I read the New York Magazine piece, and think it's a bit apocalyptic, although interesting in that it carries some of the flavor of the "Soylent Green"/"Escape from New York" era's profound pessimism about the city.
There are simple reasons why cities and states in the United States don't default on their municipal bonds, and why muni purchasers don't fear widespread defaults--these governments would either have to pay a punitively high rate on future bond issues in order to entice buyers, or simply wouldn't have buyers at all, regardless of the inducements. That would place a straitjacket on their public spending until the end of days.
Contrast this with the structure of the securitized mortgages that have gotten the United States into so much trouble. In this case, banks lending money to individual home-buyers sell the right to receive payments on the loans, that right taking the form of a security.
Because they're selling the right to repayment on a market for a one-time sum, the banks don't have the same incentive to make sure that the home-buyers they lent the money to will repay them.
Of course the buyer of this right to payment that is the security can take steps to see what the credit-worthiness of the homebuyers are, and credit rating agencies can pass judgments on the quality of these investments. Precisely why these steps failed are being investigated and debated now.
But what should be obvious is that there's a break in accountability in the very structure of that transaction that you don't see in municipal bonds.
And of course short of outright default, cities, towns and counties can declare bankruptcy. This is what Orange County, California did in 1994, and western civilization is still around, for the time being.