Thomas Sowell, on States: "They should go bankrupt. I'm looking forward to it."

There's a new interview of economist Thomas Sowell by John Hawkins of Right Wing News. Sample:

We're getting very close to the point where we could have states default on their debts for the first time. What should happen then?

They should go bankrupt. I'm looking forward to it.

There are three possibilities -- bankruptcy or bailouts or ruinous taxations. Of the three, bankruptcy is the one that makes the most sense because it's the one that conveys the most accurate knowledge -- which is that they've run out of money and couldn't cover all the promises they made. That fact should be revealed to all for future reference. The other thing about bankruptcy is that it's the only thing I know of that can get rid of these ruinous public sector union contracts with these extravagant pensions. Those pensions are so popular because the politicians can promise the pension now and get votes now without losing the votes of taxpayers now, because they don't set aside enough money to cover the pensions. Then they simply kick the can down the road and leave it to somebody else to figure out what to do when the money runs out.

There's also this bit on ending the Fed:

Now, in recent years we started to hear more people calling to get rid of the Federal Reserve. Good idea, bad idea? What are your thoughts?

Good idea.

Good idea? What do you think we should replace it with? What do you think we should do?

Well, it's like when you remove a cancer, what do you replace it with? I understand the wonderful theories about the great things the Federal Reserve can and should do. That's totally different from what the Federal Reserve has done and is likely to do in the future. It's painful to read Woodrow Wilson's glowing words when the Federal Reserve was set up, about the things it was supposed to do -- like keep the money supply from either contracting suddenly or having runaway inflation or having bank failures and so forth.

All those things empirically have become worse after there was a Federal Reserve System. So, there's no question that there are good things the Federal Reserve could do just as there are good things that the government could do. But people who say that never seem to want to look at the record and say, "Never mind what they could do; what have they actually done and what are they likely to do, given the incentives?" The incentives are there for both the Fed and for the political branches to interfere with the economy, to the detriment of the economy.

Whole thing here; link via Instapundit.

Reason on Sowell here, including Brian Doherty's May 2009 interview. See also our collections on the state fiscal crisis and the Federal Reserve.