http://www.economist.com/node/18178497
This is in lieu of what we talked about in class today.
As the recession increased joblessness rates, States borrowed considerable sums of money from the federal government. As it comes time to pay this money back, many states (Michigan included) find themselves in the red, and some even on the verge of bankruptcy. Obama has proposed a plan to give financial relief to these ailing states by deferring interest and payments until 2014. On the other side of the aisle, some Republicans believe that the states should be left to fall into bankruptcy. What do you think should be done?
What happens to a state if they fall into bankruptcy? Does that mean that enough do, they will need to be bailed out by the government? I don't think you can just leave a state bankrupt; I feel like that would create some backlash in of itself. You might as well bail them out now before they hit bankruptcy. I have heard, though, sometimes it is better for a firm to declare bankruptcy because of some of the advantages of that, but I do not know if that qualifies for an entire state. I sure hope something gets done because most states are in the red, but who knows how much money we can commit to this type of program since our own federal government is in the red too, last time I checked.
ReplyDeleteI was literally about to type the same first sentence, Brooks. Deferring payments until 2014 just seems like a bad idea. Is there any reason to believe that these states on the verge of bankruptcy will be in a better position to pay the federal government back? It seems like we have forced ourselves into a position where states have to cut back on spending in order to repay their debts. It's really sad that we are now talking about bailouts for state governments. First, the banks, then the auto industry, (or maybe in the other order) now our state government? What's next?
ReplyDeleteI bet those republicans arent in any of those states that are on the verge.
ReplyDeleteEither way, what happens in 2014 when the states cant pay? These problems have been created over decades, so it seems that the feds are just prolonging the inevitable.
I second Dave and Brooks. Is the state going to have it's capital building forclosed? Big business can be bailed out but not the public entities we rely on everyday? The Fed's gotta find a way to help it's own out. Not just flush em.
ReplyDeleteI also wonder what would happen if a state goes into bankruptcy; would all government spending/aid from the state level come to a halt? That could be very damaging for a state's economy, especially in the rough economic times that our country is currently facing. I don't think bankruptcy is the correct option. But, if we do choose a plan that would let states defer interest and debt payments until 2014, what would happen if they can't even pay them in 2014? Hopefully the fact that states are so close to bankruptcy might be a wake up call for them; maybe the states will be able to rethink their frivolous spending patterns and restructure their state governments so that they'll be able to make their supposed payments in 2014.
ReplyDeleteCan't even imagine what would happen if states start going bankrupt. If it was maybe an outlier with only one state going bankrupt then maybe the feds could bail them out but with multiple states it might not even be possible! States do need to restructure their budgets and change their spending patterns. Some tough decisions are in order and most people will probably not like these - come in benevolent fiscal dictator!
ReplyDeleteThe sound of a state facing bankruptcy sounds very scary, I'm not even sure if I know what that all entails, either way it can't be good. What is even scarier is that so many states are almost to that point. Although deferring interest and payments is am option, is it a good one? I personally don't think so because by the time 2014 rolls around, not only will we not be able to make outstanding payments from today but we won't be able to keep up with our building debt. Can large corporations somehow be a means of investment, with some sort of tax incentive or something alone those lines.
ReplyDelete