Cantor: No Bailout OR Bankruptcy for States
You’ve probably heard about states’ – specifically not excluding Rhode Island’s – cash flow problems in which unfunded pension liabilities feature prominently.
A federal bailout redux would kick the can down the road ease the problem for another year, though even the most tax-n-spend-happy state politicians have wisely been pessimistic about such a development.
You may have also heard about a far less easy approach (Andrew wonders what Gov Chafee knew about this option and when he knew it) that has just cropped up in Washington.
Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
During his weekly briefing yesterday, House Majority Leader Eric Cantor put the kibosh on both ideas.
Heading into Tuesday’s State of the Union address, Cantor showed no desire for increases in virtually any area of the federal government, and he doubled down on his opposition to new proposed spending on infrastructure and education, even in areas, like transportation, where he acknowledged there were deficiencies.
Cantor flatly rejected any changes in the law that would allow state governments struggling with record budget deficits brought on by the economic recession and rising pension costs to restructure debt, including allowing them to declare bankruptcy.
Why no bankruptcy?
“I don’t think that that is necessary, because state governments have at their disposal the requisite tools to address their fiscal ills,” the majority leader said, before going a step further.
“I think some … have mentioned this Chapter 9 equivalent for states is somehow going to stave off some kind of federal bailout — we don’t need that to stave off a federal bailout. There will be no bailout of the states,” Cantor said. “States can deal with this and have the ability to do so on their own.”
“[H]ave at their disposal the requisite tools to address their fiscal ills”? You mean, we have to face up to and deal with the problems we created without outside help?? Eeep! That sounds dreadfully … mature and responsible …
Unfortunately here in RI, we have neither a mature and responsible majority in the General Assembly nor a Governor. Woe is us.
No bail out? If Rhode Island isn’t a “shovel ready project”, I don’t know what is.
The President’s speech might be the most “shovel ready”thing around.
I’m skipping the whole thing and the responses.
Joe writes:
“The President’s speech might be the most “shovel ready”thing around.
I’m skipping the whole thing and the responses.”
I was going to watch but didn’t. I was curious to see if the new members of the Supreme Court would stand when the president entered. Typically they do not, they are a “co-equal” branch of government.
Warrington:
The problem is neither Mass nor Connecticut want Rhode Island to be shoveled into their backyards.
The problem with accountability for our elected leaders is that there isn’t any. I don’t mean right now, I mean if financial Armageddon really does hit RI. So they lose their seat. Big deal. They have their pensions and their health insurance and move on to Florida, leaving us holding the bill.
So they can continue to siphon off as much as they can until the organism dies. Hmm, it sure sounds a lot like a parasitic virus, eh?
New York State borrowed ‘from its pension fund’ to pay the payments for the pension fund this year.
Think about that one.