State Bankruptcy

[Kimmo]

Interesting that the political interest here hasn't dredged this up one yet. Kinda big, really.

 

States might be allowed to declare bankruptcy.

[genepires]

Scary.

[Jens]

REALLY SCARY!

[j_b]

How well does government fit in the Republican bathtub of no taxation on the wealthy and corporations when reeling in from another speculative bubble burst? Kind of awkward, doesn't it?

 

Let it be clear that public employee pensions have nothing to do with the current crisis, the associated cuts in public programs, and state bankruptcy.

[JayB]

Interesting that the political interest here hasn't dredged this up one yet. Kinda big, really.

 

States might be allowed to declare bankruptcy.

 

It's been covered pretty heavily in elsewhere.

 

I personally think that state and municipal bondholders have more to fear from bankruptcy than public sector unions, since concentrating the pain on bondholders will be much less politically costly than imposing cuts/losses on public sector employees.

 

Hose the bondholders and it'll have little or no immediate political cost for public officials, and the higher interest rates that states/municipalities pay going forward will spread the pain over the entire electorate for a long period of time.

 

Imposing things like pension reform and structural pay cuts on existing employees will be political suicide in democratically controlled basket cases like California, New Jersey, Illinois, Massachusetts, etc, etc, etc.

 

Think of the GM bailout. The same political dynamics that wiped out bondholders in favor of the unions will prevail in any state controlled by Democrats.

 

Having said that - the multi-trillion dollar unfunded liabilities that will bankrupt states and municipalities have been obvious for years, and anyone buying state and muni debt should have insisted on interest rates high enough to compensate them for the default risks they were shouldering.

 

Loaning money to Greece and California has certain risks, and people who did so will have to take their losses when the day of reckoning arrives.

 

 

 

 

[Hugh Conway]

I personally think that state and municipal bondholders have more to fear from bankruptcy than public sector unions

 

 

 

At least you've stopped the pretense of neutrality. If you'd followed Vallejo you'd note that the bondholders, as most shitbirds do, did better than people

 

Bankruptcy means the states are fucked for borrowing. No new roads, new bridges, new schools. No repairs on the existing ones. "bankruptcy" and the attendant impact on the state would be HUGE - hell, the prospect of such being muted is huge to the bond markets.

 

 

Bankruptcy does benefit the lawyers though, those "service" employees that Thomas Friedman fellates

 

[j_b]

Having said that - the multi-trillion dollar unfunded liabilities that will bankrupt states and municipalities

 

liar. The states are bankrupt for lack of revenue due to YOUR laissez faire/bubble crash and YOUR drown the state in a bathtub/anti-tax strategy.

[JayB]

Having said that - the multi-trillion dollar unfunded liabilities that will bankrupt states and municipalities

 

liar. The states are bankrupt for lack of revenue due to YOUR laissez faire/bubble crash and YOUR drown the state in a bathtub/anti-tax strategy.

 

If all states were in an equally deep budget hole on account of declining tax revenues in the wake of a recession, then you'd have a better case.

 

Ditto if the states with the highest tax burdens were all in the best fiscal shape. Again - not the case.

 

 

[j_b]

many of these states had a revenue deficit problem due to YOUR anti-tax strategy in the first place, AND Texas, the state of no welfare except for that of the wealthy, is one of the deepest in the hole.

Edited January 26, 2011 by j_b

[JayB]

I personally think that state and municipal bondholders have more to fear from bankruptcy than public sector unions

 

 

 

At least you've stopped the pretense of neutrality. If you'd followed Vallejo you'd note that the bondholders, as most shitbirds do, did better than people

 

Bankruptcy means the states are fucked for borrowing. No new roads, new bridges, new schools. No repairs on the existing ones. "bankruptcy" and the attendant impact on the state would be HUGE - hell, the prospect of such being muted is huge to the bond markets.

 

 

Bankruptcy does benefit the lawyers though, those "service" employees that Thomas Friedman fellates

 

States where politicians depend on public employee unions for their elections will do what's best for them politically, irrespective of the impact on the state's borrowing costs in the future.

 

In practice, that'll mean concentrating the losses on bondholders as much as possible. That'll be much more consistent their political instincts and their political philosophies than restructuring public employee pensions and benefits.

[JayB]

many of these states had a revenue deficit problem due to YOUR anti-tax strategy in the first place, AND nobody civilized should have to account for the effect of a speculative bubble burst on their finances when they had no role in inflating the speculative bubble.

 

California, New Jersey, Illinois, Mass, etc are hardly the poster children for low taxes, kemosabe.

[j_b]

spare us the pablum about official tax rates. Let's face the reality of tax evasion at some point in your life.

[Lucky Larry]

Continued economic growth was based on the premise of a fair system of checks and balances. We know who got the checks. Now they have to figure out who is going to be stiffed for the negative balance.

 

When has the economic model ever been fair? The nature of it is built on greed and hence laissez faire will never work.

 

The Philosophical Dictionary

Voltaire

Selected and Translated by H.I. Woolf

New York: Knopf, 1924

Scanned by the Hanover College Department of History in 1995.

Proofread and pages added by Jonathan Perry, March 2001.

 

 

Bankruptcy

[my comments in brackets]

 

 

Few bankruptcies were known in France before the sixteenth century. The great reason is that there were no bankers. Lombards, Jews lent on security [not needed with credit cards] at ten per cent: trade was conducted in cash [not anymore]. Exchange, remittances to foreign countries were a secret unknown to all judges.

 

It is not that many people were not ruined[certainly not bankers]; but that was not called bankruptcy; one said discomfiture; this word is sweeter to the ear. One used the word rupture as did the Boulonnais; but rupture does not sound so well.

 

The bankruptcies came to us from Italy, bancorotto, bancarotta, gambarotta e la giustizia non impicar. Every merchant had his bench (banco) in the place of exchange; and when he had conducted his business badly, declared himself fallito, and abandoned his property to his creditors with the proviso that he retained a good part of it for himself, he free and reputed a very upright man. There was nothing to be said to him, his bench was broken, banco rotto, banca rotta; he could even, in certain towns, keep all his property and baulk his creditors, provided he seated himself bare-bottomed on a stone in the presence of all the merchants[never saw goldman sacks doing this]. This was a mild derivation of the old Roman proverb-solvere aut in aere aut in cute, to pay either with one's money or one's skin [loan sharking]. But this custom no longer exists [unless it's the mob]; creditors have preferred their money to a bankrupt's hinder parts.

 

In England and in some other countries, one declares oneself bankrupt in the gazettes. The partners and creditors gather together by virtue of this announcement which is read in the coffee-houses, and they come to an arrangement as best they can.

 

As among the bankruptcies there are frequently fraudulent cases [bankers], it has been necessary to punish them [with more money]. If they are taken to court [they haven't been] they are everywhere regarded as theft, and the guilty are condemned to ignominious penalties [bigger profits].

 

It is not true that in France the death penalty was decreed against bankrupts without distinction. Simple failures involved no penalty; fraudulent bankrupts suffered the penalty of death in the states of Orleans, under Charles IX., and in the states of Blois in 1576, but these edicts, renewed by Henry IV., were merely comminatory.

 

It is too difficult to prove that a man has dishonoured himself on purpose, and has voluntarily ceded all his goods to his creditors in order to cheat them. When there has been a doubt, one has been content with putting the unfortunate man in the pillory, or with sending him to the galleys, although ordinarily a banker makes a poor convict [still free: not warrants issued] .

 

Bankrupts were very favourably treated in the last year of Louis XIV.'s reign, and during the Regency. The sad state to which the interior of the kingdom was reduced, the multitude of merchants who could not or would not pay, the quantity of unsold or unsellable effects, the fear of interrupting all commerce [sound familiar?], obliged the government in 1715, 1716, 1718, 1721, 1722, and 1726 to suspend all proceedings against all those who were in a state of insolvency [todays bankers]. The discussions of these actions were referred to the judge-consuls; this is a jurisdiction of merchants very expert in these cases, and better constituted for going into these commercial details than the parliaments which have always been more occupied with the laws of the kingdom than with finance. As the state was at that time going bankrupt, it would have been too hard to punish the poor middle-class bankrupts.

 

Since then we have had eminent men, fraudulent bankrupts, but they have not been punished [current history].

 

 

Hanover Historical Texts Project

Return to Hanover College Department of History

Please send comments to:

luttmer@hanover.edu

 

 

 

[Hugh Conway]

many of these states had a revenue deficit problem due to YOUR anti-tax strategy in the first place, AND nobody civilized should have to account for the effect of a speculative bubble burst on their finances when they had no role in inflating the speculative bubble.

 

California, New Jersey, Illinois, Mass, etc are hardly the poster children for low taxes, kemosabe.

 

You do realize those are all net-donor states and pay more in income tax to the feeds than they receive in spending? When you receive $.61 of your taxes spent in your state (New Jersey) it doesn't take a genius to see that a couple billion budget deficit would easily be covered.

 

But clearly the only way to the future is tax arbitrage, it's so successful!

[Hugh Conway]

States where politicians depend on public employee unions for their elections will do what's best for them politically, irrespective of the impact on the state's borrowing costs in the future.

 

In practice, that'll mean concentrating the losses on bondholders as much as possible. That'll be much more consistent their political instincts and their political philosophies than restructuring public employee pensions and benefits.

 

that's not whats actually happened, but hey, sounds good

[JayB]

States where politicians depend on public employee unions for their elections will do what's best for them politically, irrespective of the impact on the state's borrowing costs in the future.

 

In practice, that'll mean concentrating the losses on bondholders as much as possible. That'll be much more consistent their political instincts and their political philosophies than restructuring public employee pensions and benefits.

 

that's not whats actually happened, but hey, sounds good

 

Really?

 

What's the actual breakdown? How about OC in '94?

[JayB]

Good blog post on Ch.9 and comments/discussion here.

 

https://self-evident.org/?p=878

 

 

[Hugh Conway]

What's the actual breakdown?

 

The draft plan allows the city to pay current and former workers about $5 million on an estimated $50 million owed, city officials said in November.

 

 

http://www.ft.com/cms/s/0/918f1d8e-232e-11e0-b6a3-00144feab49a.html?ftcamp=rss#axzz1BPGDcgxD

 

http://www.contracostatimes.com/news/ci_17135269?nclick_check=1

 

That's a fairly shitty way to default on compensation; that is the nuevo american way though

[Kimmo]

Let it be clear that public employee pensions have nothing to do with the current crisis, the associated cuts in public programs, and state bankruptcy.

 

of course they do, in terms of the balance sheet. a government can for only so long spend more than it makes.

 

same as any business.

 

how to remedy this is quite obviously the contentious aspect.

[ivan]

the bbc's cutting back, so the end of the world is already upon us - for christ's sake, i won't be able to listen to the caribbean-english version anymore?!?

[j_b]

Let it be clear that public employee pensions have nothing to do with the current crisis, the associated cuts in public programs, and state bankruptcy.

of course they do, in terms of the balance sheet. a government can for only so long spend more than it makes.

 

that's not true. You get rid of the long term pension liability and the current state budgets will still be as much in the hole and the same cuts would have to take place since taxes aren't going up.

Edited January 27, 2011 by j_b

[tvashtarkatena]

the bbc's cutting back, so the end of the world is already upon us - for christ's sake, i won't be able to listen to the caribbean-english version anymore?!?

 

Folo da po bo-aht, mon!

[prole]

States where politicians depend on public employee unions for their elections will do what's best for them politically, irrespective of the impact on the state's borrowing costs in the future.

 

In practice, that'll mean concentrating the losses on bondholders as much as possible. That'll be much more consistent their political instincts and their political philosophies than restructuring public employee pensions and benefits.

 

As opposed to those politicians installed by finance capital. In practice, that'll mean concentrating the losses on public workers as much as possible. That'll be much more consistent their political instincts and their political philosophies than restructuring their debt vis a vis bondholders.

 

I do like how political and class struggle is taking a greater role in your narratives, Jay!

 

 

[tvashtarkatena]

of course they do, in terms of the balance sheet. a government can for only so long spend more than it makes.

 

that's not true. You get rid of the long term pension liability and the current state budgets will still be as much in the hole and the same cuts would have to take place since taxes aren't going up.

 

Is there a cryptologist in the house?

[j_b]

Since Red Counties Enjoy a Disproportionate Share of the State Budget, They Should Expect a Disproportionate Share of the Cuts