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Title: Path Is Sought for States to Escape Debt Burdens
Source:
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URL Source: http://www.nytimes.com/2011/01/21/b ... bankruptcy.html?_r=2&src=busln
Published: Jan 20, 2011
Author: MARY WILLIAMS WALSH
Post Date: 2011-01-21 02:35:34 by Mad Dog
Keywords: Constitution?, WHAT, CONSTITUTION?
Views: 820
Comments: 8
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 cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign. But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid. Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides. 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. “All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration. For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month. House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse. Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975. Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers. “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.” Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states’ immediate budget gaps with their long- term structural deficits. “States have adequate tools and means to meet their obligations,” the report stated. No state is known to want to declare bankruptcy, and some question the wisdom of offering them the ability to do so now, given the jitters in the normally staid municipal bond market. Slightly more than $25 billion has flowed out of mutual funds that invest in muni bonds in the last two months, according to the Investment Company Institute. Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow. Mr. Maco said the mere introduction of a state bankruptcy bill could lead to “some kind of market penalty,” even if it never passed. That “penalty” might be higher borrowing costs for a state and downward pressure on the value of its bonds. Individual bondholders would not realize any losses unless they sold. But institutional investors in municipal bonds, like insurance companies, are required to keep certain levels of capital. And they might retreat from additional investments. A deeply troubled state could eventually be priced out of the capital markets. “The precipitating event at G.M. was they were out of cash and had no ability to raise the capital they needed,” said Harry J. Wilson, the lone Republican on President Obama’s special auto task force, which led G.M. and Chrysler through an unusual restructuring in bankruptcy, financed by the federal government. Mr. Wilson, who ran an unsuccessful campaign for New York State comptroller last year, has said he believes that New York and some other states need some type of a financial restructuring. He noted that G.M. was salvaged only through an administration-led effort that Congress initially resisted, with legislators voting against financial assistance to G.M. in late 2008. “Now Congress is much more conservative,” he said. “A state shows up and wants cash, Congress says no, and it will probably be at the last minute and it’s a real problem. That’s what I’m concerned about.” Discussion of a new bankruptcy option for the states appears to have taken off in November, after Mr. Gingrich gave a speech about the country’s big challenges, including government debt and an uncompetitive labor market. excerpt, page 1 of 2
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#1. To: All (#0)
. "All HAIL the messiah "king" Obammy!"
Living in mouth breather's empty noggins 24/7/365 totally rent free!
We've known for 30 years that when the baby boomers start to retire, there are going to be huge problems with entitlements. Whether it's Social Security, or government pensions, the problem is the same -- taxpayers are forced to pay people to sit around for 20 or 30 years and be unproductive. It doesn't work. The answer to both problems is exactly the same -- people have to save for their own future and not burden taxpayers. Both government pensions and social security need to be converted into 401K type programs. That's the only answer.
All of what you say is true. But ... That is an entirely different animal. This is about who and what the USA is IS. The several states CREATED the feral gooberment. IT exists at their will, not vice versa. THIS is about making the several States disappear completely. AND destroying the US Constitution.
Living in mouth breather's empty noggins 24/7/365 totally rent free!
The answer to both problems is exactly the same -- people have to save for their own future and not burden taxpayers. Agree 110%. I spent several years in Eastern and Western Europe. W. Europe was different from what I was used to, but not all that different... E.Europe was like stepping onto a different planet. Oh, they looked similar, but the thought processes were quite different... In that they have the same "family values" that we did about 80 years ago... In short, they took care of their families. Parents took care of kids, and when the kids were adult and well-established, the parents stayed with their kids' families, and helped out with things like house-hold chores, babysitting, teaching the children, etc. Since they had no "benefits" like social-security, and maybe a tiny pension (with a purchasing power of ~$50 max), it was the logical solution. And it encouraged family strength, unity, teamwork, etc. The government is toast. They may continue to issue SS checks, but only if they've devalued the dollar so much that the checks are a pittance. If they can't devalue fast enough, they'll simply cut off the old folks, and the elderly will either starve or freeze to death, when they can't make their utility bills. History is a great teacher; one only has to remember that the nature of man (or alternatively, "bureaucrats" will do) does not change. Once that fact is grasped, and an examination of previous countries who faced similar circumstances is analyzed, the path forward will be very clear, whether we like it or not... I shake my head, thinking about this. If the obvious question is, "do we ever learn?", then the equally obvious answer is "no." So, understanding all of this, I did what any responsible adult would do: I bought an extra large house. My folks are elderly, they don't believe the government would steal their SS and retirement accounts... and they'll be coming to stay. ME: Thanks for admitting that you ARE trying to spin this (AZ shooting, and terrorism) onto Palin, and conservatives in general. "There will be no more money when the U.S. dollar has no value, until that time we can keep printing more." -- go65, resident mental giant --
. I agree with everything you have said here. "There is a STORM coming."
Living in mouth breather's empty noggins 24/7/365 totally rent free!
In short, they took care of their families. Parents took care of kids, and when the kids were adult and well-established, the parents stayed with their kids' families, and helped out with things like house-hold chores, babysitting, teaching the children, etc. Since they had no "benefits" like social-security, and maybe a tiny pension (with a purchasing power of ~$50 max), it was the logical solution. And it encouraged family strength, unity, teamwork, etc. You have defined the root cause of our problem -- government welfare programs have destroyed our family structure. The politicians have replaced the father with the state. That is why we are in so much trouble. I've spent a lot of time in Asia (Japan, Singapore, China, Philippines, and Malaysia.) What you say about Eastern Europe is true about Asia as well. In Asia you are expected to take care of yourself and your family. It's not uncommon to have three generations living in the same home, all pitching in to help the family. If you don't have a family and can't take care of yourself, you go to a charity. In some Asian countries, there might be a tiny bit of public assistance, but it's not much and it comes at a steep price of shame and embarrassment for the people who use it. Of course, Americans have lost their sense of shame, which another big part of the problem.
Since when did you decide to become a shill for Republicans and parrot their talking points? Reality Check: Go back and look at the deficit before Bush/Cheney got into the White House.
Since January 3, 2011, Republicans have controlled the power of the purse.
What does this have to do with the discussion at hand? The federal government starting destroying the American family with the Great Society programs of the 1960s. Today, nearly 80% of black kids are born in fatherless homes. An increasing number of white kids are in the same situation. The politicians have replaced the father with the state. It's a fundamental cause of the troubles we face. Yes, another issue is that the neo-con interlopers weaseled their way into positions of power during the Bush years and convinced him to gallivant around the middle east for god only knows what reason. We have battle the politicians on both fronts.
#2. To: Mad Dog (#0)
(Edited)
"It's very important to remember the law is not simply what powerful people would want others to believe it is." -- Julian Assange
#3. To: jwpegler (#2)
#4. To: jwpegler (#2)
We've known for 30 years that when the baby boomers start to retire, there are going to be huge problems with entitlements. Whether it's Social Security, or government pensions, the problem is the same -- taxpayers are forced to pay people to sit around for 20 or 30 years and be unproductive. It doesn't work.
Both government pensions and social security need to be converted into 401K type programs. That's the only answer.
That assumes the stock market is a legit marketplace. All indications are that REAL investors are fleeing, while large corporations and the government actively engage in "flash-trading." In other words, that house of cards will likely collapse too, especially when the dollar is finally tossed in the garbage, as a reserve currency...
Brian S(ocialist): I have never hidden that fact...
#5. To: Capitalist Eric (#4)
#6. To: Capitalist Eric, go65 (#4)
(Edited)
in that they have the same "family values" that we did about 80 years ago...
"It's very important to remember the law is not simply what powerful people would want others to believe it is." -- Julian Assange
#7. To: jwpegler (#6)
(Edited)
#8. To: go65 (#7)
"It's very important to remember the law is not simply what powerful people would want others to believe it is." -- Julian Assange
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