While bailout of companies seems to be over, state bailout is still a hot topic. This year state governments face a collective $125 billion in deficits. With high unemployment rate, state governments need money to pay off the benefits. However, they also need to pay the bill to the federal government for the previous bailouts. What the federal government should do about this deficit is yet to be decided. There aren’t too many options, however. Mr. Obama offered states a short-term relief by postponing the bill till 2014. Newt Gingrich, a putative Republican candidate next year, and Jeb Bush, Florida’s respected former governor, proposed that states “should be allowed to go bankrupt , so they can restructure such liabilities.” Eric Cantor, the House majority leader, on the other hand, rejects the possibility of either bail-outs or bankruptcies “States can deal with this and have the ability to do so on their own,” he said recently. Should the federal government yet once again bailout the states?
Monday, February 21, 2011
Should the federal government let states go bankrupt?
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2 comments:
Check this out - this is the front page of the NYTimes nearly a month before your article was published.
http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?_r=1&scp=1&sq=states%20declare%20bankruptcy&st=cse
Also, there is a lot of criticism towards Illinois for significantly raising their income and corporate tax rates at a time when people are so strapped for money. However, the argument for doing so is to keep the state from having to declare bankruptcy or lay off teachers, policemen, etc.
Illinois has been having budget problems for ages. I think the culture surrounding budgets needs to be remedied. I know in some states, law does not allow them to not have a balanced budget. This can be difficult for programs that rely on state funding during difficult times, but I believe it is important to keep hard-budget policies. If this isn't prevalent, states can quickly dig themselves into a hole. During contractions, it is logical that programs need to be cut. Maybe, with hard budget constraints, government can become more efficient with time. That's a big maybe though.
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