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Amazing possibility: Plans being drawn up to let states declare bankruptcy

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It would forever increase dramatically the rate at which states would have to pay in order to borrow debt; It would also make any state that did this so that it had to pay MUCH MUCH more for any future debt.

I like it; back-door balanced-budget.
 
I can't imagine any state putting itself in a position where it can essentially never borrow money again for any project/spending etc. I'd guess that muni and state bonds will not get wiped out, this appears to be a tactic for the states to try and get out from under the crushing long term unsustainable pensions promises and obligations they've saddled themselves with.
 
DesiPower said:
Another round of depression around the corner... sell your stocks people
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Sell your municipal bonds, you mean.

Wait a little: Then watch for low prices for an otherwise sound corporation. That's a sure sign it's time to Buy Stocks.
 
I'm as far from a bankruptcy expert as you can get so keep that in mind.

My guess would be that the pensions would be turned over to the PBGC and that a lot of positive spin will be put on that. Anyone who's been paying a little attention should be aware that the PBGC is broke to the tune of billions and has been for quite some time. In addition, the pension payouts will be reduced. For some not so much and for others to a great degree. There are a numbers of things that factor into how much one is to receive.

So, if this were to be the case, while it will appear to many that the problem has been minimized (remember the spin) it will not be the case by any means. The costs will have just been shifted. We've been shifting costs for decades. It's contributed greatly to the trouble we're in.
 
Politicians have shown that they don't have the will/balls to tackle the giant pensions and healthcare burdens that are going to crush their future state budgets at the current rate. A bankruptcy might allow them "political cover" to restructure some of the unsustainable pensions. I'd be on board with it, but only if it didn't result in a bunch of funds getting freed up for renewed spending waste. Governments at every level need to be forced to start balancing their spending and intake amounts.
 
nick1985 said:
http://www.msnbc.msn.com/id/41188877/ns/business-the_new_york_times

"Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout.

Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors"


wow. Not sure what I would do if I was one of those retirees. I imagine people wont take this one peacefully.


Hell, even the public employee unions are going nuts:

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”
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Well those workers are partly to blame. All the unions and what not have made it so expensive to employ anyone on the governemnt payroll.

Hate to say it, but all the welfare families out there are going to have to do without. We are to the point of either cut the lowest rungs of the ladders off, or risk the whole thing collapsing and taking everyone else with it as well.
Stop welfare spending.
Stop paying for medical care for illegals and people without insurance.
Stop spending money on useless research grants.
Stop spending money in schools to teach children of illegals in a different language.
Stop spending money trying to teach kids (teens) that don't want to be in school and are only there because they are forced to be.
Stop giving raises and increasing benifits packages for government workers until the finicial mess is fixed.
Start allowing access to drilling and mining in the US and waters so we can stop sending our money off shores for energy. Why can't states with oil and natural gas reserves use those to provide fuel for it's fleet of vehicles? Or let them sell it to make money.
It's interesting that the article says that states can't file for bankruptcy because they are considered soverign, yet the federal government won't allow states to have soverign control of their own territory.
 
Double Trouble said:
Politicians have shown that they don't have the will/balls to tackle the giant pensions and healthcare burdens that are going to crush their future state budgets at the current rate. A bankruptcy might allow them "political cover" to restructure some of the unsustainable pensions. I'd be on board with it, but only if it didn't result in a bunch of funds getting freed up for renewed spending waste. Governments at every level need to be forced to start balancing their spending and intake amounts.
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They don't have the will/balls, because those are a lot of voters. Most politicians only care about one thing. RE-ELECTION. They don't care if the ship is going down while a blaze, they will just tell people when the boat gets low enough in the water, it will put out the flames. The people are just to stupid to understand that when it gets that low in the water, it's UNDER WATER and will never be able to surface.
 
JeffreyLebowski said:
They don't have the will/balls, because those are a lot of voters. Most politicians only care about one thing. RE-ELECTION. They don't care if the ship is going down while a blaze, they will just tell people when the boat gets low enough in the water, it will put out the flames. The people are just to stupid to understand that when it gets that low in the water, it's UNDER WATER and will never be able to surface.
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Agreed, ultimately the voters generally punish politicians that want to take difficult steps to actually try to fix things and reward those who continue to promise them everything and continue deficit spending. We as voters are to blame for that......
 
soxfan said:
What. The. Hell. How goddamn hard is it for lawmakers to understand that you can't spend what you do not earn?
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Deep down, most politicians know this. They're not nearly as stupid as we like to think they are. They're merely dishonest, and they know if they tell the truth ("We as a nation simply can't afford to continue providing the level of services you've come to expect at present taxation levels"), their opponent will just tell better lies ("More freebies!! Less taxes!!") and get elected. Our stupid, self-deluding population doesn't want smart, honest leaders. We like our liars. The coming fiscal crisis is the fault of the voters, not the politicians.
 
Double Trouble said:
Agreed, ultimately the voters generally punish politicians that want to take difficult steps to actually try to fix things and reward those who continue to promise them everything and continue deficit spending. We as voters are to blame for that......
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This x100.
 
Like I suggested in another thread, "where there's a will, there's a way." It doesn't make any sense to forfeit the future of this country for ridiculous public pensions. Everyone's going to have to be poorer, even retired people.

Of course, it would be nice if legislators and their voters would stop supporting idiotic spending too.
 
I like that the article attempts to maintain the premise that the states are still considered "sovereign".

While it's bullshit for all real intents and purposes, it's nice to see.
 
rudeguy said:
ok..I guess that is good. But what about the people who are depending on that health care and those pensions that they were promised?
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What part of "they can not afford it" don't you understand?

There we go. No I get it. Its ok for people to get screwed out of their health, home and livelihood as long is it doesn't ding your account.

Dick
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No, he is selling the bond to someone else who will then get fucked instead of him.
 
DixyCrat said:
It would forever increase dramatically the rate at which states would have to pay in order to borrow debt; It would also make any state that did this so that it had to pay MUCH MUCH more for any future debt.

I like it; back-door balanced-budget.
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I doubt it. As has been stated already the states will do whatever they possibly can to not hose bondholders. If they can significantly reduce health and pension costs while leaving the bondholders whole their cost of borrowing money shouldn't raise all that much over the long term. Hell, it might make them more credit worthy as their financial situation has drastically improved.
 
if one muni declares bankruptcy, that will be like bringing the EU problem home.

borrowing interest spread will shoot up and that state can't refinance the other maturing bonds, now need a federal bail out.
 
soxfan said:
What. The. Hell. How goddamn hard is it for lawmakers to understand that you can't spend what you do not earn?

Want to improve roads? PAY FOR IT!

Want to build a bridge? PAY FOR IT!

Want welfare and social programs? PAY FOR THEM!

For some reason, the above concepts are earthshattering breakthroughs that politicians just can't seem to get their wee brains around.

Seriously, this incessant government borrowing has got to f'ing stop. And giving the states an "out" by way of bankruptcy is a horrific idea. Want to see bad times? Just wait until your state files bankruptcy and its bond rating goes into the shitter. Maybe then, when massive RIF's are REQUIRED because the state can't borrow the money to pay for its workforce, will the pencil pushers in charge understand the Rolling Stones rule of personal and public finance, i.e., "you can't always get what you want."

Seriously, it is not rocket science.
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Here is a clue: http://gonzalolira.blogspot.com/2011/01/why-democracies-will-always-go-bankrupt.html

In a nutshell, a majority of voters can be for lower taxes while another majority of voters can be for more government services. So what's a politician to do? Borrow of course, then both majorities are satisfied. Sorry to say it but mass franchise democracy is dumber than dog shit.
 
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bignateyk said:
This country would be so much better if we could have a libertarian like Ron Paul become a dictator for 4 years, clean the whole mess up, and then give it back to the republicans and democrats to fuck everything up all over again from a clean slate.
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Benevolent dictatorship is actually the best form of government. Problem is finding a benevolent dictator and ensuring he stays that way.
 
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