Mitch McConnell's state bankruptcy idea may be 'dumb' but it isn't stupid


If Senate Majority Leader Mitch McConnell (R-Ky.) manages to block aid to state and local governments in the next coronavirus relief bill, one result would be longer and deeper financial pain for the U.S., The Washington Post reports. And McConnell's idea that states should be allowed to declare bankruptcy makes no sense and would hurt everyone, Josh Barro explains at New York. New York Gov. Andrew Cuomo (D) described McConnell's bankruptcy idea as "one of the really dumb ideas of all time."
State and local governments employ 13 percent of the U.S. workforce. "Without emergency relief as their revenues crater, state and local governments will not be able to run key programs like unemployment insurance, social services, housing assistance, and small business outreach needed to protect people and businesses in this crisis," tweeted Amy Liu, director of the Brookings Metropolitan Policy Program. An unidentified local government budget expert told the Post: "If you want to send the country into an extended depression, sending state and local governments into bankruptcy is a great way to do it."
But "state bankruptcy is not some passing fancy," writes David Frum at The Atlantic. "Republicans have been advancing the idea for more than a decade." And McConnell is trying to use this fiscal crisis — states are projected to lose at least 25 percent of their revenue even as health care, welfare, and unemployment costs shoot up — to make it a reality while he still can.
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McConnell doesn't represent Kentucky so much as "the richest people in bigger, richer blue states who find it more economical to invest in less expensive small-state races," Frum writes. These wealthy donors want to gut pension funds and enact other fiscal policies anathema to voters in their states. "A federal bankruptcy process for state finances could thus enable wealthy individuals and interest groups in rich states to leverage their clout in the anti-majoritarian federal system to reverse political defeats in the more majoritarian political systems of big, rich states like California, New York, and Illinois," Frum explains. "McConnell gets it. Now you do, too." If not, read more at The Atlantic.
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Peter has worked as a news and culture writer and editor at The Week since the site's launch in 2008. He covers politics, world affairs, religion and cultural currents. His journalism career began as a copy editor at a financial newswire and has included editorial positions at The New York Times Magazine, Facts on File, and Oregon State University.
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