One policy question on the front of many people's tongues in this year of Republican control of the House is, what are the feds going to do about budget-busted states? This New York Times front-pager from today doesn't exactly answer that question, but it demonstrates that people with or near power are asking it with some urgency, and (hide your wallets!) are making explicit comparisons to the illegally bailed-out General Motors. Sample:
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. […]
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. […]
"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 […] 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."
The Times points to two Republicanoid proposals to deal with this: A Newt Gingrich speech from November urging a federal state-bankruptcy law that would "prohibit tax increases as part of the solution," and a November Weekly Standard article by David Skeel that posits bankruptcy as the best option for preventing a bigger federal bailout, and takes eight paragraphs to tiptoe through the Tenth Amendment and other consitutional "barriers."
Color me trebly skeptical. First, I'm always skeezed out by hand-waving in the face of constitutional objections. Second, until states get a little bit past considering such no-shit-Sherlock ideas as killing subsidies for film production, I won't be remotely convinced that they have come to terms with the blunt fact that they are out of money. State governments need to directly confront the consequences of their own blatant misgovernance, rather than have the can kicked to some faraway authority that the self-deluded political class and citizenry can then blame; politicians and political parties need to be punished for their malfeasance. And lastly, any movement initiated by the House GOP is going to look one helluva lot different after the Democratic Senate and the union-friendly White House are done mangling it. There is no way, given the realities of public sector union dominance of Democratic fundraising, that federal lawmakers are going to sign off on something that doesn't give at least partial veto power to the racket that helped get us into this mess in the first place.
Our three we-told-you-so cover stories: "The Next Catastrophe: Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode," from February 2009, "Failed States: After a long spending binge, governors go begging for a handout. It won't be their last," from May 2009; and "Class War: How public servants became our masters," from February 2010.
And never forget: When union honcho Andy Stern was confronted by the L.A. Times about his role in driving the state budget into the ditch, he said "I think democracy is an ugly thing sometimes."
