Secret GOP plan: Push states to declare bankruptcy and smash unions

[WizardLeft62]

Secret GOP plan: Push states to declare bankruptcy and smash unions
Dec 7, 2010 13:42 EST

James Pethokoukis
Politics and policy from inside Washington
blogs.reuters.com

Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011. That’s why the most intriguing aspect of President Barack Obama’s tax deal with Republicans is what the compromise fails to include — a provision to continue the Build America Bonds program. BABs now account for more than 20 percent of new debt sold by states and local governments thanks to a federal rebate equal to 35 percent of interest costs on the bonds. The subsidy program ends on Dec. 31. And my Reuters colleagues report that a GOP congressional aide said Republicans “have a very firm line on BABS — we are not going to allow them to be included.”

In short, the lack of a BAB program would make it harder for states to borrow to cover a $140 billion budgetary shortfall next year, as estimated by the Center for Budget and Policy Priorities. The long-term numbers are even scarier. Estimates of states’ unfunded liabilities to pay for retiree benefits range from $750 billion to more than $3 trillion. Republicans in the House of Representatives already want to stop state and local governments from issuing tax-exempt bonds unless they are more forthright about these future obligations. Republican Representatives Devin Nunes and Darrell Issa of California and Paul Ryan of Wisconsin have introduced a bill that would require state and local governments to estimate the size of public pension liabilities if their assets earned a more conservative rate of return than many plans currently expect. Failure to do so would result in the suspension of their ability to issue tax-exempt bonds....

Read article in full and other related material at:
http://blogs.reuters.com/james-pethokoukis/2010/12/07/secret-gop-plan-push-states-to-declare-bankruptcy-and-smash-unions/

[snot]

1. K&R'd

[nadinbrzezinski]

2. Ok...let's use the right term...conspiracy

And this will not end well

[tom_paine]

6. Now, now, nadine, conspiracies are not practiced by the top 0.1%, our nobility

Even though conspiracy is prosecuted and tried thousands of times a day across the country for Filthy Little Nobodies.

Why does conspiracy not exist for the Nobles but only for Filthy Little Nobodies.

Everyone knows that. It's because our Nobles are so gosh darned Noble and above reproach.

[ChumbawambaFan]

3. Secret to who? nt

[progressoid]

4. Let's not kid ourselves.

There are plenty of Democrats that have been doing their part to weaken unions too.

[jtuck004]

5. I don't see the big secret - but does anyone have a suggestion

as to where the money is going to come from? Do we just keep adding more to the debt figures? There is not enough tax money coming in at a federal or state level to continue to pay all the bills that are out there. Having the feds give\loan money just puts you on the hook for the state you live in AND any state in finacial trouble, just kicks the problem down the road. It doesn't solve it by any means.

Any serious job growth project shows that it will take us at least 20 years to re-empoy enough people to get the unemployment rate down to around 5-6%, and most of those will be jobs that have replaced $60K a year salaries with $20K a year salaries - because that is what is being paid now for people with 2 to 4 years of college and some experience. Some people who have been laid off at 50 or 55 will never work another job, and their next best hope is Social Security. Feel free to look at the numbers of the BLS Unemployment and JOLTS surveys - 5-6 unemployed or underemployed people for every job opening (and that doesn't count the ones waiting for it outside of our borders at 1/4 of what you can work for), and any serious projected job growth shows at least 15 years to in fantasy land,

It's a direct result of shiping jobs out of the country for the last 40 years and the total lack of re-investment in our country and our people, and allowing the wealthy and investment banks to create huge bubbles and vacuum off the proceeds with help from their friends in the government - and that crosses all party lines for the past 4 decades.

We don't have to borrow, because we are the sole manufacturers of the dollar, but as we bring that debt figure up the dollar will lose purchasing power, mostly as a result of not purchasing anything. Tariffs won't work because other nations now trade with each other, they will just bypass us if we make it too expensive to sell stuff here. Mexico and China have BOTH instituted tariffs on products we need to sell in response to our actions of the last couple of years.

Running the debt up is not a bad thing, if we invest it in more training, teaching people how to live in a global economy, starting new small business. But if we are just paying debt that goes for nothing, the dollars in your pocket will, in fact, become worth less.

So what's the answer? Anything other than useless blaming and name-calling?

Will we as democrats be able to hold together enough to raise the debt higher, and invest in our country? Or...?

[Rethuglican]

10. Those strike me as good points.

An additional thing to keep an eye out for, and this is just a guess mind you, is the possibility of some combination of inflation, too many newly issued bonds, and credit ratings causing a very very nasty increase in interest rates. If that were to happen, I can see where you would get a feedback loop where everybody rushes to the door. Existing bond holders, which include a lot of 401k's and pension plans, could see a severe haircut in addition to an increase in the cost of borrowing money as debt is turned over.

In systems this complicated and with thinking actors (ie. it's not just simply a matter of physics but is more akin to game theory) getting from here to there, wherever 'there' is, sounds like something that isn't a matter of a simple plan...and maybe doesn't succumb to analysis at all.

[old mark]

7. Look at Chris Christie of New Jersey - he is the model the new GOP governors

are following. Hates unions, cutting funding to cities, laying off workers, huge salaries to his friends. Our own PA version - Tom Corbett - will take over here on January 1, and I expect the same from him...
FWIW, I think Christie will run for President at some point...
Rec.
mark

[indimuse]

8. well...IT"S WORKING!!!

this has been in play for quite a while! :mad:

[Stuart G]

9. Thanks for posting this...very significant important article...nt

[bhikkhu]

11. I think its more about schools, myself

Unions have shrunk quite a bit for decades now and lost much of their clout, but most states' education systems are in dire condition as state budgets teeter on the brink...I think that in every case where a type of "shock doctrine" can be opportunistically applied, it will be, to eliminate public education in favor of for-profit private education. Think New Orleans after Katrina, the complete replacement of the prior system on a new model. There's massive money to be made there, and everything is poised to go in most places.