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Should States Be Permitted to File Bankruptcy? And How the Heck Did They Spend More than they Made?

By Joseph McDaniel, Esq.

Look, a harried housewife might make an error balancing a checkbook, or might not notice that her hubbie was playing the ponies and that he hadn't made the last six mortgage payments.

That I can understand. Easily.

Or a guy might have worked all his life, then gotten fired because his job was outsourced to India or China. That just makes sense. It happens all too often. Actually, once is too often.

Or a guy might lose a job because his employer went belly-up; that just means that it's Wednesday.

Or a doctor might have invested heavily in real property on the advice of his CPA, and then become hopelessly insolvent, even though he makes very good money every month.

But a STATE? Don't they have professional bean counters? Don't they know how much they're going to be able to squeeze out of taxpayers?

They should be solvent, because their economic experts can add and subtract, right?

Well, maybe not.

I don't even want to think about who might be to blame for that kind of intentional stupidity.

But the question has arisen, should States be able to file bankruptcy? And naturally, Nancy Rapoport, my Blogging Icon, noticed that question, and she discussed an article and book that you should probably buy.

And here's another nifty take on the issue, and I like it that I'm not the only guy who is...confused by the idea that a State can't manage it's budget, as though it's a drunken sailor on leave after a year at sea. 

Now here's a question: who should feel guilty if a STATE needs to file a bankruptcy?

And if States have to file bankruptcy, why should any mere wage-earner feel guilty about it?

Now, what could possibly be good about the fact that we have a series of insolvent States floating around?

Nothing.

But if there were, it would be this: the States that went crazy spending other people's money that they hadn't grabbed yet will be a pretty good example for all the other States.


As long as we don't bail them out.

And as long as we make the Insolvent States wear the Cone of Shame.

p.s. Why is a Bankruptcy Judge better suited than elected politicians for telling people that there's no dough to fulfill the idiotic promises of handouts that have been peddled to 'em for years? All it takes is a legislature with brains and...oh, wait. You're right. Might as well have 'em file a bankruptcy.

Full post as published by Arizona Bankruptcy Attorney Blog on January 18, 2011 (boomark / email).