States May be Able to Declare Bankruptcy

[Kreutz]

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.

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.

More at:

http://finance.yahoo.com/news/A-Path-Is ... l?x=0&.v=1

It's only a matter of time.

[allingeneral]

get out from under crushing debts, including the pensions they have promised to retired public workers.

Maybe the Federal government should take a cue from this regarding all of the entitlement programs that are currently being offered and the fact that the Fed has no chance to keep up with their promises to give everyone something for free.

[WRW]

I can see it...if they are willing to relinquish Statehood, become territories of the U. S., and lose all voting rights at the Federal level until such time as each geographic area of the affected territory becomes solvent and applies for Statehood.

[gunderwood]

I figured this would happen sooner or later. IMHO it is a bad idea. The federal government will dangle a carrot in front of those states and get them to give up more power in exchange for the ability to declare bankruptcy. Of course, once the states can do that they will have no fear of spending far more than they did to get into the mess.

IMHO, let those states be held up as an example of why deficit spending and Keynesian economic theory is a failure. Let them fail.

[zephyp]

@Garrett - of course its a bad idea no matter how you stack it up. Nothing good can come from something like this.

@Rick - yup. Orange county officials admitted earlier this week that the cost of illegal children cost them about $600M - yes $600M - per year.

[VBshooter]

With this news the protectors of the welfare state are shaking in their shoes, and those that are entitlment junkies aren't far behind in the paranoia that the goodie fountain may dry up;;;;

[skeeterss0]

I've seen the prequal to this in the federsal gov. I joined the Corps in 1981 with the promise of free health care for me and my dependants for life. Provided by military providers. Well somewhere during my 20 years in they started charging me for health insurance. The cost of which inches up year after year. Now that I'm retired they are talking about raising the cost even more. All this comes from the Fed government.

Back in 2001 when I retired from the Marines people kept telling me to go into a civil service job, keep working for the government for the benefits. I thought better of it. They keep making promises (social security) then renigging on the promise. They say they can't afford the payouts and I say then you shouldn't have made the promise.

I see similarities in the civilian world with companies dealing with unions. The company promises its workers a nice retirement. Then money gets tight, the company is about to go bankrupt so the renegotiate with the union. Or they go bankrupt and the workers get screwed even worse.

[gunderwood]

I've seen the prequal to this in the federsal gov. I joined the Corps in 1981 with the promise of free health care for me and my dependants for life. Provided by military providers. Well somewhere during my 20 years in they started charging me for health insurance. The cost of which inches up year after year. Now that I'm retired they are talking about raising the cost even more. All this comes from the Fed government.

Back in 2001 when I retired from the Marines people kept telling me to go into a civil service job, keep working for the government for the benefits. I thought better of it. They keep making promises (social security) then renigging on the promise. They say they can't afford the payouts and I say then you shouldn't have made the promise.

I see similarities in the civilian world with companies dealing with unions. The company promises its workers a nice retirement. Then money gets tight, the company is about to go bankrupt so the renegotiate with the union. Or they go bankrupt and the workers get screwed even worse.

The problem was it never was a sustainable system. They should never have made the promise, but the politicians who did make it won't be held accountable or are dead now. Same with the unions. A union must prove its worth (in order to keep collecting dues so its leaders can live like kings) by always asking for more. We all want to be paid more, but at some point the job isn't worth what your asking.

Interestingly enough Congress is very hard on the DoD about multi-year contracts, but they make multi-generational social contracts on a whim.