The Next Big Crisis: State Bankruptcies

Jewish World Review ^ | 6/22/10 | Dick Morris and Eileen McGann

[rhema]

Many say that the situation in Greece is a harbinger of what is coming to the United States. They are right. But first it will come to states like New York, California and Michigan, which are stretched way beyond their means and deeply in debt.

Until now, the problems in these states have been papered over by federal aid. Essentially, Washington has relieved these states (and the local governments they fund) of their constitutional obligations to balance their budgets by giving them welfare checks in the nick of time. Barack Obama now seeks to pass $50 billion in additional welfare to the states.

But, since these federal funds are not necessarily recurring — and the jobs and obligations they fund are — they simply enlarge each year's deficit hole and enable the states to go more deeply into the red.

As these deficits mount — particularly if a newly elected Republican House and/or Senate refuse to fund them — bondholders will get more and more nervous. Eventually, they will realize that the less solvent states are bankrupt and will refuse to buy their debt. Eyes in Sacramento, Lansing and Albany will turn helplessly to Washington to guarantee their debt, just as Athens turns to Berlin.

Republicans, if they control either or both Houses, should stand firm and insist that these states sink or swim on their own. America's taxpayers will not take kindly to having to bail out other states — or even their own — to pay for years of reckless spending. Americans will swarm to the GOP and will hail its stand.

[KarlInOhio]

But first it will come to states like New York, California and Michigan, which are stretched way beyond their means and deeply in debt.

Tweeeeet! Improper use of the passive voice to avoid blame. Proper usage is "which have spent massively more than they should."

[central_va]

Worth Repeating:

America's taxpayers will not take kindly to having to bail out other states

[Jack Hydrazine]

Great call, news ref!

[VRW Conspirator]

Republicans, if they control either or both Houses, should stand firm and insist that these states sink or swim on their own. America's taxpayers will not take kindly to having to bail out other states — or even their own — to pay for years of reckless spending. Americans will swarm to the GOP and will hail its stand.

Let's hope so Dick.

[GailA]

It will take more than $50 B to bail just those few states alone, much less the other states that are in bad shape, especially those states that have had large natural disasters this year, some of them multiple ones..

[YankeeReb]

Republicans, if they control either or both Houses, should stand firm and insist that these states sink or swim on their own.

Easier said than done. Most of the problem stems from unfunded federal mandates and state union contracts/pensions. The only solution may be to declare bankruptcy and all these contracts get renegotiated. I don't think any politician has the b@lls to do that. Does anyone have a better suggestion?

BTW is anyone else sick to death of hearing how "The American people don't want to pay for all the government programs they demand.". Personally I wish they'd get rid of most of the crap they fund.

[Varsity Flight]

Satellite states of the Beltway.

[Pollster1]

Never let a crisis go to waste. Is it time to nationalize those states as they grabbed GM and Chrysler, Citi and BofA, and our medical industry?

[sickoflibs]

RE :”Until now, the problems in these states have been papered over by federal aid. Essentially, Washington has relieved these states (and the local governments they fund) of their constitutional obligations to balance their budgets by giving them welfare checks in the nick of time. Barack Obama now seeks to pass $50 billion in additional welfare to the states. But, since these federal funds are not necessarily recurring — and the jobs and obligations they fund are — they simply enlarge each year's deficit hole and enable the states to go more deeply into the red.As these deficits mount — particularly if a newly elected Republican House and/or Senate refuse to fund them — bondholders will get more and more nervous. Eventually, they will realize that the less solvent states are bankrupt and will refuse to buy their debt. Eyes in Sacramento, Lansing and Albany will turn helplessly to Washington to guarantee their debt, just as Athens turns to Berlin.”

Isn't it the federal governments primary job to take money away from responsible states and give it to the irresponsible ones like NY and CA?? If one of your kids had a paper route and the other got arrested for stealing wouldnt it be your job to take away the good kids money to help bail out the bad kid? Are you heartless??? :)

Thank Obama, he turned the country against this sort of idiotic logic, but that wasnt his intention.

[Eska]

I heard Ron Paul mention that we should bring all our troops back home on American shores; of course I always thought that was short sighted and reckless. Then Paul said that we are going to end up doing that anyway in a couple years when we go broke and end up like Russia in early 90s. That really hit the mark.

I tend to believe the same thing will occur with respect to spending overall in our country; just wish the politicals would accomplish it in a systematic manner rather than having hell in the streets across America when the bottom falls out.

Those Dem states are in for a big awakening. I'm just glad I live in rural Alaska; pretty much isolated from everything and have done without for so long (stores & food from Sams) that I could continue this way and not even notice.

[Liz]

Obama now seeks $50 billion in additional welfare to the states..........

California alone is looking at a yawning $500 Billion hole in its obligations.

The $50B is another Ohaha slush fund.

[YankeeReb]

I’m convinced that hell in the streets and civil war are part of the magic muslim’s plans for this country. Another day, another outrage and another assault on our liberty.

[IamConservative]

I’m convinced that hell in the streets and civil war are part of the magic muslim’s plans for this country. Another day, another outrage and another assault on our liberty.

You can visualize it fairly easily. The 52% of the population that don't pay taxes and rely on social programs stop getting checks. They go out into the areas what the other 48% live and start taking what they are "owed." Shooting will commence.

[Uncle Miltie]

This is impossible because massive Keynesian Spending stimulates the economy.

Paul Krugman told me so.

[Uncle Miltie]

This is impossible because massive Keynesian Spending stimulates the economy.

Nobel Prize winning economist Paul Krugman told me so.

[GOPJ]

I don’t want to pay for California’s irresponsible spending. Period. They made their bed, let them lie in it.

[GOPJ]

Ummm - the “/s” is missing - and yeah - there are liberals who will take you at your word...

[Alberta's Child]

If you were to look at a list of states and compare their Federal tax burdens to the amount of money they receive in Federal spending, you might be surprised to find that "Blue" states like New York and Massachusetts are among those that pay a hell of a lot more in taxes than they get back in Federal spending -- and the biggest "recipient" states tend to be "Red" states.

There are a number of reasons for this, of course -- including the fact that more urban states have higher living costs (and therefore people have higher salaries and pay higher income taxes) and fewer military facilities and Indian reservations.

But this idea that the Federal govermnent is propping up these "Blue" states is a myth.

[sickoflibs]

RE :”If you were to look at a list of states and compare their Federal tax burdens to the amount of money they receive in Federal spending, you might be surprised to find that “Blue” states like New York and Massachusetts are among those that pay a hell of a lot more in taxes than they get back in Federal spending — and the biggest “recipient” states tend to be “Red” states. There are a number of reasons for this, of course — including the fact that more urban states have higher living costs (and therefore people have higher salaries and pay higher income taxes) and fewer military facilities and Indian reservations.”

Good point.

This is because those high cost of living coastal states demand Washington IMPOSE a more and more redistributed progressive federal income and capital tax. This would be like the Jews voting for Hitler and then complaining about it. If those states want their ‘tax money’ used on them then they would support less federal government so they could raise their local taxes more to spend as they want it. (This would cause them problems too.) The whole idea of redistribution is ‘someone else get’s others money’. It is not 'you get to keep your own money'. In a way I would like to see the AMT tax go up under Obama to make those liberals scream.

Yes, I know Republicans were a big part of the federal expansion problem.