To Save the States Let'em Declare Bankruptcy
By DICK MORRIS & EILEEN MCGANN
Published in the New York Post on January 12, 2011
Facing huge budget difficulties, New Jersey Gov. Chris Christie has been
showing other states how to survive -- namely, by taking on the
government-employee unions.
Christie's battles with the teachers unions over the past year have
produced countless YouTube hits. And last month, he got a law passed to
limit wage hikes from labor arbitrations between the state and
public-employee unions to an average 2 percent annual increase.
As New Jersey, New York, California and Illinois -- the four with the
highest insurance premiums on their bonds -- face life without a
compliant Congress to approve their pleas for more cash, they'll
increasingly have to follow Christie's example and rein in their unions.
As Margaret Thatcher famously said, the problem with socialism is that
sooner or later "you run out of other people's money."
When the states come calling, the House must say, "No." More, it's time
to amend the federal bankruptcy laws to create a procedure for state
bankruptcies -- allowing states to abrogate their municipal-union
contracts from the school-board level on up.
States, in bankruptcy court, should be able to reorganize their finances
so as to put themselves back on a stable footing.
Initially, municipal-bond buyers will protest the lack of federal
assistance and may even deny states and localities access to the bond
market at any interest rate. But once the states reorganize, they should
be able to proceed normally -- just as New York City did after its
financial meltdown in the '70s.
Such reorganizations needn't require any ongoing federal involvement.
The procedure would let the states help themselves, giving governors and
legislatures a third way out of their financial mess. Raise taxes, cut
spending or . . . alter union contracts. Each state would face the
choice of whether to wallow in overspending or take steps to correct it.
Initially, Democrats will oppose the idea of state bankruptcies. But
when House Republicans make clear that no more aid will be forthcoming
and that the stimulus spigot is turned off, at least some Democrats will
realize this is their best option.
Then, fiscal necessity will have achieved what so many of us want -- a
return of true local government.
No more will schools be run for the teachers and by the teachers -- nor
will such unions as the Service Employees International Union and the
American Federation of State, County and Municipal Employees dominate
state legislatures. School choice, charter schools and even voucher
programs will have a chance to flourish.
Some fear the US Constitution prevents federal law from extending
Chapter 9 to permit state bankruptcies, because it would violate state
sovereignty. Yet Chapter 9 is voluntary, so states would remain
sovereign -- with merely the option of subjecting themselves to Chapter
9 constraints.
Giving insolvent states the power to break their union contracts would
alter dramatically the balance of political power all across the nation.
No longer would municipal unions have the financial ability to
underwrite the Democratic Party. Gone from our politics would be $200
million that the American Federation of Teachers, the National Education
Association, SEIU and AFSCME together spent on political action in the
last election cycle.
Government would be returned to the people.
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***COPYRIGHT EILEEN MCGANN AND DICK MORRIS 2011. ***
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