In their op-ed in the Wall Street Journal John S. Baker Jr. and Robert T. Miller don’t like the idea of bankruptcy for states at all:
With tax revenue crashing and expenditures soaring, states face severe financial problems. Illinois has already requested a federal bailout of its pension system, and last month Senate Majority Leader Mitch McConnell suggested that Congress should enact legislation allowing states to go bankrupt.
Thankfully, Mr. McConnell appears to have dropped the idea. Allowing states to declare bankruptcy would fundamentally contradict the federal structure of our constitution. In that structure, the states are self-governing entities. But as anyone who’s endured the bankruptcy process knows, bankruptcy protection means the bankruptcy court is in charge. Federal bankruptcy protection would greatly constrain a state’s sovereignty, or power to govern itself, which the Constitution guarantees.
But if states are free to govern themselves, they’re also free to make poor choices. Decades of fiscal mismanagement left some states in a precarious financial position before the pandemic. Before Congress grants hundreds of billions of dollars to states—a step Mr. McConnell now says he’d entertain in exchange for legislation guaranteeing liability protection for businesses—it should consider an alternative grounded in prudence and reflection on American history.
but I find their proposed alternative cold comfort:
Covid-19 isn’t the states’ fault. But the states least able to weather its financial consequences got that way through decades of profligate spending and confiscatory taxation. Borrowing and timely repayment, not default or bankruptcy, is the best way for states to deal with the current crisis while getting their financial affairs in order. The essence of sovereignty is self-government, which entails a measure of responsibility.
Illinois is teetering on the brink of a completely inability to borrow at any rate of interest and there is no realistic prospect of the state’s corrupt, incompetent, do-nothing legislature taking the steps necessary to mend Illinois’s fiscal house. Gov. Pritzker’s preferred solution, a graduated income tax, requires ratification by direct popular vote (because the legislature is too cowardly to enact it on its own). What would it accomplish, anyway, other than encouraging rich people to leave Illinois?
I proposed solutions yesterday. Understandably, those will not be put in place voluntarily because elected officials don’t want to commit political seppuku.
Seeing the financial state of IL, NY, and other states like them reminds me of the financial state of the Ancien Regime of France prior to the appointment of the swiss banker Jacques Necker. Everyone in the court and elsewhere had such high hopes for and opinions of Necker, figuring that this financial wizard was sure to be able to find a way to solve the fiscal dilemma of the treasury. When his plan was revealed, which was to ask the people of France to voluntarily contribute to the crown to help eliminate the debt (much of it incurred to help the American Rebellion), the resultant outcry resulted in the summoning of the Estates-General, which of course eventually led to twenty-five years of hell in continental Europe.
They are hoping for a miracle. Then want a federal financial bailout. They need it desperately. Pelosi’s people are right now writing the bill to get it to them. Failing that IMO the governors of these states are willing to try and keep their states locked down to use it as political leverage (we’ll cause another Great Depression which would be blamed you, OMB!) or to use it to get OMB out of office.
We are living in interesting times. It seems like every damned day some new earth-shattering bombshell or crisis erupts. I’m tired of it. And the people throwing the bombs are the ones who say they’ll go back to normal once OMB is gone. And I have a moon rocket to sell too.
Guess I’m slow.
Came up with Old Man Biden,
Before Orange Man Bad.
Never heard of OMB. Thanks to Gray for breaking the code!
Here in CA Gov Newsom has an iron hand keeping all counties locked down. Some businesses in rural areas, with few virus cases and no deaths, have dared defy him, opening their doors early for commerce . He is now threatening to send people into those areas and close them down, just like what would be done in a police state. Newsom is another progressive dem who has squandered resources, bulked up on power, wants a bailout, and probably won’t let go of all his restrictions until he gets one – with the assistance of CA state politicians like Feinstein & Pelosi.
However, because of Newson’s authoritarian governance, a 2nd recall has been set in motion. The first one was clumsily put together by novices, getting 300,000 valid signatures. This next one will have the benefit of prior experience and more groups of people angered by his unreasonable response to the Coronavirus.