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<blockquote data-quote="D. Hargrove" data-source="post: 2993308" data-attributes="member: 41761"><p>Found this interesting....</p><p></p><p>States, unlike cities and counties, currently can’t declare bankruptcy. The case for allowing it is that a well-run proceeding apportions losses fairly and fast. Lenders and bondholders absorb some of the pain, but so do government workers and retirees. Taxes go up and government services are cut back, but ideally not as severely as in an uncontrolled default. The result is a government that’s streamlined, not gutted.</p><p></p><p>“Bankruptcy lets you get ahead of the problem,” says David Skeel Jr., a professor at University of Pennsylvania Law School and a leading advocate of giving federal bankruptcy protection to states. Without that option, he says, “what inevitably happens when you’re in deep financial distress is that you have to cannibalize other stuff. You cut police, schools, other services. You reinforce the downward spiral.”</p><p></p><p>In another scenario, a state that goes broke and has no recourse to bankruptcy may end up seeking help from the federal government. “We want to cut off the politicians from assuming that at the end of their wild overspending they can just dump the responsibilities on other taxpayers,” says former House Speaker Newt Gingrich</p><p></p><p><a href="https://www.bloomberg.com/news/articles/2016-01-21/the-case-for-allowing-u-s-states-to-declare-bankruptcy" target="_blank">https://www.bloomberg.com/news/articles/2016-01-21/the-case-for-allowing-u-s-states-to-declare-bankruptcy</a></p></blockquote><p></p>
[QUOTE="D. Hargrove, post: 2993308, member: 41761"] Found this interesting.... States, unlike cities and counties, currently can’t declare bankruptcy. The case for allowing it is that a well-run proceeding apportions losses fairly and fast. Lenders and bondholders absorb some of the pain, but so do government workers and retirees. Taxes go up and government services are cut back, but ideally not as severely as in an uncontrolled default. The result is a government that’s streamlined, not gutted. “Bankruptcy lets you get ahead of the problem,” says David Skeel Jr., a professor at University of Pennsylvania Law School and a leading advocate of giving federal bankruptcy protection to states. Without that option, he says, “what inevitably happens when you’re in deep financial distress is that you have to cannibalize other stuff. You cut police, schools, other services. You reinforce the downward spiral.” In another scenario, a state that goes broke and has no recourse to bankruptcy may end up seeking help from the federal government. “We want to cut off the politicians from assuming that at the end of their wild overspending they can just dump the responsibilities on other taxpayers,” says former House Speaker Newt Gingrich [URL]https://www.bloomberg.com/news/articles/2016-01-21/the-case-for-allowing-u-s-states-to-declare-bankruptcy[/URL] [/QUOTE]
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