SPECIAL POST
The NEW YORK TIMES is reporting that “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 the Federal Government, states are not able to print money to pay their way out of debt. Some states are so burdened with debt and obligations to employees that it is impossible for them to work their way out; obviously, this is due to poor fiscal management, both past and current. Added to this problem is the fact that the states cannot issue bonds at favorable rates, because potential bondholders are afraid they will not get paid or will not get paid on time. The fear of destabilizing the municipal bond market with the words “state bankruptcy” has the bond markets watching closely.
Theoretically, a modification to the Constitution may be necessary to accommodate state bankruptcy. Such bankruptcy would not eliminate debt, but would restructure it and would allow states to renegotiate pensions and government wages.
It appears to me to be part of the American culture to run up all of the debt that we want and then to run from the consequences by finding a way out of repayment. It’s the same culture that infests Washington, where they enact laws without reading them and then shuck and duck when things go bad.
And, who is to blame for that?
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