Posted on 04/25/2020 11:00:41 AM PDT by Rummyfan
Mitch McConnell believes he has hit upon a solution for states that are upside-down on their pension obligations and other financial commitments: “I would certainly be in favor of allowing states to use the bankruptcy route,” he told Hugh Hewitt on Wednesday. “It’s saved some cities, and there’s no good reason for it not to be available.”
There are a couple of good reasons for denying the states bankruptcy protection. One is the fact that there is no such thing as state-bankruptcy law in the United States. A second reason, related to the first, is the Constitution.
In the United States, we have a bankruptcy law for individuals, another one for businesses, and yet another one for municipalities and their subordinate agencies. We do not have a bankruptcy law for the states or for the federal government, for the same reason: They are sovereigns.
The several states are not administrative subdivisions of the federal government. They are powers in their own right, superseded by the U.S. government only in certain matters that involve more than one state: Washington can declare war or write immigration law, but it cannot tell Austin how to run the Texas Rangers or Sacramento how to prioritize its finances.
Because bankruptcy law is federal law, putting states into bankruptcy reorganization would upend our basic constitutional arrangement, making state governments answerable to federal bankruptcy judges and, behind them, to Congress. The people in Illinois are, for their sins, represented by the elected officials of Illinois in matters pertaining to Illinois.
(Excerpt) Read more at nationalreview.com ...
Open that Pandora’s Box and you will never close it.
but it cannot tell Austin how to run the Texas Rangers
I did a double take here. They mean the Texas Rangers law enforcement agency in Texas, not the Texas Rangers baseball team.
Absolutely the states should not have the right to bankruptcy. By the same token the states should ALL live with the consequences of THEIR actions... to include THEIR shutdown decisions and actions. There should not be one single penny give to the states for their actions.
except that counties and cities (as political creatures of their states) should ALSO not be permitted to run into federal bankruptcy court, I agree with the thrust of this editorial
we have had some great FR discussion of this question already so I will leave it to the pro side to post their arguments.
(I will only observe that giving states an escape route out of paying their financial obligations would only encourage corrupt state politicians to run up more and more debts, which is exactly the wrong thing for us to “incentivize” if we ever hope for responsible (and non-corrupt) state administrations
Spot on article... but you don’t bail them out either. Let the states figure it out on their own. They can borrow money outside the US if they want and aren’t a credit risk which I’m sure some are, or they could learn how to balance their checkbooks and stop handing out free shxt for votes. and no they can’t tax their way out of it either.
I like the idea posted here on FR of allowing these states to file for bankruptcy ... and then losing their statehood as part of the process. They would revert to territorial status and would have to start all over again.
IF they save Illinois, eff them until the end of time.
It’s long past time we let loosers lose. And Democrats = losers.
Ultimately, a state's Democrat leadership needs to be forced to go before a Federal tribunal and - in full view of their voting base - be required to state: "We promised to pay these greedy idiots too much and now we have to cut them off to survive!"
Then let the electoral chips fall where they may. :)
This is going to be a big piece of the economic fallout from the virus. States and cities are facing going broke, because with so much of the economy shut down, sales tax revenue and state income tax revenues are also cratering.
The amounts could be in the billions of dollars in some states and big cities.
The numbers are big but the concept is fairly straightforward. A sharp decline in budgeted revenues, combined with no corresponding decrease in governmental expenditures, results in a budget deficit.
I can imagine the Democrats would want to see a bailout from Washington, DC, to make up for the losses of tax revenue during this crisis.
Will it happen?
If Biden wins the election, and Democrats stay in control of the House and gain or capture the Senate, I expect legislation to cover these state and local deficits will happen.
Just add another trillion or so to the federal deficit. What’s a few trillion among friends. (sarcasm)
Our Federal, State, County and City, have existed in bankruptcy for generations by consistently spending more than their income. But it has never bothered them before because it’s not their debt it is the people they claim to represent debt. But now that their insane policies have their taxpayers out of work they must find new lemons to squeeze not awaking to the reality that it’s the same flaccid lemons that they have already emptied.
On another thread, someone said that if a state tried to declare bankruptcy, or simply quit paying its bills, it would lose statehood status, and revert to being a territory of the United States, rather than a state.
The Turtle showed his true color — Lawyer Green.
DC is all about feeding lawyers more and more and ever more work. DC is a lawyers’ full-employment jobs program.
that sounds good but what would it mean, do in practical terms?
would it at least get rid of the corrupt state level politicians that are responsible for most of the state government overspending? if so, would WashingtonDC appoint territorial governors or what? I really don’t know. Would you trust WashingtonDC to appoint honest, fiscally responsible governors? (I wouldn’t trust WashingtonDC to appoint our local dog catcher). Or?
I don’t see being a USA Territory as a punishment. I don’t see being a USA state as a reward. I just wish for more integrity in the state governments ... but how to get it if the public won’t elect it? Trusting other politicians to appoint territorial governors? PDJT would probably try to find honest people for the jobs but .. in general...would you trust WashDC to do the right thing? It so seldom does, smile smile smile.
I sure hope Im overlooking something about reverting to a USA territory, something that would indeed clean things up
This is one of the consequences Dirksen warned us about of the USSC decision that made all state legislators beholden to population size and not have one house (upper house like the US Senate) represent territory or some other principle. ( Don’t remember the na.e of the decision!)The Constitution guarantees the states a Republican form of government. The state governments should mirror the Fed in structure.That decision introduced to much “mob-ocracy” into state government and you’re seeing state governments ( particularly driven by state employee & teachers unions) vote themselves larger & larger chunks of the state tax revenue.
Isn’t it a fact, that some states, such as Illinois, are facing crushing pension debts? And that these debts, as opposed to just funding ongoing operations, are the reason for their facing financial insolvency?
My state is fiscally sound. I do NOT want my federal tax dollars to be given to states that haven’t balanced their budget. Especially states that spend their money catering to Illegals, trains to nowhere, and such.
Thats the facts. Unions bought politicians who bought votes by a Giant Ponzi scheme. If they had not “borrowed” from the Pension funds for various social schemes there would not be a problem. Now its a scramble to find excuses for the embezzlement. But at this point the Titanic is half underwater, playing music on the decks is just background noise.
If the Feds bail them out, does anybody really think they will stop stealing the money?
We got a preliminary look at this a few yrs ago with Greece. There is no international bankruptcy court. A country that says it is defaulting on debt will have the clock run. Any time they have assets outside the country, they can be seized, and that clock running is compounding. There is no expungement. There is no court that can say debt expunged.
In the case of US Bankruptcy court, there are no provisions for a state filing. There are provisions for municipalities filing, but the text of the US Bankruptcy Code makes clear that US courts will not supersede the ability of the state to exercise control over the municipality.
And besides that, as was demonstrated with airlines, a contract with employees assuring them of pensions can be undone in a bankruptcy filing.
This is what McConnell was referring to. A bankruptcy filing by a state would result in the court undoing state pensions, which inevitably will be the only way to resolve the case. Expunging debt would do nothing more than prevent any future lenders from lending, especially if the budget continues to show deficit.
That certainly concerns me. If these spendthrift states get a bailout, what incentive is there to ever manage their money properly?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.