Posted on 01/22/2011 9:24:25 PM PST by Acton
The New York Times published an article on Friday entitled, "Path Is Sought for States to Escape Their Debt Burdens." The gist of the article is that the Federal Government should create a new bankruptcy code that permits the states to shed some of the obligations they have contracted for:
Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid....
(Excerpt) Read more at nytimes.com ...
The States incurred these obligations. Let's say Illinois incurred an obligation to an American citizen who bought a general obligation bond and a Chinese agency purchased Illinois debt. If the US passes a law giving Illinois the right to default on its debt through a "bankruptcy," the US citizen may be out. He may have a claim under the Constitution because the Federal government has assisted the State in impairing its contract, and he might even win. But he might lose, because the courts might hold that Congress has the power under the bankruptcy clause to establish the rights of the person under the agreement -- even if it deprives him of the right he thought he had when he lent the money to Illinois.
On the other hand, the Chinese agency has a better chance of getting its money back. It can claim its contract is impaired in the US courts, or make a claim under international law to its government, who can make a claim for redress to the US government. China can claim, as the US claimed after 1949, that the property held by its citizens in the US was expropriated, and demand prompt, adequate and effective compensation, as we did after 1949. Why would we favor such a result?
Doesn't that depend on how the Bankruptcy Code is revised?
The US shouldn’t bail out private companies either...
Then, there came a time when they couldn't meet their commitments. Every one of those in default paid the price, made the appropriate adjustments and regained their financial equilibrium.
It may have taken a decade...and there were periods of austerity, sure. But they survived. And, no doubt, learned from the experience.
So if bankrupt companies are protected from their creditors, should a bankrupt state be protected from unfunded federal mandates?
No, it's time to shed those unsustainable retirement plans, medical plans, and fricken two weeks of holidays and a month of vacation. It is time to stop buying (or rather leasing) those hugely expensive hybrid vehicles, those electric buses and compressed natural gas buses that are in need of constant repairs, to stop spending money in a manner that would embarrass a drunken sailor.
The states don't have a budget imbalance, nor an income shortage, they have a spending problem and the central problem has been and continues to be feeding the public employee unions. Oh, and while we're at it, end the stupid benefits and retirement plans for elected officials. Geeze, I earn a third of what the lowest elected official earns and I pay my own health care costs!
There is NO reason the red states should play Little Red Hen or the ant to the blue states grasshoppers.
Nor dirtbag third world countries for that matter.
I am having a hard time reading anything in the Constitution that allows the Federal Government to mandate a state pay for ANYTHING, much less unfunded mandates...
The federal government was created by the (then) sovereign states to serve the purposes of the states and the people, not to be the master of their affairs. Using the power to tax, the federal government has sucked up so much of the people’s wealth that state and local governments have become deprived of revenue sources sufficient to fund even basic, legitimate protective services, a situation exacerbated by overly generous surrenders to demands of public employee unions.
That’s precious. LOL (California; we are better, we are smarter, and we are broke.)
Of course, doing away with freebies to illegals would probably help a lot, too.
simple solution
pay public employees with scrip
I’m just curious. Did the New York Times believe this about 20 years ago when New York City was pleading with the feds for a bailout? I just want to know if they’re consistent.
the problem I have with that is that the Supreme court ruled that states were responsible to educate and care for children of illegal aliens. this has cost california dearly, the assets are misused.
That would happen only if the Constitutional changes required to make state bankruptcy legal would permit it. For state bankruptcy to work, it would have to ensure that creditors could not go after anyone else to pay back the debt.
What I don't get is this... what is stopping a state like Illinois or California from simply saying "Screw this, we're not paying." I would imagine that any state could grant to itself sovereign immunity in its own court system, but I am not sure if creditors would have any standing in federal court to sue. In addition, such an action would automatically reduce a state's credit rating to pretty much nothing, which would then force the state to live within the means of its taxpayers.
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