Skip to comments.First U.S. State Bankruptcy: The Unpleasant Race to it
Posted on 01/22/2011 1:34:13 PM PST by RC one
Ten U.S. states, accounting for about one-third of the U.S. population, are insolvent. You will find the list of states below.
The question: what state will go bankrupt first?
Technically, there is no legal process by which a state can file for bankruptcy. Chapter 9 of the Bankruptcy Code permits cities and municipalities to file for bankruptcy, but not states. One of the most famous municipalities to go bankrupt was Orange County, California, in 1994. Fifteen U.S. municipalities filed for bankruptcy in 2009 and 2010.
Californias deficit could reach $24.0 billion this year. Illinois deficit sits at about $15.0 billion.
Illinois, which could be the most insolvent state, raised its personal income tax rate earlier this year by a whopping 66%. Illinois is sitting on about $5.0 billion in bills it cannot pay.
Some states are making the hard decisions necessary to remain solvent. A two-year budget plan released by the Texas House of Representatives yesterday calls for the elimination of about 10,000 state-related jobs over the next two years.
According to the Washington-based Center on Budget and Policy Priorities, U.S. states as a whole will have a budget deficit of $140 billion this year.
The U.S. government lent more than $100 billion to a single company, American International Group (AIG), during the credit crisis. AIG is now paying back the government. If push comes to shove, why wouldnt the federal government lend $100 billion to $200 billion to state governments, asking for repayment over a 20-year period?
Heres why: AIG could have filed for bankruptcy; state governments have no legal mechanism to do so. Financially troubled states just keep piling on the bills without paying them. They are like interest-free loans from your suppliers. Why borrow money to pay your suppliers if they cannot petition you into bankruptcy?
The total value of the bond market worldwide is about $50.0 trillion. Half of that market is made up of U.S. bonds, $25.0 trillion, of which $2.7 trillion is the size of the U.S. municipality bond market.
The 10 most insolvent U.S. states are: California, Florida, Illinois, Arizona, New Jersey, Michigan, Nevada, Oregon, Wisconsin, and Rhode Island. These states make up about one-third of the U.S. population.
FTA The 10 most insolvent U.S. states are: California, Florida, Illinois, Arizona, New Jersey, Michigan, Nevada, Oregon, Wisconsin, and Rhode Island. These states make up about one-third of the U.S. population.
See anything in common here, except for Florida and AZ????
Let em die.
Democrats = Dig deeper to get out of hole.
CUT ENTITLEMENT PROGRAMS and institute policies that cause illegal immigrants to leave, cut taxes and get government the ‘f’ out of the way.
Will there be a bailout? Or will the administration choose harsh medicine?
Do we really need to ask? Yes, there will be a bailout. Yes, the dollar will break support and head down. Yes, gold will continue its bull market trend.
Hope California goes as soon as possible!!
Fire 2/3 of employees and eliminate state pensions!!
could be the real reason jerry brown is wanting to SHIFT debt and responsibilities for more and more services to local governments from the state...that and to SHAFT them too
I think existing contracts need to be honored but the government gravy train needs to come to an end; furthermore, anything that can be privatized needs to be from garbage pick up to water distribution to prisons to mail delivery to public transport, etc. Privatize everything and let the free market establish prices and wages.
I’m looking at picking up another 8 sovereigns this month.
No way, wipe put the unions and their contracts and fire at least 2/3 of public employees, eliminating the departments they work for!
That’s atricky situation. I generally believe that contracts should be honored by all of the people engaged in them. If Ohio or Indiana taxpater, for example, have to bail out the state of california in order for the state of California to honor its contractual obligations, that definitely adds a twist to things. As I said, “quite unprecedented”.
The common link for Florida and Arizona were Charlie Crist and Janet Napolitano. They both were outright morons.
We'll be repairing the damage for years.
I don't live in CA, so don't know how Orange County is doing today - they surely didn't disintegrate and disappear. They are surely not a pariah and I just wonder if they had any difficulty selling bonds thereafter and at what interest rate. They could pose as poster children for bankruptcies - "See? No one grew two heads or came down with warts!"
What are sovereigns? A precious metal?
Speaking as a resident of what is probably the first State to have to repudiate it’s debt, Illinois, I say let us crash and burn.
good luck getting that on the airplane to argentina.
That might be for the best of course. I think we should consider all aspects of the situation before we start yelling and screaming either way though. There may be big money to be made off of this after all. At the same time, rewarding profligacy is rarely a wise policy.