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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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