Earlier this week, we expressed concern that some conservative pundits and policy makers are pushing states facing large budget deficits (both in the short- and long-term) to declare bankruptcy. Reuters' James Pethokoukis provides the latest example about why this approach is problematic.
Republicans in Congress have introduced a bill that suspends the ability of states and localities to sell tax-exempt bonds if they don't report their pension-fund liabilities to the U.S. Treasury Department. (State sovereignty, it seems, is a right conservatives uphold only when it's politically convenient.) The hope among some on the right is that "the shock" of the debt load will, in the words of Pethokoukis, "grease the way towards explicitly permitting states to declare bankruptcy." And that's important because it would give Republican lawmakers an opportunity to smash union contracts. "Allowing them the same ability to renegotiate obligations," he writes, "could enable them to slash public employees’ lavish benefits, a big factor in their financial woes ... From the Republican perspective, the fiscal crisis on the state level provides a golden opportunity to defund a key Democratic interest group."
Never mind that public employee pensions are, by and large, not lavish at all. Never mind that those workers bargained for those retirement benefits with the state. Never mind that the vast majority don't earn Social Security. And never mind that the state has several fiscal options to pay off the obligations, if they can muster the strength to do so. If conservatives can figure out a way to bash organized labor, they always will.