Photo: Pete Souza via Wikimedia
Undeterred by House Republicans, Newt Gingrich and former Florida Governor Jeb Bush make the case for letting states file for bankruptcy in a Los Angeles Times op-ed today.The pair urge Congress to pass a law that would let states seek federal bankruptcy protection, arguing this would be a “fair, orderly, predictable and lawful approach to help struggling state governments address their financial challenges without resorting to wasteful bailouts.” The piece doesn’t address how state bankruptcies might affect the existing muni bond market.
Gingrich, a former House Speaker, has been a leading proponent of letting states declare bankruptcy for several months. He told Reuters last week that passage of the bill is imminent. But House Majority Leader Eric Cantor said Monday that he is opposed to changing the state bankruptcy law.
Gingrich and Bush argue that a state bankruptcy process similar to Chapter 9 municipal bankruptcy would allow floundering states to restructure their debts, especially to public worker unions. Even just the threat of bankruptcy, they write, would be enough to release the “stranglehold government employee unions have on state and federal budgets.”
Given Gingrich’s likely bid for the 2012 GOP presidential nomination, the op-ed is strategic: California is facing a $25.4 billion budget shortfall and has more than 2.6 million public employees and retirees.
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