To Save the States, Let ‘Em Declare Bankruptcy
Dick Morris and Eileen McGann|Townhall
Christie’s battles with the teachers unions over the past year have produced countless YouTube hits. And last month, he got a law passed to limit wage hikes from labor arbitrations between the state and public-employee unions to an average 2 percent annual increase.
As New Jersey, New York, California and Illinois — the four with the highest insurance premiums on their bonds — face life without a compliant Congress to approve their pleas for more cash, they’ll increasingly have to follow Christie’s example and rein in their unions.
As Margaret Thatcher famously said, the problem with socialism is that sooner or later “you run out of other people’s money.”
When the states come calling, the House must say, “No.” What’s more, it’s time to amend the federal bankruptcy laws to create a procedure for state bankruptcies — allowing states to abrogate their municipal-union contracts from the school-board level on up.
States, in bankruptcy court, should be able to reorganize their finances so as to put themselves back on a stable footing.
Initially, municipal-bond buyers will protest the lack of federal assistance and may even deny states and localities access to the bond market at any interest rate. But once the states reorganize, they should be able to proceed normally — just as New York City did after its financial meltdown in the ’70s.
Such reorganizations needn’t require any ongoing federal involvement. The procedure would let the states help themselves, giving governors and legislatures a third way out of their financial mess. Raise taxes, cut spending or … alter union contracts. Each state would face the choice of whether to wallow in overspending or take steps to correct it.