Could the crisis over the coronavirus result in a new law providing a way for states to declare bankruptcy? It’s starting to look like the answer may yes. That’s what we take from the comments today by Senator Mitch McConnell. The Senate majority leader, in a radio interview with Hugh Hewitt, is stating this flatly. He would, he says, “certainly” be “in favor of allowing states to use the bankruptcy route.”
That would represent a radical reform. The Constitution grants Congress the power to establish uniform laws for bankruptcies throughout the country. Yet the bankruptcy code lacks a chapter extending such protection to states, which might be why some of them have become so profligate. That combined with the coronavirus has put some of them on the brink of collapse.
This erupted in the news when the President of the Illinois senate, Don Harmon, wrote a letter to the Illinois delegation in the U.S. Congress asking a bailout of more than $40 billion for the state. Chicago Tribune blew its stack in a memorable editorial. What was so galling about it, at least to us, is that Mr. Harmon sought a $10 billion bailout directly to the Land of Lincoln’s long-underfunded pension system.
That had nothing to do with the pandemic, of course; it was about years of mismanagement of Illinois’ budget. New York and California have also dug themselves into shockingly deep holes. For any state in such circumstances to suggest that its obligations ought be paid by taxpayers in other states boggles the mind. Particularly when many states pensions are far more generous than those of private employers..........To Read More.....
That would represent a radical reform. The Constitution grants Congress the power to establish uniform laws for bankruptcies throughout the country. Yet the bankruptcy code lacks a chapter extending such protection to states, which might be why some of them have become so profligate. That combined with the coronavirus has put some of them on the brink of collapse.
This erupted in the news when the President of the Illinois senate, Don Harmon, wrote a letter to the Illinois delegation in the U.S. Congress asking a bailout of more than $40 billion for the state. Chicago Tribune blew its stack in a memorable editorial. What was so galling about it, at least to us, is that Mr. Harmon sought a $10 billion bailout directly to the Land of Lincoln’s long-underfunded pension system.
That had nothing to do with the pandemic, of course; it was about years of mismanagement of Illinois’ budget. New York and California have also dug themselves into shockingly deep holes. For any state in such circumstances to suggest that its obligations ought be paid by taxpayers in other states boggles the mind. Particularly when many states pensions are far more generous than those of private employers..........To Read More.....
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