The States’ Debt Crisis is a Federal Debt Crisis Because the States are No Longer Independent Economic Entities

Gary Allen, in The Rockefeller File, states that the CFR is behind the many regional government plans, which would abolish city, county, and state lines, leaving us at the mercy of federal bureaucrats; and that the CFR is behind the push for "land use" controls. They want "federal control of everything since they intend to control the federal government." [Source]

The sales tax had been the No. 1 source of state and local revenue since the mid-1970s. Before that, property taxes were the primary source. That changed in the first three months of 2009. In a historic first, federal aid has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments. [Source]

When States Go Broke

May 23, 2011

The Conglomerate - On May 13, I attended a conference called When States Go Broke: The Origins, Context, and Solutions for the American States in Crisis (program here: look for a much expanded book version in early 2012):

• The States in Crisis: Political Dimensions
• Panel I: The Politics of State Insolvency
• Panel II: The Pros, Cons, and Mechanics of State Bankruptcy
• Panel III: Lessons and Implications from Public Default: Local, State, National
• Panel IV: The Economics and Finance of State Default

The breadth of the conference discussion made for a fascinating day. David Skeel, co-organizer of the conference, kicked it off with a thoughtful, nuanced defense of his proposal to modify the Bankruptcy Code to allow states to file for a court-supervised, voluntary restructuring.

Four panels followed, discussing:

1. The politics of state debt;
   
2. The bankruptcy proposal itself;
   
3. A contextualization of state debt crises with experts on international restructuring and municipal default; and
   
4. A panel on the economic causes and consequences of state debt crises.
   

All of the panels were extremely substantive, with experts from a variety of disciplines and backgrounds.

One of the most interesting exchanges was a spirited colloquy between the AFL-CIO’s Damon Silvers and Stanford political scientist Jonathan Rodden. Their basic disagreement was the question on whether the states’ debt crisis—which some at the conference viewed as an inherently dubious label itself—could be anything other than a federal debt crisis.

Silvers said that the entire question of whether the states were actually independent economic entities was resolved in the negative by Abraham Lincoln and his version of the Navy SEALS, the Union Army. Rodden, one of the leading scholars of the politics of federations, disagreed, and thought the idea of an individual state’s default not only fully plausible, but also that the political toxicity of bailouts meant that the federal government, Gerald Ford style, could conceivably tell the states to drop dead in the event they came pleading for federal assistance.

Rodden and Silvers’ back-and-forth—respectful, without question, but also pointed and never dull—set the tone for the rest of the conference, where even on panels as united in their general conclusions as the state bankruptcy panel—all panelists were against Skeel's state bankruptcy proposal, to varying degrees—panelists presented starkly different views of how the world of state debt works.

The conference—and the forthcoming book, with expanded contributions from some of the conference attendees and several others—are important not simply because these issues are pressing, but also because there is so little, ex ante, upon which people agree, both concerning the nature of state debt crises, and consequently the best approach for solving them.

I’m confident that the conversations initiated at the conference and more clearly defined in the book will establish the parameters of the debate that, at the very least, will allow for those who engage in it to recognize what, exactly, they are arguing about.

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