For Tottering States, Bankruptcy Could Be The Answer (How To Defeat The Public Union Mafia Alert)

Townhall ^ | 11/29/2010 | Michael Barone

[goldstategop]

Blue State America faces huge budget deficits and a political culture were its held hostage by the public union mafia. How to break the logjam? Michael Barone proposes that Congress should pass a law allowing states to pursue bankruptcy, cut spending and rewrite public union contracts. At least this might save them from going under like the Titanic. One thing is for sure: bailouts will only delay the changes needed to get them back on the road to sound fiscal health. Its worth considering.

[curiosity]

Great idea, but I don't know how we could get a provision in the code for state bankruptcy through the Senate.

But then there's a key question: what happens when states run out of money and there's no bailout from the Feds? Without the possibility of bankruptcy, I can't see a way out.

[bruinbirdman]

"How To Defeat The Public Union Mafia Alert "

There is a CA city that went bust. I suppose its in state receivership. In any case, 90% of its current income goes to service pension obligations.

Familiar with this? Not Bell(flower).

yitbos

[goldstategop]

Orange County went bankrupt in 1994. That was the largest US bankruptcy on record. And absolving CA of much of its debt is going to be needed to put its fiscal house back in order.

[RobbyS]

Since Reagan fired the air traffic controllers, the public employee unions have managed to use their purses—filled with public funds — to claw their way into virtual control of some governments. This is an intolerable situation. It is one thing to let private sector unions to have a seat at the table, quite another to have nion of “public servants” to have such a place. Already the “permanent government” prohibits any meaningful restraints on policy change. Noe they have the power to bust the budget.

[goldstategop]

Agreed. The Republican-led House is not going to provide taxpayer bailouts for Blue States and the only avenue left is bankruptcy.

[rdcbn]

The union compensation packages are unsustainable. Unions have two options.

The first is to renegotiate a compensation package that is sustainable.

The second is to have the states go into bankruptcy, lose most of the benefits as unsecured creditors and have a revised compensation package imposed upon item at time of economic crisis where they will receive bad publicity and little sympathy.

They will choose the second option

[goldstategop]

The larger question is who does government serve: the taxpayers or the unions? That’s going to come up if and when Congress is asked to address the issue.

[goldstategop]

The unions can either agree to more realistic retirement benefits or see their members get nothing.

Given that choice, they will choose option 1.

[monocle]

Moral of story: Do not invest in blue state debt instruments.

[RobbyS]

The irony is that most civil servants if asked would give back part of their salaries to solve the budget crunch. The exceptions would be those, especially in DC, who think their jobs meaningless but have no other options.

[goldstategop]

The bond markets aren’t investing. CA and NY are stone cold broke. They have no way out and while Andrew Cuomo wants to cut spending, good luck getting it past the Assembly Democrats in Albany.

[USNBandit]

San Diego?

[goldstategop]

I think you’re thinking of Vallejo, CA, which filed for bankruptcy to void union contracts that had it paying for pensions for which no money was ever set aside. San Diego, CA is also facing bankruptcy on accounting of ballooning pension costs for which again, no money has been set aside.

And in the state of CA, there is a huge state pension IOU - unfunded liability for which no money was ever set aside to pay for it. Its a mess.

[nathanbedford]

I think you are right, the unions will choose to drive the states into bankruptcy because that way the leadership of the unions will not have to explain why they traded away their members' pensions they can simply blame it on the Republicans and the courts.

The Republicans, for their part, face a political problem: if they oppose bailing out the states they will be accused of heartlessness again and could be held responsible for the fallout damage which cannot now be calculated. It is impossible to say how bad the ripple effect would be from the implosion of an economy the size of California's.

Therefore, Republicans must define the equation as a choice between those states which have been responsible and those states which have been irresponsible and ask why responsible states should be taxed for irresponsible states which pandered to public-interest unions to win elections for Democrats. Even more effective, Republicans must structure the argument as a choice between public interest union pensions and Social Security.

[bruinbirdman]

"Prichard, Alabama officials are trying to do something that has never been done anywhere in the United States: Reduce vested pension benefits through municipal bankruptcy."

yitbos

[goldstategop]

No one begrudges those who have served our country and no one wants to take away their retirement benefits from them. That’s a non-issue. By the same token, if we’re going to save those pensions, we have to make sure we can pay for them. And if we can’t, then people who were counting on receiving them in their golden years will be left with nothing. That is just not acceptable. And pension reform is already happening, whether the unions like it or not.

[Tzimisce]

It’s a great idea.

The problem is left wing judges won’t let Union contracts be re-negotiated.

[goldstategop]

Judges can’t order the government to raise taxes. That would be the only realistic way to pay for existing pension benefits. Ain’t gonna happen.

[Tzimisce]

Judges can’t order the government to raise taxes. That would be the only realistic way to pay for existing pension benefits. Ain’t gonna happen.

I believe states have sued for bankruptcy before only to have judges tell them they can not renegotiate Union contracts.

But let's assume judges haven't. There is nothing stopping them from doing it now.