# "McConnell thinks bankruptcy, not more federal money, might be best for state and local governments" **URL:** \ **Category:** Politics & Elections\ **Created:** [April 23, 2020, 12:10am UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389 "2020-04-23T00:10:38Z")\ **Posts on this page:** 17\ **Page:** 2
**Author:** ![Bijou\_Drains](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bijou_drains/32/2814_2.png) [@Bijou\_Drains](https://boards.straightdope.com/u/Bijou_Drains)\ **Post date:** [April 24, 2020, 4:44pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/21 "2020-04-24T16:44:33Z")
Cities and counties have gone bankrupt. I don’t think any state has. ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [April 24, 2020, 4:47pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/22 "2020-04-24T16:47:04Z")
The problem is that with businesses closed, people unemployed, tax revenues are way down, while expenses are way up and the constitutions of most states forbid deficits. Something’s gotta give. When I was living in IL I had the impression that the state’s contribution to the pension was **entirely** unfunded. In fact, even when a federally funded research grant provided funds to cover the state’s purported contribution to the pension fund, that money went simply into the state’s treasury. And when I left, taking my contribution with me, that federal money simply disappeared. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [April 24, 2020, 4:47pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/23 "2020-04-24T16:47:14Z")
> [@Bijou\_Drains](#): > > Cities and counties have gone bankrupt. I don’t think any state has. Legally they can’t. ---
**Author:** ![erysichthon](https://avatars.discourse-cdn.com/v4/letter/e/d07c76/32.png) [@erysichthon](https://boards.straightdope.com/u/erysichthon)\ **Post date:** [April 24, 2020, 6:31pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/24 "2020-04-24T18:31:03Z")
> [@Hari\_Seldon](#): > > When I was living in IL I had the impression that the state’s contribution to the pension was **entirely** unfunded. It is not entirely unfunded, but there have been many years in which the state deferred (i.e., blew off) its required annual contribution. ---
**Author:** ![ThelmaLou](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thelmalou/32/390_2.png) [@ThelmaLou](https://boards.straightdope.com/u/ThelmaLou)\ **Post date:** [April 25, 2020, 2:07pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/25 "2020-04-25T14:07:43Z")
[ **Why Mitch McConnell Wants States to Go Bankrupt** _The Senate majority leader is prioritizing the Republican Party rather than the American people during this crisis._](https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-mcconnell-wants-states-go-bankrupt/610714/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%253A+TheAtlantic+%2528The+Atlantic+-+Master+Feed%2529) > [@](#): > > … > To understand why Republicans want state bankruptcy, it’s necessary to understand what bankruptcy is—and what it is not. > > A bankruptcy is not a default. States have defaulted on their debts before; that is not new. Arkansas defaulted in the depression year of 1933. Eight states defaulted on canal and railway debt within a single year, 1841. The Fourteenth Amendment required former Confederate states to repudiate their Civil War debts. > > A default is a sovereign act. A defaulting sovereign can decide for itself which—if any—debts to pay in full, which to repay in part, which debts to not pay at all. > > \*\*Bankruptcy, by contrast, is a legal process in which a judge decides \*\*which debts will be paid, in what order, and in what amount. Under the Constitution, bankruptcy is a power entirely reserved to the federal government. An American bankruptcy is overseen in federal court, by a federal judge, according to federal law. > > Understand that, and you begin to understand the appeal of state bankruptcy to Republican legislators in the post-2010 era. > > Since 2010, American fiscal federalism has been defined by three overwhelming facts. > > First, the country’s wealthiest and most productive states are overwhelmingly blue. Of the 15 states least reliant on federal transfers, 11 are led by Democratic governors. Of the 15 states most reliant on federal transfers, 11 have Republican governors. > > Second, Congress is dominated by Republicans. Republicans controlled the House for eight of the last 10 years; the Senate for six. Because of the Republican hold on the Senate, the federal judiciary has likewise shifted in conservative and Republican directions. > > **A state bankruptcy process would thus enable a Republican Party based in the poorer states to use its federal ascendancy to impose its priorities upon the budgets of the richer states.** > … It’s tied to the Republicans’ (pretty successful) drive to dominate the federal judiciary. Bankruptcy of states would be overseen by federal courts. That’s his strategy in a nutshell-- on the surface. But wait! That’s not all. There is even more underhandedness at work. > [@](#): > > …Republican plans for state bankruptcy sedulously\* protect state taxpayers. The Bush-Gingrich op-ed of 2011 was explicit on this point. A federal law of state bankruptcy “must explicitly forbid any federal judge from mandating a tax hike,” they wrote. You might wonder: Why? If a Republican Senate majority leader from Kentucky is willing to squeeze Illinois state pensioners, why would he care about shielding Illinois state taxpayers? The answer is found in the third of the three facts of American fiscal federalism: > > ``` > United States senators from smaller, poorer red states do not only represent their states. Often, they do not even primarily represent their states. They represent, more often, the richest people in bigger, richer blue States who find it more economical to invest in less expensive small-state races. The biggest contributor to Mitch McConnell’s 2020 campaign and leadership committee is a PAC headquartered in Englewood, New Jersey. The second is a conduit for funds from real-estate investors. The third is the tobacco company Altria. The fourth is the parcel delivery service UPS. The fifth is the Eli Lilly pharmaceutical corporation. The sixth is the home health-care company, LHC Group. The seventh is the Blackstone hedge fund. And so on and on. > > ``` > > A federal bankruptcy process for state finances could thus enable wealthy individuals and interest groups in rich states to leverage their clout in the anti-majoritarian federal system to reverse political defeats in the more majoritarian political systems of big, rich states like California, New York, and Illinois. > … Everything Unca Mitch proposes is to benefit wealthy Republican **individuals**. No wonder they \*lurve \*him. - sedulously –\> diligently, persistently (I didn’t know this word.) ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 25, 2020, 2:49pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/26 "2020-04-25T14:49:44Z")
Thank you for that. Which states are most likely to have to consider bankruptcy? Are they the wealthiest and most productive states, mostly led by Democratic governors? Or are they the poorest, least productive states, mostly led by Republican governors? ---
**Author:** ![ThelmaLou](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thelmalou/32/390_2.png) [@ThelmaLou](https://boards.straightdope.com/u/ThelmaLou)\ **Post date:** [April 25, 2020, 3:02pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/27 "2020-04-25T15:02:08Z")
> [@Dewey\_Finn](#): > > Thank you for that. Which states are most likely to have to consider bankruptcy? Are they the wealthiest and most productive states, mostly led by Democratic governors? Or are they the poorest, least productive states, mostly led by Republican governors? Thanks for reading it. 🙂 I don’t know which states… that will require some creative googling. If you search for the topic, articles from 2010-2011 come up from the last time the Pubs were talking about this. Constrain the search to the past year and see what you get. I’m off to take the clothes out of the dryer. 🙂 Here’s the punch line of the article: > [@](#): > > … > Difficult and important as these problems are, they are not urgent problems. They existed 24 months ago; they will remain 24 months from now. From a strictly economic point of view, McConnell’s schemes for state bankruptcy are utterly irrelevant to the present crisis. Reducing future pension liabilities will not replenish lost revenues or reduce suddenly crushing social-welfare burdens. > > But McConnell seems to be following the rule “Never let a good crisis go to waste.” He’s realist enough to recognize that the pandemic probably means the end not only of the Trump presidency, but of his own majority leadership. **He’s got until January to refashion the federal government in ways that will constrain his successors. That’s what the state-bankruptcy plan is all about.** > > McConnell gets it. Now you do, too. This is why I don’t hate trump, but I absolutely hate McConnell. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [April 25, 2020, 3:20pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/28 "2020-04-25T15:20:38Z")
I’ve heard a theory that McConnell knows demographics will make life very hard for the GOP in decades ahead. So that is why he prioritizes stacking the supreme court and appellate court. Even if we get a progressive movement in the 2040s, the courts may just overturn a lot of the laws passed. We may get UHC, wealth tax, subsidized daycare, voting rights act, etc passed but the GOP judges may just invalidate them while giving the green light to right wing legislation. Which is why even if you don’t support Biden, its better to vote for him anyway since Biden won’t appoint far right judges who sit on the bench for 30-50 years. ---
**Author:** ![erysichthon](https://avatars.discourse-cdn.com/v4/letter/e/d07c76/32.png) [@erysichthon](https://boards.straightdope.com/u/erysichthon)\ **Post date:** [April 25, 2020, 5:31pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/29 "2020-04-25T17:31:00Z")
> [@ThelmaLou](#): > > [ **Why Mitch McConnell Wants States to Go Bankrupt** > _The Senate majority leader is prioritizing the Republican Party rather than the American people during this crisis._](https://www.theatlantic.com/ideas/archive/2020/04/why-mitch-mcconnell-wants-states-go-bankrupt/610714/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%253A+TheAtlantic+%2528The+Atlantic+-+Master+Feed%2529)[/SIZE] Frum’s article is interesting, but I don’t see how McConnell could possibly ram through a state bankruptcy bill this year. Even if he got something passed in the Senate, which seems doubtful to me, it would certainly die in the House. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 25, 2020, 5:53pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/30 "2020-04-25T17:53:22Z")
Doesn’t the [Contracts Clause](https://en.wikipedia.org/wiki/Contract_Clause) of the US Constitution (“No State shall . . . pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts”) mean that state bankruptcy would require a constitutional amendment? ---
**Author:** ![RioRico](https://avatars.discourse-cdn.com/v4/letter/r/f04885/32.png) [@RioRico](https://boards.straightdope.com/u/RioRico)\ **Post date:** [April 25, 2020, 6:35pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/31 "2020-04-25T18:35:05Z")
> [@erysichthon](#): > > Frum’s article is interesting, but I don’t see how McConnell could possibly ram through a state bankruptcy bill this year. Even if he got something passed in the Senate, which seems doubtful to me, it would certainly die in the House. No, this House won’t go for it. How about a presidential executive order? Then let our stacked courts worry about it in a few years, after the _fait accompli_ is solid and the federal hostile takeover of blue states is history. Deploy troops to reluctant capitals to maintain order. Detain dissident governors and legislators. Maintain the peace. Right. ---
**Author:** ![erysichthon](https://avatars.discourse-cdn.com/v4/letter/e/d07c76/32.png) [@erysichthon](https://boards.straightdope.com/u/erysichthon)\ **Post date:** [April 25, 2020, 6:35pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/32 "2020-04-25T18:35:54Z")
> [@Dewey\_Finn](#): > > Doesn’t the [Contracts Clause](https://en.wikipedia.org/wiki/Contract_Clause) of the US Constitution (“No State shall . . . pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts”) mean that state bankruptcy would require a constitutional amendment? That’s a good question; I think it would. The argument against that (see **UltraVires** ’s post above) is that it would be the federal bankruptcy court cancelling the contracts, not the state, but to me that’s a meaningless distinction. The state would still be initiating the process by declaring bankruptcy, and presumably the state legislature would have to pass a bill doing that. I know that the Illinois state constitution also has a contract protection clause, and I suspect other states do too. If McConnell managed to pass a bill allowing state bankruptcies, you’d likely have multiple states challenging the law in the courts and the SCOTUS would have to resolve these questions. Allowing state bankruptcy would be enormous and hugely controversial, and it baffles me that McConnell is talking about it so casually. It reminds me of George W. Bush’s breezy talk about privatizing Social Security. ---
**Author:** ![Lord\_Feldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lord_feldon/32/341_2.png) [@Lord\_Feldon](https://boards.straightdope.com/u/Lord_Feldon)\ **Post date:** [April 26, 2020, 2:57am UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/33 "2020-04-26T02:57:23Z")
If state bankruptcy is unconstitutional due to the contract clause, then so is municipal bankruptcy which has been allowed for over 80 years. From the point of view of the US Constitution, there’s no such thing as a municipal government, it’s a mere limb of the state itself. Allowing the “City of Detroit” to declare bankruptcy is the same as allowing Michigan to declare bankruptcy, because Detroit is (from the federal perspective) just an agency set up by the state of Michigan for its own internal conveniences, no different from the Michigan Department of Transportation or the Michigan State Police. ---
**Author:** ![JRDelirious](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jrdelirious/32/9531_2.png) [@JRDelirious](https://boards.straightdope.com/u/JRDelirious)\ **Post date:** [April 26, 2020, 3:41am UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/34 "2020-04-26T03:41:29Z")
The distinction the existing law makes is between a direct agency of a State Branch of Government like the Department of Transportation or the State Police or the Office of Courts Administration, and chartered entities with their own corporate legal personality, like an incorporated city or the Ports Authority, that has the capacity to issue its own bonds separate from the state general obligation debt. ---
**Author:** ![RioRico](https://avatars.discourse-cdn.com/v4/letter/r/f04885/32.png) [@RioRico](https://boards.straightdope.com/u/RioRico)\ **Post date:** [April 26, 2020, 5:34am UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/35 "2020-04-26T05:34:15Z")
> [@Lord\_Feldon](#): > > If state bankruptcy is unconstitutional due to the contract clause, then so is municipal bankruptcy which has been allowed for over 80 years. From the point of view of the US Constitution, there’s no such thing as a municipal government, it’s a mere limb of the state itself. Allowing the “City of Detroit” to declare bankruptcy is the same as allowing Michigan to declare bankruptcy, because Detroit is (from the federal perspective) just an agency set up by the state of Michigan for its own internal conveniences, no different from the Michigan Department of Transportation or the Michigan State Police. See my post #5 upthread. Especially note this part, quoting “Kenneth Katkin, a law professor at the Salmon P. Chase College of Law at Northern Kentucky University”: > [@](#): > > …the federal bankruptcy code does not allow—and has never allowed—state governments to declare bankruptcy. Since 1937, the bankruptcy code has allowed ‘municipalities’ to declare bankruptcy. The term ‘municipality’ is defined in the bankruptcy code as a ‘political subdivision or public agency or instrumentality of a state.’ This definition is broad enough to include cities, counties, townships, school districts and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities and gas authorities. But it does not include state governments. As noted, a McConnell-instigated revision of federal bankruptcy code is most unlikely to be passed by this House unless the Dems are confined in protective custody. ---
**Author:** ![ThelmaLou](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thelmalou/32/390_2.png) [@ThelmaLou](https://boards.straightdope.com/u/ThelmaLou)\ **Post date:** [April 29, 2020, 11:28am UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/36 "2020-04-29T11:28:39Z")
I like how boldly and bluntly it’s stated here. In case anyone thinks Mitch’s intention is not to punish blue states. My emphasis. > [@](#): > > Forty states in this country receive more money from the federal government than their residents pay out in federal taxes. Let’s think of those as Taker States. > > The other 10 states pay more to the federal government than they receive. We’ll call them Donor States. > > **Eight of those 10 Donor States, including the top six donors, voted Democratic in the 2016 presidential election.** > > This is relevant only because U.S. Sen. Mitch McConnell recently badmouthed the idea of the federal government helping pull states out of the fiscal gutter that the COVID-19 pandemic (and the accompanying economic shutdown) has caused. > … > [Source](http://digital.olivesoftware.com/olive/ODN/SanAntonioExpressNews/shared/ShowArticle.aspx?doc=SAEN%2F2020%2F04%2F29&entity=Ar00200&sk=53E6DC1A&mode=text) :mad: ---
**Author:** ![E-DUB](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/e-dub/32/403_2.png) [@E-DUB](https://boards.straightdope.com/u/E-DUB)\ **Post date:** [April 29, 2020, 5:06pm UTC](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389/37 "2020-04-29T17:06:31Z")
In Michigan inability to reduce pensions is in the bloody state Constitution, because they knew back in the early '60s that a day like this would come when the vultures would be circling about that money. Please be reminded that pensions, public or private, are not a cost to the employer. They are paid for by the employee over the course of their working lifetime. As a retired public employee, I can only apologize to leader McConnell that not enough of us have died quickly enough to please him. (Or I can tell him to lick a doorknob.) [Previous page](https://boards.straightdope.com/t/mcconnell-thinks-bankruptcy-not-more-federal-money-might-be-best-for-state-and-local-governments/852389.md?page=1)