Why Democrats Won’t Let States Go Bankrupt

There are quite a few fiscally unhealthy American states.  According to a recent ABC news story, $500 billion more was spent collectively by all 50 states than came in from revenue.  States such as Kalifornia are so heavily in debt that their credit rating is lower than the country of Kazakhstan.  These states are burdened by heavy Big Union pension costs.  For fiscal year 2008 there was a $1 trillion gap between outgoing pension liabilities and incoming revenue.  In fact, only two states had enough money on hand to fund at least 50% of what they owed retired Big Union employees (Alaska and Arizona).

When you spend too much and you just can’t pay your bills anymore there’s only one legal solution: go belly up.

Although there has never been an American state that has gone bust (several cities have) it is a sure bet some will declare bankruptcy.

Or will they be allowed?

Currently there is no mechanism by which a state can declare bankruptcy.  It’s not against the law, there’s just no process established as to how this could be done.

The how will have to be decided upon by our elected officials and the courts.

Democrats will not want any states to declare bankruptcy for the simple reason that it will hurt Big Union, a multi-million dollar supporter to Democrats across the country.

If a state goes bust the decision as to who gets paid what goes to the courts where judges could very well tell Big Union that they’re out of luck… no pensions for you or, more likely greatly reduced checks every month.

Big Union has been the mainstay of Democratic support for many decades.  Big Union takes the membership dues they collect monthly from their “members” and this goes into a slush fund which is then used to further the interests of the organization.  Since politicians are largely the ones who set the rules for Big Union, they get the lion’s share of the monies and Democrats get much more than Republicans do.

It is a vicious cycle of you scratch my back, I scratch yours and Democrats have been doing everything in their power to help Big Union increase their membership roles even though fewer and fewer Americans want to be a part of Big Union.

The irony is that Big Union and Democrats have created the environment that has caused this coming pension funding crisis and they won’t do what’s necessary to solve it: cut spending.  Kalifornia’s legislature has been under Democratic control for many, many years and they have done a terrible job of being fiscally responsible.

The saddest part of this story is that many Big Union members signed up for state jobs in part because of the generous pension benefits and they may face the very real possibility that all of that money they’ve been spending on dues over the years for the promise of a cushy retirement might go away.  In short, they will be told that what they signed up for is not what they’re getting and that’s simply too bad but they’ll have to deal with it.

If Democrats really cared about Big Union’s members, they wouldn’t have created such a generous pension system that would eventually kill the patient.

In the end, the “friend” of Big Union is actually going to be the one who hurts their supporters the most.

We can expect a soap opera to play itself out over the coming 2-3 years as state budgets head for a crash and legislatures and governors beg for Washington to help make up the difference, sort of a GM-style bailout for them.  Republicans will certainly oppose this and Democrats and Big Union will play the only card they have left: call for civil disobedience on the grounds that the American way of life is being destroyed by evil Conservatives.

The same thing is playing out in Europe as Big Union thugs firebomb banks, set fire to cars, attack police, and conduct work slowdowns and strikes which disrupt the economy and hurt private businesses.

America is currently in the calm before the storm and things are only going to get worse as the meat runs out and people start getting hungry.  When people are metaphorically starving they will do anything to eat.

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