed to stand, Vallejo's attack on its own employees would send shock waves throughout the labor movement." Gloster, the attorney representing Vallejo's firefighters and police officers, says, "It's very difficult to see how their politicians should actually do the hard work to balance their budgets if they can get a do-over with a simple bankruptcy filing." Vallejo's unions are contending in court that the city is not truly insolvent. The city rejected an offer from the unions for about $10 million in concessions.

For Gloster, the question isn't whether Vallejo will have an effect on other cities but what ramifications other cities are already seeing. Specifically, he pointed to Vallejo's impact on ongoing labor negotiations. "What I hear from people in other cities is that it's already being played as a card," he says. " 'If you don't agree to these changes, we can do a Vallejo.' That's what they call it."

Now, I don't begrudge a union trying to cut the best deal it can for its members or anybody taking the best deal that they can get on a pension. If you don't act in your own self-interest, who will?

However, the problem we're seeing in private industry, in government, and in Vallejo is that the retirees are being paid far too well and for far too long. This is something politicians almost never say because those retirees can still vote.

But, what people have to understand is that the productive people, not the retirees, produce wealth and pay most of the bills for our society -- and there's a balance there. Yes, you don't want people starving in the streets when they retire, but you also don't want to saddle the people who are actually creating wealth with so much of a burden that they don't produce.

Unfortunately, in our society, the scales have been tilted way too far in the wrong direction already. Look at Vallejo. It may be a phenomenal deal for a fireman to work 30 years and then spend roughly another 30 years retired, making 90% of the salary he did when he was working, but it's such a bad deal for the people of Vallejo that the city is being driven into bankruptcy.

When the scale tilts too far away from the producers towards the takers in a society, inevitably one of two things will happen.

The first is that the producers will cry out in such numbers that there may be no choice other than to significantly cut the benefits for the retirees. People may not think that can happen, but remember what your parents used to say to you when you were a kid? "As long as you live under my roof, you'll follow my rules." Well, if you are living off of money made by the producers, then ultimately, you should have to play by their rules.

If that doesn't happen and the producers don't rebel, then eventually the people paying for their retirees will go broke and then there will be no other choice than to dramatically cut benefits.

That's what it came to in Vallejo and it's what it will come to with Social Security, Medicare, and the federal budget unless some changes are made.