{"id":2684,"date":"2020-05-08T11:47:53","date_gmt":"2020-05-08T11:47:53","guid":{"rendered":"http:\/\/lonecandle.com\/?p=2684"},"modified":"2020-05-08T11:47:53","modified_gmt":"2020-05-08T11:47:53","slug":"why-the-us-shouldnt-let-states-go-bankrupt","status":"publish","type":"post","link":"https:\/\/lonecandle.com\/?p=2684","title":{"rendered":"Why the US shouldn\u2019t let states go bankrupt"},"content":{"rendered":"\n

\n\n“Senate Majority Leader Mitch McConnell<\/a>\u2019s suggestion<\/a> that maybe states and cities should just go bankrupt amid the coronavirus<\/a>-induced economic crisis<\/a> they\u2019re facing has not been particularly well-received. A big part of the issue: As the law stands right now, states can\u2019t <\/em>declare bankruptcy.<\/p>\n\n\n\n

But the controversy points to a broader problem states across the country are facing \u2014 their costs have skyrocketed and their revenue has plummeted, and unlike the federal government, they can\u2019t run a deficit. They\u2019ve got to balance their budgets so that they take in what they put out. And right now, a lot of states are sounding the alarm that they\u2019re going to need to make deep spending cuts unless the federal government steps in.<\/p>\n\n\n\n

New Hampshire Gov. Chris Sununu, for example, warned<\/a> his state could need to make $500 million in cuts next year. Missouri Gov. Mike Parson estimated<\/a> he\u2019ll have to cut $700 million and has already put a pause in $227 million in state funding. Los Angeles Mayor Eric Garcetti has said<\/a> he plans to furlough thousands of city workers.<\/p>\n\n\n\n

The problem \u2014 at least with most states and cities \u2014 isn\u2019t that they\u2019ve managed their finances particularly poorly. It\u2019s that they\u2019re in the midst of an unprecedented crisis.<\/p>\n\n\n\n

\u201cStates have balanced budget rules to keep them from doing things that are fiscally imprudent. In practice, when we\u2019ve hit recessions that\u2019s led to difficulty,\u201d explained Kim Rueben, director of the state and local finance initiative at the left-leaning Urban Institute. States are able to raise more tax money when the economy is doing well, not when it\u2019s doing poorly, even though that\u2019s often the time when it needs money for things like unemployment and health care most. Many states have rainy day funds to cover downturns \u2014 the 50-state total recently hit $75 billion<\/a>.<\/p>\n\n\n\n

\u201cNot all of the states were good, but on average, they had actually put money away to try and handle what is your normal economic cycle,\u201d Rueben said. \u201cWhat we are entering into right now is not normal in any way, shape, or form.\u201d”<\/p>\n\n\n\n

…<\/p>\n\n\n\n

“the first state<\/a> to put in place a balanced budget amendment in its constitution was Rhode Island in 1842, and other states followed. As of 2015, 46 states plus Washington, DC, have some sort of balanced budget requirement<\/a>, which basically means they can only spend as much revenue as they\u2019re bringing in. How stringent these requirements are varies by state<\/a>; some experts say the only state that doesn\u2019t have to balance its budget is Vermont” <\/p>\n\n\n\n

…<\/p>\n\n\n\n

“The United States has a system where many of the country\u2019s priorities are handled at the state and local level \u2014 the local school systems, colleges and universities, infrastructure, prisons and jails, the health care systems. The federal government is supposed to work in partnership with states and cities by design, the idea being that they\u2019re closer to the ground on understanding the needs and wants of their citizens.<\/p>\n\n\n\n

\u201cYou want the financing of them to be solid,\u201d Leachman said. \u201cIt\u2019s in the national interest to make sure that that happens, and it\u2019s another reason why it should be a no-brainer for the federal government to provide the fiscal relief that states and localities need right now.\u201d”<\/p>\n\n\n\n

https:\/\/www.vox.com\/2020\/4\/29\/21241162\/balanced-budget-amendment-state-bankrupt-mitch-mcconell-cares-act<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

“Senate Majority Leader Mitch McConnell\u2019s suggestion that maybe states and cities should just go bankrupt amid the coronavirus-induced economic crisis they\u2019re facing has not been particularly well-received. A big part of the issue: As the law stands right now, states can\u2019t declare bankruptcy.<\/p>\n

But the controversy points to a broader problem states across the country are facing \u2014 their costs have skyrocketed and their revenue has plummeted, and unlike the federal government, they can\u2019t run a deficit. They\u2019ve got to balance their budgets so that they take in what they put out. And right now, a lot of states are sounding the alarm that they\u2019re going to need to make deep spending cuts unless the federal government steps in.<\/p>\n

New Hampshire Gov. Chris Sununu, for example, warned his state could need to make $500 million in cuts next year. Missouri Gov. Mike Parson estimated he\u2019ll have to cut $700 million and has already put a pause in $227 million in state funding. Los Angeles Mayor Eric Garcetti has said he plans to furlough thousands of city workers.<\/p>\n

The problem \u2014 at least with most states and cities \u2014 isn\u2019t that they\u2019ve managed their finances particularly poorly. It\u2019s that they\u2019re in the midst of an unprecedented crisis.<\/p>\n

\u201cStates have balanced budget rules to keep them from doing things that are fiscally imprudent. In practice, when we\u2019ve hit recessions that\u2019s led to difficulty,\u201d explained Kim Rueben, director of the state and local finance initiative at the left-leaning Urban Institute. States are able to raise more tax money when the economy is doing well, not when it\u2019s doing poorly, even though that\u2019s often the time when it needs money for things like unemployment and health care most. Many states have rainy day funds to cover downturns \u2014 the 50-state total recently hit $75 billion.<\/p>\n

\u201cNot all of the states were good, but on average, they had actually put money away to try and handle what is your normal economic cycle,\u201d Rueben said. \u201cWhat we are entering into right now is not normal in any way, shape, or form.\u201d”<\/p>\n

…<\/p>\n

“the first state to put in place a balanced budget amendment in its constitution was Rhode Island in 1842, and other states followed. As of 2015, 46 states plus Washington, DC, have some sort of balanced budget requirement, which basically means they can only spend as much revenue as they\u2019re bringing in. How stringent these requirements are varies by state; some experts say the only state that doesn\u2019t have to balance its budget is Vermont” <\/p>\n

…<\/p>\n

“The United States has a system where many of the country\u2019s priorities are handled at the state and local level \u2014 the local school systems, colleges and universities, infrastructure, prisons and jails, the health care systems. The federal government is supposed to work in partnership with states and cities by design, the idea being that they\u2019re closer to the ground on understanding the needs and wants of their citizens.<\/p>\n

\u201cYou want the financing of them to be solid,\u201d Leachman said. \u201cIt\u2019s in the national interest to make sure that that happens, and it\u2019s another reason why it should be a no-brainer for the federal government to provide the fiscal relief that states and localities need right now.\u201d”<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[13],"tags":[450,588,409,483,759],"class_list":["post-2684","post","type-post","status-publish","format-standard","hentry","category-article-share","tag-budget","tag-corona","tag-coronavirus","tag-covid-19","tag-states"],"_links":{"self":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/2684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2684"}],"version-history":[{"count":1,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/2684\/revisions"}],"predecessor-version":[{"id":2685,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/2684\/revisions\/2685"}],"wp:attachment":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}