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Discussion Starter #1
Choice 1: Bail out the states, with more fake money.
Choice 2: Let the states file bankruptcy, and leave Wall Street and unions holding the bag.

I'll take choice 2 for $15 trillion Alex.

The bankruptcy debate heats up.

It’s a solution of apparent Alexandrian elegance and simplicity: Empower America’s cash-strapped states to slice cleanly through a strangling knot of debilitating debt and government union cronyism by letting them file for bankruptcy. Long-term liabilities could be restructured, unaffordable labor contracts rewritten, fiscal health restored. No federal bailouts necessary.

This intriguing idea quickened last November when former House speaker Newt Gingrich gave it an animating shoutout during a speech at a Dallas think tank. That was followed by a detailed explanation in this magazine by David Skeel, a corporate law professor and bankruptcy expert at the University of Pennsylvania (“Give States a Way to Go Bankrupt,” November 29, 2010). As conservative Republicans on Capitol Hill began cooking up legislation to change the federal bankruptcy code, the concept exploded across the Internet—not to mention in Wall Street research departments.

Liberal bloggers, in particular, seemed to perceive the danger to a status quo where Big Labor elects state and local legislators who then return the favor by agreeing to contracts that, say, allow police officers to retire at age 50 with pensions equal to 90 percent of their highest salary. It’s a system that’s made government unions crazy powerful within the Democratic party while also helping states rack up some $3.5 trillion in unfunded pension and health care liabilities. (And that’s in addition to the anticipated $250 billion shortfall in state budgets over the next two years.) Kevin Drum of Mother Jones put it this way: State bankruptcy “promises to become a pretty serious battle. For Republicans it’s got everything: The tea parties will love it, it provides an alternative to raising taxes, and .  .  . it helps defund a key Democratic interest group. What’s not to like?”

Surprisingly, quite a bit—at least among some Republicans and conservatives. In a January 24 session with reporters, House majority leader Eric Cantor brushed off the idea. “I don’t think [permitting states to declare bankruptcy] is necessary because state governments have at their disposal the requisite tools to address their fiscal ills.” The Virginia Republican added, “They have the ability to enter into new negotiations if there are any collective bargaining agreements in place. They have the ability to adjust levels of spending as well as revenues at the state level.”

A more pointed critique was offered by members of the highly respected free-market Manhattan Institute, Nicole Gelinas and E. J. McMahon, in the op-ed pages of the Wall Street Journal and other papers. Among their many objections to state bankruptcy: It would violate the constitutions of many states; it would damage the balance sheets of banks holding a quarter of a trillion dollars in state and municipal bonds; it might even cause such investor panic as to risk repeating the 2008 financial meltdown. “Bond-market brinkmanship and bankruptcy threats can’t save the states from themselves,” Gelinas wrote in the Boston Globe on January 23.

Even as ardent a supporter as Skeel readily concedes he hasn’t discovered a silver bullet to state fiscal woes. As he wrote back in November, “Although bankruptcy would be an imperfect solution to out-of-control state deficits, it’s the best option we have, at least if we want to have any chance of avoiding massive federal bailouts of state governments.” Of course, that’s the essence of wise policy-making. Every “solution” inevitably comes with trade-offs. The challenge is to find answers with large enough net benefits to justify the inevitable costs and problems.

But the case for state bankruptcy may be better than some naysayers suggest. Even critics don’t really deny that bankruptcy—or even the mere threat of it—would be a powerful tool in reducing labor’s bargaining power. Government unions and their advocates certainly understand this. On January 24, California treasurer Bill Lockyer joined with the union-backed Economic Policy Institute in a conference call for reporters to denounce state bankruptcy as “a cynical proposal intended to incite a panicked response to a phony crisis.” And now that the bankruptcy option has been raised, liberal think tanks that had been arguing for more federal assistance to bolster state finances are suddenly painting a much rosier fiscal picture. As they used to say in the Soviet Union, “It’s no coincidence.”

continued in link........

http://www.weeklystandard.com/articles/when-states-go-bust_541424.html
 

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Taxpayers have absolutely no leverage in renegotiating contracts with government unions without bankruptcy being an option. Many of these agreements were bad for taxpayers from the beginning, and the generous negotiators are out of office. With the contracts in place, there is little incentive for unions to come to the bargaining table. The mere option of bankruptcy will allow some of the worst contracts (from the taxpayers standpoint) to be renogotiated. Times have changed. It's not 1996 any more. Retirement at 50 with 90% pay is no longer feasible. Private workers don't get anything approaching that. Neither should public workers.
 

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Which one is Texas going to do? :D
 

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Choice 1: Bail out the states, with more fake money.
Choice 2: Let the states file bankruptcy, and leave Wall Street and unions holding the bag.

I'll take choice 2 for $15 trillion Alex.
Monty, I'm going with whats behind door number 3

Let the states file bankruptcy, and any elected government employee no longer recieves a salary until bankrupt states are solvent:lookinup:
 

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Which one is Texas going to do? :D
Well, right now, #2 is not a legal option. I'm sure there will be some of #1 involved, but mostly there is already major budget slashing taking place in Austin. Our economy is relatively strong. I have no doubt the budget will be balanced in the next two year cycle.
 

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Discussion Starter #7
Well, right now, #2 is not a legal option. I'm sure there will be some of #1 involved, but mostly there is already major budget slashing taking place in Austin. Our economy is relatively strong. I have no doubt the budget will be balanced in the next two year cycle.
We wouldn't need #2, it's unconstitutional in Texas to borrow money... #1 won't be necessary because of the same law. The budget gets balanced... end of story. Liberals scream and cry, we continue on.
 

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Well, right now, #2 is not a legal option. I'm sure there will be some of #1 involved, but mostly there is already major budget slashing taking place in Austin. Our economy is relatively strong. I have no doubt the budget will be balanced in the next two year cycle.
We wouldn't need #2, it's unconstitutional in Texas to borrow money... #1 won't be necessary because of the same law. The budget gets balanced... end of story. Liberals scream and cry, we continue on.
Im quoting both of these for future reference. It will be interesting to see if both of you are right.
 

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Discussion Starter #9
Im quoting both of these for future reference. It will be interesting to see if both of you are right.
Both, or one? :laughing:

Texas has a balanced budget amendment.. can't get around it without a change to the constitution which is not going to happen.
 

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Im quoting both of these for future reference. It will be interesting to see if both of you are right.
I believe this round of deficit can be fixed with budget cutting and minor tax increases (we don't have an income tax). But longer term, the public employee retirement bomb is waiting. I'm not sure how they will handle that one.
 

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Both, or one? :laughing:

Texas has a balanced budget amendment.. can't get around it without a change to the constitution which is not going to happen.
Exactly. It will be interesting to see what means they employ to close the gap. Meanwhile they are voting on abortion rights...
 

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Exactly. It will be interesting to see what means they employ to close the gap. Meanwhile they are voting on abortion rights...
They are multi-taskers. They can consider more than one thing at a time. The beauty of our system is that the legislators only meet for a few months every two years. They work their asses off during that time, but some of it is definitely wasted on less than important issues.
 

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Allowing states to go Bankrupt would hurt The states credit rating first, the nations credit rating second and those who have invested in Municipal bonds the most.
Munys are where most of your money gets put in your 401K when you come close to retirement age. It is considered a safe investment since states can not go bankrupt, and since it is tax free income, it greatly helps balance the portfolios of those who will be retiring soon and will be getting hit with the taxes due on 401K distributions.

As to the credit ratings of the States and the US, I think we all want to see lower interest rates. The rates that the governement would see in the 10-15% range after the first state goes bankrupt would push consumer interest rates higher too. This could cause a major hit to our place as the worlds greatest economy. Just doesn't seem like the smart move.
 

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Discussion Starter #14
Allowing states to go Bankrupt would hurt The states credit rating first, the nations credit rating second and those who have invested in Municipal bonds the most.
Munys are where most of your money gets put in your 401K when you come close to retirement age. It is considered a safe investment since states can not go bankrupt, and since it is tax free income, it greatly helps balance the portfolios of those who will be retiring soon and will be getting hit with the taxes due on 401K distributions.

As to the credit ratings of the States and the US, I think we all want to see lower interest rates. The rates that the governement would see in the 10-15% range after the first state goes bankrupt would push consumer interest rates higher too. This could cause a major hit to our place as the worlds greatest economy. Just doesn't seem like the smart move.
I don't think there is a smart move, bail em out, problem, bankruptcy, problem, default, problem. It's a national problem as well, a default is coming, unless someone can pass 100% taxation, that would get us to within $100 trillion or so...
 

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Having this knowledge, ask yourself this. What would the government look like after this "not smart move" ? What would their size, scope and influence over the people and business, look like ? What reason would you give for need to fundamentally transform an entire nation. If you wished to fundamentally transform an entire nation and the world... where would you start ?
 

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I don't think there is a smart move, bail em out, problem, bankruptcy, problem, default, problem. It's a national problem as well, a default is coming, unless someone can pass 100% taxation, that would get us to within $100 trillion or so...
State governments have the power and ability to restructure contracts with unions. Our governor is doing it right now. A change to the state constitution could also limit the future indebtedness of the state and mandate that what was done in NJ cannot continue to happen, Namely steal from pension funds to balance budgets.

To claim bankruptcy thus ruining the credit of a state and thus costing untold billions more in interest payments to the state probably for many many years is not just short sighted but just plain wreckless.
 

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Having this knowledge, ask yourself this. What would the government look like after this "not smart move" ? What would their size, scope and influence over the people and business, look like ? What reason would you give for need to fundamentally transform an entire nation. If you wished to fundamentally transform an entire nation and the world... where would you start ?
And this statement exposes the real reason that the extreme right is calling for Government bankruptcy. The willingness of the ultra right to ruin this country in hopes of giving themselves a boost is disgusting and imoral.

We are all well aware of Grover Norquists goal of shrinking government until it can be drowned in a bathtub, but this plan of doing so destroys not only government but the USA itself. I guess it doesn't matter if you are a Canadian making your money here until you retire in Mexico, but as a natural born American who plans on living here until I die, I find this plan abhorant.
 

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State governments have the power and ability to restructure contracts with unions. Our governor is doing it right now. A change to the state constitution could also limit the future indebtedness of the state and mandate that what was done in NJ cannot continue to happen, Namely steal from pension funds to balance budgets.

To claim bankruptcy thus ruining the credit of a state and thus costing untold billions more in interest payments to the state probably for many many years is not just short sighted but just plain wreckless.
States cannot unilaterally renegotiate contracts. Both parties must agree, and without the possibility of bankruptcy - or something that looks like it - government employees have no incentive to agree. I have read that a new bankruptcy-like procedure just for states could be developed that protected bond investors, but gave states wide latitude to force renegotiation of all contracts. Congress would have to develop it. The economc world has changed permanently, and public employees got unsustainable benefits when their leverage was high and the economy was good. They will see taxpayers bankrupted before they voluntarily give up pay and benefits. And since unions are some of the largest donors to congressional candidates, it's a long shot congress will act before it is too late.
 

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Discussion Starter #19
State governments have the power and ability to restructure contracts with unions. Our governor is doing it right now. A change to the state constitution could also limit the future indebtedness of the state and mandate that what was done in NJ cannot continue to happen, Namely steal from pension funds to balance budgets.

To claim bankruptcy thus ruining the credit of a state and thus costing untold billions more in interest payments to the state probably for many many years is not just short sighted but just plain wreckless.
Personally, I think anything past bankruptcy is a pipe dream. These liberal, spend til you die states are just not going to change their constitution nor renegotiate with their strongest voting base, the unions.

All the legal wrangling involved with the unions and changing constitutions take time, and that is something state's don't have much of. IMO.

We are all well aware of Grover Norquists goal of shrinking government until it can be drowned in a bathtub, but this plan of doing so destroys not only government but the USA itself.
I don't know if you missed the memo, but we are already there. Time to put the genie back in the bottle..
 

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And this statement exposes the real reason that the extreme right is calling for Government bankruptcy. The willingness of the ultra right to ruin this country in hopes of giving themselves a boost is disgusting and imoral.

We are all well aware of Grover Norquists goal of shrinking government until it can be drowned in a bathtub, but this plan of doing so destroys not only government but the USA itself. I guess it doesn't matter if you are a Canadian making your money here until you retire in Mexico, but as a natural born American who plans on living here until I die, I find this plan abhorant.
...-And your statement exposes the "absolute naivete" of those on the absolute left who are willing to defend what they KNOW will destroy both. We are also all aware of Saul Alinsky's plan to expand government, until it is "we" who are drowning in a bathtub of debt for the explicit reason of fundamental change.

Here's the difference... One republican in 100 thousand, can quote Grover Norquist... or even knows who he is. On the other hand... this President and the vast majority of his cabinet, professes to admire and wishes to assimilate Saul Alinsky's plan to expand government and transform this country... ADMITTEDLY. Going so far as to be tutored by Alinsky.

What is the bigger danger to this country... your naivete... or our concern over what is actually happening to this great country ? -Answer that, Mr. American... ?

Outlining his strategy in organizing, Alinsky writes:

There's another reason for working inside the system. Dostoevski said that taking a new step is what people fear most. Any revolutionary change must be preceded by a passive, affirmative, non-challenging attitude toward change among the mass of our people. They must feel so frustrated, so defeated, so lost, so futureless in the prevailing system that they are willing to let go of the past and change the future.
 
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