bankruptcy yes... bailouts NO!!!
Posted on 01/22/2011 3:36:55 AM PST by Scanian
The constitutional hurdles are very high, says this New York Times piece. And the topic is so sensitive that no one will dare put it in writing on the Hill. But it may very well come down to bailing out some states with federal money or allowing them to declare some kind of bankruptcy:
"Policy makers 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.
"Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides."
And, of course, public unions are gearing up for a battle to save their gold plated pensions:
"'They are readying a massive assault on us,' said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. 'We're taking this very seriously.' Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states' immediate budget gaps with their long-term structural deficits.
'States have adequate tools and means to meet their obligations,' the report stated."
Could it happen? Bankruptcy remains a longshot given what it might do to the municipal bond market. More likely is some kind of federal bailout with strings attached. Nothing will happen until next year (fiscal year) when a lot of these temporary tax increases and spending cuts passed by the states expire.
ILLINOIS? OBAMA LAND? The answer is yes.
Regarding this state bankruptcy thing, I think you need to be asking yourself one very important question: “sovereigns or Krugerrands”?
The states in the worst financial shape namely California, Illinois, Massachusetts, New York and Michigan should immediately decalre bankruptcy.
This would be the first step in nullifying all existing union contracts and pension plans which can then be renegotiated anew and with a more practical financial and economic sustainability, in other words, having the recipients of these plans pay a lot more into their own pensions (at least 50% minimum).
Note that North Dakota, with its own bank and access to credit similar to what the federal govt. has, is basically immune to all the grief we read about.
What effect do you think that would have on the bond market.
ND’s energy production is also a big economic help.
Unknown at least as far as the long term.
Furthermore, not all states would have to declare bankruptcy.
Some states are in good financial and economic shape because they have taken the hard steps necessary to ensure future sustainability, job growth, pro business policies, lower tax structures etc.
Should a state declare bankruptcy, it will be interesting watching all the “I’m retired with a great pension and health benefits in my early 50’s...aren’t you?” crowd howl and gnash-about. Their smug snooty-obliviousness has been a bit much.
I read somewhere that only four states have an "A" credit rating. Of course I can't find the article now.
“ND’s energy production is also a big economic help.”
That is true but North Dakota was on a sound economic basis before the energy boom started.
You left out the Peoples Republic of Connecticut. We bucked the national trend and voted all the communists back in and even a dim governor this time. I guess you just can’t win in a state with the highest per capita of state workers. Please please Gov Malloy raise the “temporary” income tax to pay for all those sweet state pensions!
simple solution
pay public employees in scrip
It is quite a dilemma they can be insolvent but cannot erase their liabilities under current law.
This predicament makes insolvent U.S. states practically ungovernable and unable to sell bonds.
Insolvent states cannot pay their bills and current law gives them no place to turn.
bankruptcy yes... bailouts NO!!!
I second that! Although it would never happen, I would love to see the unions get pennies on the dollar.
New York. They can’t do bankrupcy soon enough!
A failed state.
Let them die or be absorbed into other states who are willing to lend the bankrupt residents a hand.
This is what promising everything and spending like their is no tomorrow gets you.
Someone has to pay.
There is no such thing as something for nothing...ever!
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