Hillary Clinton on Wednesday accused Donald Trump of looting his casinos and pillaging Atlantic City, and that was the gracious part. If she’s going to criticize Mr. Trump’s business record, she should also have to defend the failure of Atlantic City’s model of progressive governance.

Democrats aim to rehash the story of how Mr. Trump loaded his casinos with debt and declared bankruptcy four times—stiffing creditors and workers while shielding himself personally—ad nauseam through November. “He doesn’t default and go bankrupt as a last resort,” Mrs. Clinton declared. “He does it over and over again on purpose.” She’s one to talk about incorrigible behavior.

While Mr. Trump may have contributed to Atlantic City’s downward spiral by oversaturating the casino market, it takes more than one man to raze a city. The businessman experienced a moment of lucidity—if only he could expand beyond 140 characters—when he fired back in a tweet that “Democrat pols in Atlantic City made all the wrong moves—Convention Center, Airport—and destroyed City.”

In 1976 New Jersey voters approved a referendum that legalized gambling in Atlantic City. The constitutional amendment required casino revenues to fund programs for senior citizens and disabled residents, but politicians have instead funneled the cash to favored projects and businesses under the guise of promoting development. Guess how that’s turned out?

A 1984 law required casinos to pay 2.5% of gaming revenues to the state or “reinvest” 1.25% in tax-exempt bonds issued by the state Casino Reinvestment Development Authority for state and community “projects that would not attract capital in normal market conditions.” Investment recipients have included Best of Bass Pro shop, Margaritaville and Healthplex.

A decade later, state lawmakers imposed a $1.50 fee (which has since doubled) on casino parking spots to fund Atlantic City transportation, casino construction and a convention center. In 2004 lawmakers added a $3 surcharge for casino hotel stays to finance new hotel rooms and retail establishments, which had the effect of promoting unsustainable commercial and casino development.

Then came gambling competition, in Connecticut in 1992 and Pennsylvania in 2004. As more states in the Northeast legalized gaming, Atlantic City’s monopoly withered. In 2014 four Atlantic City casinos shut down even as the state development authority reported $352.2 million in cash and investments and $103.2 million in annual revenues (equal to about a quarter of the city budget).

Irony alert: Mr. Trump in 1997 sued to block the state’s redistribution of casino income when a competing developer stood to benefit from its investments. However, New Jersey’s liberal Supreme Court ruled that voters should have known that the referendum was actually intended to revitalize Atlantic City tourism, not help seniors.

Employment in Atlantic City has declined by about 10% over the last decade. Since 2010 the city’s property tax base has shrunk by two thirds. Local politicians raised property taxes by 50% between 2013 and 2014 to compensate for the dwindling tax base, but this has merely deterred new business investment and propelled flight.

Meantime, local politicians have continued to spend like they work for Google. Between 2010 and 2014, expenditures increased by 10% while government debt doubled. The city government spends about $6,600 a year per resident—more than any other city in the state including Newark ($2,344). Its budget exceeds that of nearly half of New Jersey’s counties. Labor costs constitute about 70% of the budget.

Earlier this year, the city emergency manager projected a $393 million cumulative deficit over the next five years absent reforms. More than 100 workers have recently been laid off. In May Democratic legislators and Governor Chris Christie passed a bailout that allows the city to squeeze an additional $120 million out of casinos in revenues annually to compensate for lower property-tax revenue.

To sum up: New Jersey Democrats plundered Atlantic City casinos, redistributed the spoils and loaded up the city with unaffordable levels of debt. The gambling mecca is a five-star example of failed liberal policies.