United 'States' Weigh Bankruptcy Option

4 posts


States, of course, are sovereign and cannot sue for bankruptcy protection in Federal court. It might require a constitutional amendment to complete the work of the 'War Between the States' that ended up subjecting all of them to the Consolidated Government.

The NYT floats the trial balloon of Final Surrender for a bowl of pottage.

(thanks, PennDutch at OD for the link)

This will be *the* defining constitutional issue of our time, perhaps of this century, so it is worth a read. The cost of supporting our current social structures is to accept a degree of socialism that we have never yet experienced. What began in Russia, will end in America.
Niccolo and Donkey

Great find Mac, thanks. They're gonna raid your pensions. What then?

Bob Dylan Roof
As far as I can tell, the only clear obstacle to State bankruptcy is the Bankruptcy Code itself, which, as of now, does not provide for State bankruptcies. I'm not an expert by any means, but I don't see any Constitutional obstacle to a State filing with the federal judiciary for injunctive relief against creditors; after all, the federal courts regularly hear criminal cases where a State is a party to the case. But this doesn't seem necessary either because the States have sovereign immunity under the 11th Amendment and therefore cannot be sued by any of their creditors, including the States' own employees. The only option for creditors would be forceful appropriation of State property.
Would off-loading the Federal debt on the States then be a viable political option? The states could take their pension fund reserves, sell the assets, and use the proceeds to buy Fed-bonds, then stiff everyone with impunity (and inevitability). No one could sue the states and the federales would be solvent, so far as foreign creditors are concerned.

Where's the flaw?