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Title: U.S. States Must Be Allowed To Declare Bankruptcy To Reduce Pension Bills, Say Republicans
Source:
DAILY MAIL
URL Source: http://www.dailymail.co.uk/news/art ... ptcy-reduce-pension-bills.html
Published: Jan 21, 2011
Author: DAILY MAIL
Post Date: 2011-01-21 14:13:26 by Brian S
Keywords: None
Views: 2961
Comments: 4
Republican politicians are fighting to win U.S. states the right to declare bankruptcy in a bid to free them crippling pension bills and other punishing debts. Currently states such as Illinois and California, which are struggling to pay back loans, are forbidden from claiming federal protection from insolvency. But advocates, including Senator John Cornyn and former House Speaker Newt Gingrich, say states are so burdened by debt that bankruptcy may be the only feasible way out. For example, bankruptcy would allow allow governors to reduce contractual pension payments, which are often protected by state constitutions. It could also provide an alternative to bailouts, which Republicans have shown themselves determined to oppose since Barack Obama’s election as president. But there are also fears in Congress that states’ bonds could be reduced to junk and it would put investors off buying U.S. debt. Paul Maco, a former head of the Office of Municipal Securities at America’s financial regulator, the Securities and Exchange Commission, told the New York Times that fear of the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. So policy makers have been forced to work behind the scenes to change the rules, which could require a difficult constitutional amendment as states are considered sovereign by Washington. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator Cornyn, of Texas, asked Ben Bernanke, the chairman of the central bank, the Federal Reserve, about the possibility in a hearing this month. Discussion of a new bankruptcy option appears to have begun in November following a speech by Mr Gingrich about soaring debts. “We just have to be honest and clear about this, and I also hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy,” he said. Although, nothing formal has been outlines, unions are worrying about the prospects of their members losing retirement income. Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers. Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees told the New York Times: “They are readying a massive assault on us. We’re taking this very seriously.” He added that public employees and their benefits were not the cause of the states’ financial problems so should not be treated as a scapegoat. 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. Other experts have warned that bankruptcy is unnecessary as states’ immediate problems are not their long-term structural deficits but their current budgets. “States have adequate tools and means to meet their obligations,” a report by the Centre on Budget and Policy Priorities stated yesterday. James E. Spiotto, head of the bankruptcy practice at law firm Chapman & Cutler in Chicago, said the possibility of some states declaring bankruptcy could also raise the cost of borrowing for others.
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#1. To: Brian S (#0)
So retired teachers, firefighters and police are the ones who take the brunt of state budget cuts? OK.
#2. To: go65 (#1)
(Edited)
I hope Americans will enjoy driving on unpaved roads and having garbage go uncollected (see Baghdad). This is what limited govt services looks like: BAGHDAD, IRAQ - APRIL 19: An Iraqi man attempts to clear a pile of trash outside an apartment building April 19, 2003 in Baghdad, Iraq. Uncollected trash is scattered throughout the city with no government services available for collection.
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