The bill for decades of fiscal mismanagement is coming due in a great rush. The big blue states, led by New York, California and Illinois have been broke for years. They have trapped themselves in a vicious circle of raising taxes to pay for promised benefits for state employees and social services and productive citizens fleeing to escape said taxes; the shrinking tax base forcing a ratcheting up of taxes and even more flight. They will be seeking a Federal handout to put off the day of reckoning at least past their own terms in office. We need to think about what the price for the coming certain bailouts should be now, and the price needs to be set very high.
Like a drowning man, these governors have latched onto the Coronavirus scare to force the hand of the Federal Government to lend them the billions of dollars required for them to remain solvent and keep their constituents, mainly in terms of public employee pensions, financially whole. The have calculated that they cannot be blamed for the their fiscal situation. They will make the (specious) argument that this pandemic is an act of God and without it they would have been ok. But it has to be bad for this to work; hence their interminable lock down strategy. They claim they cannot end the lock down or else innocent people will die. The media has taken the hint and helped them make this a plausible story.
These governors, along with mostly willing legislatures, have crossed a line. They mandate healthy people quarantine contrary to science, law and common sense; for the thinly veiled, cynical, purpose of crushing the economy to enhance their claim to a bailout. Perhaps I am wrong and they will not make such a request. Anyone want to bet? The question is will there be consequences for those in charge.
As of right now, States cannot declare bankruptcy. My default position is that this should not change. States should be forced to clean up their own messes, cutting spending and borrowing at punitively high rates if not. However, the political pressure to bail them out will be very high. Bending to this pressure is extremely likely. Since this is the case, I am suggesting a change to existing law to allow for States to declare bankruptcy. To wit, as in the case of corporate bankruptcy, current management should not be rewarded. In this case, that would be the current political leaders.
I know it would be radical, but I am proposing that, as a condition to bankruptcy, and, yes, we should call it what it is, the current Governor and legislatures should resign (and be ineligible to run again) and the State be run by federally appointed trustees with a defined date for new elections. I know it would be contrary to our nominally “federal” system. It would be practically Lincolnesque; the unholy patron saint of both the modern right and left. I can hear the shrieking already. I say let us have a modern day Reconstruction.
We might need an amendment to the constitution to really get the meat of it. A draft:
The Federal Government shall have the authority to set laws allowing for Bankruptcy of States upon their lawful application, including the authority to condition relief upon the resignation of any elected official and the establishment of trustees in their stead. In such case, the President shall appoint a chairperson. Of the remaining trustees, the President shall appoint one half to be confirmed by the House of Representatives and the other half to be confirmed by the Senate. Once appointed, trustees shall preside in an acting fashion until either confirmed or not by the House or Senate. In cases where elected officials are required to resign, elections shall be scheduled not less than two years from the last of such resignations.
Sadly, given the demographics of most of these states, they would likely elect representatives that will start them down the same path almost immediately. The only long term solution, and it is likely a bridge too far, would be to disenfranchise public charges, including state employees.
As I said, I am a fan of real federalism and the States should work it out on their own. And they do claim sovereignty; witness their arbitrary lock downs. Since the bailouts are coming anyway, I say, let’s at least take some scalps.
Start the discussion