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.
Bummer it is missing the folding AR7 sniper’s rifle with infra-red sight. Someone would probably need a ton of ATF paperwork just to take it out of the store.
I pray everyday for CA to go Bankrupt- we could be back in action real fast if we dissolved the union thuggeraucraty
States will raise taxes and fees to make up the shortfall if the situation becomes critical. They rather risk losing businesses and see people leave, but that all takes time before that impacts the state. In the meantime there are many who cannot leave and they will be the ones fleeced. States will avoid defaulting because it means decades into the future where no one will loan them money nor buy their bonds. That is a fate worst then political unpopularity.
Freepers we live in dangerous times. When government and financial elites blow up our economy, that is the era where the middle class will be destroyed. Remember in any economic change (globalism, free trade) or crisis (depression, hyperinflation, default, etc) the middle class will always be sacrificed and the rich (who control the system) will protect themselves.
A booming and expanding economy is the only period where the middle class and upper middle class grows. IMHO we are too powerless to force change on our corporate and government elites, unless we chose violent armed revolution. Most Americans are not prepared to do that, and even if they do, does one replace chaos with chaos. The only path left is democracy. Democracy is too slow to bring on change, because our smaller number elites are too nimble and will counter faster then the voters. By the time we are mobilized to change, the crisis is already upon us.
The only thing we have power to do is protect our families from the coming financial storm of inflation as our bankers/fed reserve/US Treasury made a strategic decision to borrow and inflate our way out of debt. People should have started preparing since the meltdown in 2008. It is still not too late to prepare, but time is running out.
Does that if the US goes bankrupt we get to fire Obama -
just like a failed CEO...?
Spending, spending, spending - with no reservations...
Then, the worst state of all - Illinois does exactly the opposite of what they should to rectify the situation - they keep spending, then jack up income taxes by 66% - thus further screwing businesses and individuals.
The #1 method of stimulating the tax income of states is to LOWER taxes so that more $ is available for spending, investing, paying salaries, and thus feeding the economy which PRODUCES revenue...
But hey-— it’s ok. Obama is gonna bail his Chicago thug jerks out...again...
Put yer money down, ladies and gents. the winner gets a lovely pile of cash from the taxpayers!
As they should be figuring out by now, we still have the power to throw the bums out every other year. They don't like getting fired any more than anyone else.
CEO’s no longer lose their jobs. As I recall all of the Wall Street CEO’s kept their jobs after being technically insolvent and getting billions in government bailouts in 2008 and 2009. They then collected millions in bonuses. Why should Obama expect different treatment?
I don't think there will be a major bailout of the states. Bernanke has stated publicly he's not going to do it, and Tea Partiers will stiffen the spines of Pubbies in the House of Representatives.
Problem we are facing is the proper financial decisions should have been made atleast ten years ago to avoid high debt and forced move to inflate our way out. Throwing the bums out will only throttle the speed towards inflation, but will not avoid it. Having a GOP Tea Party Congress will not stop it if the Federal Reserve continues to print money. Granted reducing the federal budget by $ 2.5 trillion over ten years is nice GOP first move, but our debt, guarantees and unfunded liabilities is equal to about 90 to 100 trillion dollars.
My best advice to freepers is don’t put all your hopes on the GOP or Tea Party because the forces of destruction has already been unleashed and it is too late to stop it. The only thing left is prepare yourself and family to survive the coming crisis.
The House originates all spending bills, & it is controlled by Pubs. So any bailout will be the work of REPUBLICANS who can easily block any bailout.
Certainly Obama would love to have all that bailout money pass through his sticky hands. The game of Wealth Redistribution always means some of the money will end up in his pockets through kickbacks, er... contributions. But his slush fund is not big enough to bail out even one of the mentioned states.
I imagine any bailout will follow the TARP script of “too big to fail”. The RINOs (with tears in their eyes & earmarks in their pockets) will join the Rats, & the deal will be done.
Frankly, I think these states are trying to hold off any bailout until after Obama is reelected to avoid any backlash from the voters affecting his chances in ‘12. TARP was very unpopular with voters. A bailout of states will be even more unpopular.
Extraordinary times call for truly unique solutions. Rather than conducting business as usual, with all the lemmings marching steadily toward the cliff, we should have a new law that removes all but one representative from those states with a debt greater than $100M times the current number of representatives. This would cut the number of Congress-critters by nearly 35%, give states an incentive to get their finances in order, and prevent at least a portion of the inept from having a voice in governing the rest of the states that are making the hard decisions to stay solvent.
Just a thought.
Bankruptcy is not a good idea for prolifigate spending states like California. It foists their irresponsibility on suppliers who gave them credit and muni bond investors who get wiped out. California’s debt slate is wiped clean with no consequences and they resume their spending to begin the cycle all over again. The voters of California never learn the consequences of their liberal votes.No bankruptcy and no bailouts.
Congress will not approve allocation of money for bailouts.
There are two other avenues for states to get money - the executive branch and the judicial branch.
There are no doubt many avenues open to allocate funds to states by executive order. Last I read there were still funds available in porkulus. That’s one way. It would be unpopular, but Obama is between a rock and a hard place. He’ll do what the unions want him to do.
States in trouble can mount lawsuits claiming their state bears an unfair burden for the care of illegals, children, subsidized college students, senior citizens, mentally ill, addicted - you name it. Other states who don’t have this type of burden should share the cost. A liberal sympathetic court would agree.
When liberals don’t get their way through legislation, they usually turn to the courts, so I think that’s what they’ll do.
I live in CA and it is our only hope.
Nevada, which is 90% owned by the federal government, the BLM and the UN is insolvent because the Feds don’t know how to enforce the No Trespassing signs on the US border.
Anyone applying for substantial financial payments should apply to the US Treasury before even stepping on the Governors doorstep.
There is absolutely NO Reason why the feds should own more than a few acres of Nevada!
>When liberals dont get their way through legislation, they usually turn to the courts, so I think thats what theyll do.
On that note: http://www.freerepublic.com/focus/f-news/2661665/posts
I don't understand why states NEED bankruptcy. Other than a few items assigned by the Constitution to the Federal Government, states are soveriegn. Don't want to pay pension obligations? Pass a law and don't pay them.
>I live in CA and it is our only hope.
If a state-bailout happens, I can easily imagine dead officials: taxation w/o representation — and taking my taxes and GIVING it to CA where I have no representation would qualify in MOST people’s minds — has been fought over before as it was one of the points that influenced the Revolutionary War.
What’s interesting is that the argument “you ARE represented in the legislature via your Representative/Senator” is EXACTLY the sort of argument England was making; “You ARE represented by the House of Commons.”
Send the New Conquistadores back home.
” Bernanke has stated publicly he’s not going to do it”
Bernanke testified under oath to Congress he was not going to monetize the debt and now they have monetized the debt and will be at least until June when QE2 runs out.
“I imagine any bailout will follow the TARP script of too big to fail
I think your right it will be the same crap as the banks we didn’t want to bail them out either but they didn’t listen so now on top of that they will say Moral Hazard. Bernanke is the last one you should trust he’s nothing more then a Marxist enabler and the Fed has now changed their accounting tactics. How convenient.
Accounting Tweak Could Save Fed From Losses
“The only thing we have power to do is protect our families from the coming financial storm of inflation as our bankers/fed reserve/US Treasury made a strategic decision to borrow and inflate our way out of debt. People should have started preparing since the meltdown in 2008. It is still not too late to prepare, but time is running out.”
Good assessment Fee I agree.
It was bush's fault.
Right. Now CEO's who drive a company to bankruptcy get rewarded with a nice gov't bail out bonus and an appointment to the regime.
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