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Path Is Sought for States to Escape Debt Burdens

Renae

Renae

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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.

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.
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http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?_r=1&src=busln

Oh man, what a scary scary idea. Letting states declare bankruptcy? BAD JUJU.
 
Albert Di Salvo said:
What choice is there? None. The states have to be given protection from creditors. It's the only reasonable thing to do. Let a Bankruptcy Court judge decide what is fair and what is unreasonable.
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Do you realize they let even a single SINGLE state do this, and the municipal bond market would collapse. How does that help anyone?
 
Albert Di Salvo said:
What choice is there? None. The states have to be given protection from creditors. It's the only reasonable thing to do. Let a Bankruptcy Court judge decide what is fair and what is unreasonable.
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Yeah, let one man control the market. What's the difference between this and a dictatorship?
 
MrVicchio said:
Do you realize they let even a single SINGLE state do this, and the municipal bond market would collapse. How does that help anyone?
Click to expand...

But what exactly is the alternative? A federal bailout?
 
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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.
Click to expand...
Isn't socialism vunderful? Expand government and promise the world...

Spend, spend, spend, spend, spend... whine about proposed cuts, spend, spend, spend, spend...whine about proposed cuts... spend, spend, spend... call The Tea Party a bunch of racist, bigot ne'er-do-wells.

How long did it take for this fiasco to implode the states? 40-years? About par with what happened with the post war Commi countries.

And the Libs have the gall to ask for more socialist crap like ObamaKare? Yes one is Federal, and we are talking about states... but it's the same road to destruction.

****ing incredible.

As for the solution? First cut and gut down to the bone and into the bone.
 
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Kandahar said:
But what exactly is the alternative? A federal bailout?
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That is the only solution. The very fabric of the US at stake here.. if the other states or/and Feds dont help save states in trouble, then what is the freaking point of the US any more?

Problem is to fix this issue, the states, politicians and so on have to come out of the total denial they are in.. all options including tax's going up, must be on the table.... and I think pigs will fly before that happens.
 
Albert Di Salvo said:
What choice is there? None. The states have to be given protection from creditors. It's the only reasonable thing to do. Let a Bankruptcy Court judge decide what is fair and what is unreasonable.
Click to expand...

States had better be able to find an alternative. The bond market is collapsing right now due to these rumors. It's a matter of time before nobody's going to buy their debt paper whether they declare or not. It would be a complete disaster. Would the Chinese buy our national debt if bankruptcy of states became possible? That's an unspoken warning that the Fed could do the very same thing. What a freakin' mess.

Kandahar said:
But what exactly is the alternative? A federal bailout?
Click to expand...

I cannot imagine that happening. What does that solve? Just gives more time for another run-up to the stratosphere.

zimmer said:
Isn't socialism vunderful? Expand government and promise the world...

Spend, spend, spend, spend, spend... whine about proposed cuts, spend, spend, spend, spend...whine about proposed cuts... spend, spend, spend... call The Tea Party a bunch of racist, bigot ne'er-do-wells.

How long did it take for this fiasco to implode the states? 40-years? About par with what happened with the post war Commi countries.

And the Libs have the gall to ask for more socialist crap like ObamaKare? Yes one is Federal, and we are talking about states... but it's the same road to destruction.

****ing incredible.

As for the solution? First cut and gut down to the bone and into the bone.
Click to expand...

If public sector unions will not renegotiate their onerous contracts, they will be ultimately responsible for something a whole lot worse than The Great Depression.
 
Cutting spending in a consumer based market...sometimes I wonder if conservatives are pretending that our industry is based on manufacturing and agriculture.
 
MaggieD said:
States had better be able to find an alternative. The bond market is collapsing right now due to these rumors. It's a matter of time before nobody's going to buy their debt paper whether they declare or not. It would be a complete disaster. Would the Chinese buy our national debt if bankruptcy of states became possible? That's an unspoken warning that the Fed could do the very same thing. What a freakin' mess.

I cannot imagine that happening. What does that solve? Just gives more time for another run-up to the stratosphere.

If public sector unions will not renegotiate their onerous contracts, they will be ultimately responsible for something a whole lot worse than The Great Depression.
Click to expand...

Have you seen what the average Fed worker is making these days?
Federal workers earning double their private counterparts
Federal workers earning double their private counterparts - USATODAY.com
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Their pay freeze is a joke too. Smoke and mirrors. Promote someone and voila... a raise.

.
 
CriticalThought said:
Cutting spending in a consumer based market...sometimes I wonder if conservatives are pretending that our industry is based on manufacturing and agriculture.
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Spending money we don't have, only Liberals call this smart.
 
Albert Di Salvo said:
What choice is there? None. The states have to be given protection from creditors. It's the only reasonable thing to do. Let a Bankruptcy Court judge decide what is fair and what is unreasonable.
Click to expand...

And the muni bonds go in the toilet.

Well done...
 
hazlnut said:
And the muni bonds go in the toilet.

Well done...
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For the life of me, I don't see how this can happen.

If one state is allowed to write off its muni debt, it will cripple every other state's ability to raise funds. And, of course, China would be wonderin' about the Feds. I'm thinking a reorganizational bankruptcy...exempting muni's. Anything short of that will bring on complete disaster.
 
hazlnut said:
And the muni bonds go in the toilet.

Well done...
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So what then? A federal bailout? At $14 trillion in debt, where are the feds going to get it?

California is a like that alcoholic relative that is constantly needing a place to stay and can't keep a job.
 
States need to live within their means. Federal govt. needs to live within their means. People need to live within their means. Its going to hurt, but cuts in or elimination of many programs are going to have to happen to bring the budget in line with income and to eliminate the State debt. If our elected officials can't do the job, we need people who can and will.
 
Erod said:
So what then? A federal bailout? At $14 trillion in debt, where are the feds going to get it?

California is a like that alcoholic relative that is constantly needing a place to stay and can't keep a job.
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And the drunks elected the equivalent of Hazlnut as governor. How is that going to work out?

.
 
CriticalThought said:
Cutting spending in a consumer based market...sometimes I wonder if conservatives are pretending that our industry is based on manufacturing and agriculture.
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Sometimes I wonder if liberals are pretending that money grows on trees.
 
American said:
Sometimes I wonder if liberals are pretending that money grows on trees.
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Here's the deal. If the federal government bails out California, as it did GM, then what does that do to California's state's rights? What does the federal government get in exchange? Does California now have a lesser voice?

Is this a route to a stronger central government and lesser state power like, oh, Arizona, which is taking on Washington for the right to institute a stronger immigration policy?

Obamacare is going to bankrupt every state. Think about that.
 
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MrVicchio said:
Do you realize they let even a single SINGLE state do this, and the municipal bond market would collapse. How does that help anyone?
Click to expand...

No pain no gain. Investors and taxpayers will have to take the pain so that those who gamed the system can be swept overboard.
 
PeteEU said:
That is the only solution. The very fabric of the US at stake here.. if the other states or/and Feds dont help save states in trouble, then what is the freaking point of the US any more?

Problem is to fix this issue, the states, politicians and so on have to come out of the total denial they are in.. all options including tax's going up, must be on the table.... and I think pigs will fly before that happens.
Click to expand...

You don't get it. There is no point in the continued existence of the current polity. It no longer makes sense. Let everyone go their own way in peace. Americans can be friends, but they cannot be brothers and sisters any more.
 
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