States Look Towards Bankruptcy To Avoid Crushing Debt

I’ve mentioned many times the dire straights the States are in economically, mostly thanks to liberal policies (they aren’t solely to blame, though. Republican overspending is a part, too). The NY Times is finally noticing this, too. Interestingly, they never mention that the majority of States in really, really bad shape have been mostly run by Democrats, ones such as California, NJ, and NY

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.

You mean that Glenn Beck, Neal Boortz, and Sean Hannity are correct, since they constantly talk about the crushing debt caused be out of control public pensions? Goodness! But, see, there is one problem with bankruptcy for states

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.

The State and federal constitutions forbid states from reneging on their debts. Maybe they could do what California has done, and pass out IOUs?

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. 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.

The Fish Wrap goes on to discuss what bankruptcy would allow states to do, theoretically, since they can’t actually declare bankruptcy. How about, instead, they cut down spending, spend the money they forcibly take from residents wisely, stop promising to be Mommy and Daddy, and become tax friendly, which would mean companies hiring, people spending, companies coming in and starting up, and restrict themselves to core functions. Obviously, that is a simplistic overview, but, sometimes, government tries to be too complicated.

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4 Responses to “States Look Towards Bankruptcy To Avoid Crushing Debt”

  1. captainfish says:

    Quote:
    How about, instead, they cut down spending, …, and become tax friendly, …, and restrict themselves to core functions.

    RAOTFLMFAO

    yeah, ain’t gonna happen. They would rather dump police and fire and hospitals before dumping parks, museums, welfare, subsidies, art shows, red tape, and paying extra for union projects.

    And don’t forget giving out free rides to bus and trains and handing out money to the ever-unemployed.

  2. Yeah, I know, I know, I’m living in the Real World, rather than Political World.

  3. Kevin says:

    I guess it is time to go to war with China. If we win, we don’t owe them anything…

  4. Rob in Katy says:

    The could target the pensions, oh sorry, I didn’t mean to say “target”, I meant “kill off” the pensioners and that would lighten that debt obligation.

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