They don't always get bailed out, at least not entirely. During the last recession, when Detroit collapsed, the state of Michigan was just installing emergency officers in a bunch of cities to override the local mayors and manage the bankruptcy processes. There were also a few municipalities in CA that went through something like bankruptcy a few years later. That's my recollection anyway.

I think there's a real chance that we see some of the major cities, that have been hemorrhaging capital and labor, collapse under the weight of decades of mismanagement.