Gosh, Why Would Mitch McConnell Think States Should Go Bankrupt Instead Of Getting Some Stimmy?
Mitch McConnell did an interview with rightwing radio hoser Hugh Hewitt Wednesday in which the Senate majority leader explained he has little sympathy for states going broke because of the coronavirus pandemic, and in fact he'd rather see them go bankrupt than give states any more federal aid. (Happily, the link is to a transcript, so you don't have to listen to either of those nutclots.) You see, McConnell explained, it's time to reopen America for business and hope for the best, and if states go broke, well that's their lookout, not his. (In McConnell's world, or at least how he's pitching it, only blue states need bailouts, which will not even begin to be somewhat conceivably true.)
Mind you, there's one little problem with McConnell's preferred approach, as Hewitt points out in the interview: Under federal law, states can't go bankrupt, although cities and other local governments can. So in order to get his wish, McConnell would have to get Congress to pass a substantial change to bankruptcy laws. That might be even more difficult than passing a new stimulus package, even! All to fuck the libs.
Hewitt brought up the idea that certain states don't deserve any help during the economic crash, because too many blue states have had the temerity to say they'll honor their pension obligations with public employees, and what sort of monster would support paying out on retirement plans for teachers and cops, who aren't even in MILITARY, for gosh sakes!
Now Leader, I haven't been on the radio as long as you've been in the Senate, but it's close. And since I've been on the radio, I've been warning people that pension funds for public employees are dangerously underfunded. And I know that [Speaker Nancy Pelosi] and your colleague Chuck Schumer want to pour money into these funds. But they need to be reformed. I mean, some of the benefits they grant are ridiculous. I don't think any public employee, even a great teacher of 30 years, should make more than a colonel in the Army or the Marine Corps who served 25 years, or a captain in the Navy. I just think they're out of control. Will you insist on reforms of state pension plans if they get replenished by the next bill?
McConnell agreed that if states do get any aid, he'd make darn sure the funds are "not spent on solving problems that they created for themselves over the years with their pension programs."
Hewitt returned to the possibility of just leaving states out to dry instead of providing them any federal aid, asking McConnell who he'd put in charge of allowing state bankruptcies so obligations to public employee unions could be eliminated. McConnell didn't actually commit to any such change in the law, but he'd sure like to see it happen, at least in a nonspecific sort of way that wouldn't require both houses of Congress to return to Washington to rewrite the bankruptcy laws for the sake of screwing unions during a pandemic and economic depression.
Instead, McConnell said the federal government had done all the helping anyone should expect for now:
We all have governors regardless of party who would love to have free money. And that's why I said yesterday we're going to push the pause button here, because I think this whole business of additional assistance for state and local governments need to be thoroughly evaluated [...]
I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there's no good reason for it not to be available. [Apart from the minor hurdle that it isn't legal , and the other minor hurdle that it is screwing the people the states owe money to -- Dok Z] My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don't have to do that. That's not something I'm going to be in favor of.
This isn't the first time Republicans have had a stiffy for rewriting bankruptcy law to allow states to go bankrupt and escape their obligations to unions and to bondholders. (Bondholders! The people with money!) Senate Republicans proposed it following the 2008 financial crash, but as Bloomberg News points out, the proposal went absolutely nowhere then, too:
It was immediately condemned by Wall Street investors, public employee unions and Republican and Democratic governors, who said it was unnecessary and would saddle them with rising interest rates by spooking the bond market. The discussion was dropped after a single hearing in the U.S. House of Representatives [...]
Then, states were quick to say it was unneeded: With the broad power to raise taxes, no state has defaulted on its debt since the Great Depression. Even only a handful of struggling cities resorted to bankruptcy during the last contraction, since it was seen as a last resort that would hobble their ability to raise money for public works.
Matt Fabian, a financial boffin who testified before the House in 2011 on the proposal, dismissed McConnell's attempt to resurrect the proposal as a "red herring" aimed at staking out Republican opposition to helping the states in negotiations over a new stimulus package.
State bankruptcy is probably not possible under the U.S. Constitution, and there's even less chance that Congress would attempt to allow it. The Senator's statement is really about the likelihood of his caucus providing more aid directly to the states than it is about state bankruptcy.
Once you start talking about state bankruptcy being a better option than more federal assistance, you're really saying you don't want to provide more federal assistance.
And in the meantime, McConnell's press office has been citing the interview with Hewitt and calling for an end to "blue state bailouts," since apparently not a single red state is having financial difficulty, and never will, especially what with all the fun new coronavirus outbreaks they're having.
There so far doesn't seem to be any widespread support for creating a wave of state bankruptcies, which would only lead to wider chaos in the economy and pain for states, state employees, and the general population (which assumes people use state services, like unemployment insurance. Do they? We don't think so). More important, it would hurt the investor class, whose lives really matter in the ultimate scheme of things.
Then again, we never would have expected wingnuts to militate for the sacred right to spread disease, either, so it's not inconceivable Fox News may start calling for Patriots to demand state bankruptcies, so that state debt can be liquidated for fractions of pennies on the dollar. After all, Donald Trump, the greatest deal-maker of all, likes to brag, "I've always made more money in bad markets than in good markets," so there might be some very compelling reasons to push the economy even farther down the toilet. It's not unthinkable, especially if Trump decides reelection is a wash and he'd like new options for one last smash-and-grab robbery.
But golly, that's surely just the most cynical speculation, right?
Yr Wonkette is supported entirely by reader donations. Help us keep the servers humming and the writers paid. And if you're sheltering in place, here's our Amazon linky, too.
Doktor Zoom's real name is Marty Kelley, and he lives in the wilds of Boise, Idaho. He is not a medical doctor, but does have a real PhD in Rhetoric. You should definitely donate some money to this little mommyblog where he has finally found acceptance and cat pictures. He is on maternity leave until 2033. Here is his Twitter, also. His quest to avoid prolixity is not going so great.