State Bankruptcy?
- By Jerry Taylor
- Published 02/1/2011
- Stuff
The Legislature has now been in session for almost a month and, knock on wood, there has not yet been any ringing of alarm bells for LEOFF 1. It seems that the Legislature has, at least thus far, accepted the assessments of State Actuary and other officials that pension systems are a “hands off” item. I am sure that the pension surplus numbers are tempting but the realization that those “surplus” dollars are not real money in the sense they were believed to be in 2001 have kept the lawmakers at bay.
None the less, there has been a bit of concern about rumors flying around the internet dealing with proposals to allow States to go bankrupt and thus avoid paying their pension obligations. We first noted an article in the NY Times on January 20th. In “A Path Is Sought for States to Escape Their Debt Burdens”, the author, Mary Williams Walsh, reviews several proposals that nominally would allow States to file bankruptcy and thereby avoid their bond and pension obligations. The subject was picked up by a number of venues including other papers, talk shows and blogs. We received alerts from several of our members.
Frankly, I think it is all sort of political hype. Of course the idea is to make villains of public employee unions and pensioners. While it is fun to talk about these broad brush scenarios that claim offer instant solutions to vexing problems, the devil still lives in the details. A state bankruptcy or even the option for a state bankruptcy would send bond rates through the roof and thereby further exacerbate the problem. If they actually did go bankrupt they would have to sell off government building and land just to meet their constitutional obligations.
The real underlying message I this proposal is that the legislators need to stop playing politics and spending money just to get a few more vote. Rather it is time to actually govern. That means cutting spending and, God forgive us, raising taxes. It means doing the job they were elected to do. Would that not be a real surprise.
The message is not yet getting through. Just this week there was an article bemoaning the possible cut in funding of county fairs. It struck me as strange that we would turn criminals out of our jails and cut healthcare for children but cry because we could not fund county fairs. That, in my mind, is not governing.
US House Majority Leader Eric Cantor opposes a bill allowing state bankruptcies. Given his clout, the bill attempt seems dead. Besides, even if it did pass, it would immediately be challenged in court as unconstitutional. Cantor also opposes federal bailouts of states. This leaves states with apparently few options except to cut spending, raise taxes, and try to renegotiate agreements.
Any serious review of the proposal exposes it as a frivolous idea. Here are a couple of additional articles on the subject. They are interesting discussions.
On state bankruptcy and bond traders
Bob Morris, CAVIN
More On Why The "State Bankruptcy" Idea Is Dangerous Nonsense
Business Insider/Joe Weisenthal
None the less, there has been a bit of concern about rumors flying around the internet dealing with proposals to allow States to go bankrupt and thus avoid paying their pension obligations. We first noted an article in the NY Times on January 20th. In “A Path Is Sought for States to Escape Their Debt Burdens”, the author, Mary Williams Walsh, reviews several proposals that nominally would allow States to file bankruptcy and thereby avoid their bond and pension obligations. The subject was picked up by a number of venues including other papers, talk shows and blogs. We received alerts from several of our members.
Frankly, I think it is all sort of political hype. Of course the idea is to make villains of public employee unions and pensioners. While it is fun to talk about these broad brush scenarios that claim offer instant solutions to vexing problems, the devil still lives in the details. A state bankruptcy or even the option for a state bankruptcy would send bond rates through the roof and thereby further exacerbate the problem. If they actually did go bankrupt they would have to sell off government building and land just to meet their constitutional obligations.
The real underlying message I this proposal is that the legislators need to stop playing politics and spending money just to get a few more vote. Rather it is time to actually govern. That means cutting spending and, God forgive us, raising taxes. It means doing the job they were elected to do. Would that not be a real surprise.
The message is not yet getting through. Just this week there was an article bemoaning the possible cut in funding of county fairs. It struck me as strange that we would turn criminals out of our jails and cut healthcare for children but cry because we could not fund county fairs. That, in my mind, is not governing.
US House Majority Leader Eric Cantor opposes a bill allowing state bankruptcies. Given his clout, the bill attempt seems dead. Besides, even if it did pass, it would immediately be challenged in court as unconstitutional. Cantor also opposes federal bailouts of states. This leaves states with apparently few options except to cut spending, raise taxes, and try to renegotiate agreements.
Any serious review of the proposal exposes it as a frivolous idea. Here are a couple of additional articles on the subject. They are interesting discussions.
On state bankruptcy and bond traders
Bob Morris, CAVIN
More On Why The "State Bankruptcy" Idea Is Dangerous Nonsense
Business Insider/Joe Weisenthal
