You and I can declare bankruptcy if we need to. Municipalities can. For some reason, states can't. Newt Gingrich wants federal law to let them in on the game. (Tip of the hat: Zero Hedge.)
As everybody knows by now, the states are strangling on pensions and benefits owed to their employees. Like the bigger Union of which they are components, they have felt immensely generous in the past. They've made golden handshakes standard operating procedure, and are wracked with remorse because they are sunk in the new economic battlefield.
Mr. Gingrich discussed the proposal in a Nov. 11 speech before the Institute for Policy Innovation, an anti-big-government group based in Lewisville, Texas. According to a transcript of the speech on Mr. Gingrich's website, www.newt.org, he said:
“I ... hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy, so that states like California and New York and Illinois that think they're going to come to Washington for money can be told, you know, you need to sit down with all your government employee unions and look at their health plans and their pension plans and, frankly, if they don't want to change, our recommendation is you go into bankruptcy court and let the bankruptcy judge change it, and I would make the federal bankruptcy law prohibit tax increases as part of the solution, so no bankruptcy judge could impose a tax increase on the people of the states.”
What happens when the states kneecap their employees and it's all jolly legal? Does Newt actually believe that will be the end of it? Never mind the lawsuits; those take too long to work their way up the great chain of judicial being. No, the jilted beneficiaries will then take their turn at bat, demanding a fat pitch from Congress.