« | »

NYT: State Bankruptcy Option Is Sought

From a suddenly concerned New York Times:

Path Is Sought for States to Escape Debt Burdens

January 20, 2011

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.

Oh, that bothersome Constitution.

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.

Illinois? Why cite Illinois as an example? The New York Times was just singing Illinois’ praises for courageously hiking their income tax 66%. We thought that had solved all their problems.

Does this mean that the public unions will end up owning the states like the UAW ended up owning GM?

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.

By the way, in this typically lengthy New York Times article the word ‘union’ is only used once. And even that is buried.

But isn’t it funny? How come we never hear how fat cat union types are taking money away from the poor and the sick?

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.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout.

Think how crazy it is that these public sector unions were able to enshrine their gold-plated deals put into the states’ constitution. If this fiasco is ever put behind us, public sector unions should be outlawed for the rest of time.

In fact, such a prohibition should be written into every state’s constitution.

Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors

You mean like GM and Chrysler’s stockholders? Funny, but The Times had no problem with that. Perhaps they own New York state bonds.

Still, we imagine all this talk is going to make it all that much harder for states to borrow money from now on.

For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity [sic] in a hearing this month.

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975

Or maybe Mr. Obama could establish a blue ribbon panel or some study groups.

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.

“They are readying a massive assault on us,” said Charles M. Loveless [sic], 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

Of course not. Who could even imagine thinking such a thing?

This article was posted by Steve on Friday, January 21st, 2011. Comments are currently closed.

3 Responses to “NYT: State Bankruptcy Option Is Sought”

  1. proreason says:

    POLITICIANS !!!!! Are you listening?

    Remember that pesky second amendment. You know, the one where the people have the right to bear arms because the Founders had experience with politicians who thought they had unlimited power.

    Yeh, that amendment.

    That’s the amendment that will be the reason 200 million gun barrels will be shoved up your anuses if you try to bail out states, PARTICULARLY New York and California.

    Just sayin

  2. tranquil.night says:

    “If this fiasco is ever put behind us, public sector unions should be outlawed for the rest of time.”

    Along with the bulk of the public sector.

    The mechanics for a smooth transition to mass privatization are there in this highly networked era.

  3. wardmama4 says:

    OMG – bailouts for States – Hey wake up idiots, stupid masses and entitlement crowds – A government big enough to give you everything, is big enough to take everything away.

    Boy, if even one crapweasel in DC suggests this idea – The shot heard around the World won’t compare to what will happen next – The Second American Revolution –

    When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

    Works for me.

« Front Page | To Top
« | »