Newt Gingrich (and Jeb Bush): Allow voters to send their states into bankruptcy

In today’s Los Angeles Times, Newt Gingrich and Jeb Bush have double-bylined an argument for a federal law to permit state bankruptcies. From the op-ed:

“The figures for next year’s budgets are staggering. California, which faces a $25.4-billion budget shortfall, will pay $100,000+ pensions to more than 12,000 state and municipal retirees this year. A Stanford study puts the state’s unfunded pension obligations at more than half a trillion dollars. Illinois has a $15-billion budget deficit, prompting its governor and lame-duck Legislature to hike its personal income tax rate by 66%. New York, where 73% of the government workforce is unionized, is staring at a $10-billion deficit.

“…[A]s with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.

“…[T]he new law should provide for triggering mechanisms to initiate the bankruptcy process that respect the sovereignty of the people of a state. A state legislature acting by a majority vote, with the governor, would fit this test. The new federal bankruptcy law should also allow those states that provide for the right of initiative, like California, to put the question to voters whether they support a reorganization of their state government under the U.S. Bankruptcy Code.”

A popular vote on whether to send a state into bankruptcy? Think of the TV ads.

- By Jim Galloway, Political Insider

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71 comments Add your comment

TrickleDownStupid

January 27th, 2011
2:19 pm

Isn’t it true that a few years ago, the GOP pushed through legislation that would make it harder for individuals to file bankruptcy?

Aubre Boone

January 27th, 2011
2:27 pm

The Republicans won’t be satisfied until they destroy this country and blame it on the Democrats and others who they consider enemies.

Jeff and the Camaros

January 27th, 2011
2:34 pm

To Trickle Down–you are right on!

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khc

January 27th, 2011
2:54 pm

let’s give tax breaks to wealthy and take away benefits to police and teachers….where is the shared pain and Trickledown you are so correct about repub hypocrisy

Smarty

January 27th, 2011
2:54 pm

How about TERM LIMITS for all these clowns!! OF course their pension would not be involved.

Bill

January 27th, 2011
2:55 pm

Trickle down, Indeed it is. So, if you get laid off or ill, and it prevents you from paying your bills, you are stuck. On the other hand, if politicians mishandle public money, I guess all is forgiven.

Dr. J

January 27th, 2011
2:55 pm

Four comments? Does anybody read the AJC?

Bill

January 27th, 2011
2:58 pm

This is a very thinly disguised effort to put the last nail in the union coffin. Forget about the union contracts for a minute, what about the social contract. For decades, state employees have been told that, even though we can pay them what they would make in the private sector, they had better job security, and better benefits. Now, we are ready to renege on decades of promises we made.

Certainly, there is much belt tightening that needs to be done, but we made promises to these people. Raise my taxes, please.

blue dog

January 27th, 2011
3:00 pm

Georgia state employees pensions are not bloated and the pension fund is solvent dispute Perdue underfunding it the last few years. My concern is that once states bankrupt unchallenged, it will influence our GOP majority legislature to continue this underfunding, artificially creating a crisis requiring Ga to bankrupt…all in the name of smaller government.

Jane

January 27th, 2011
3:00 pm

Let’s start by eliminating all pensions for elected officials. it’s easy for them to place blame on hardworking and for the most part underpaid government employees when they’ve lived their whole lives on the backs of the taxpayers.

Observer

January 27th, 2011
3:01 pm

Newt Gingrich is a putz.

JP

January 27th, 2011
3:02 pm

So politicians on both sides demonize people who declare bankruptcy, yet want to allow states to break their committments to their own employees. Will the states still be allowed to cut taxes for everyone?

Business Man

January 27th, 2011
3:02 pm

This is actually a really good idea. Now if they would make Congressional pensions need based, we would be talking.

crudmudgeon

January 27th, 2011
3:04 pm

The GOP has laid out there agenda quite clearly. Bust all the unions, squeeze government till it is reduced to only the military and kill off all social programs. So, here we have the majority of folks in this country that rely heavily on government for social security, Medicare, disability payments, the VA etc. voting for Republicans who want to kill off everything that supports them. I can’t understand how completely idiotic that is? AND on top of that the GO-Pee-r’s think that taking 1 trillion out of the economy by reducing government spending (in the middle of a recession that they created) will somehow help the economy? Say instead we kill off all the corporate influence and see how the economy does? Makes sense that those corporations that rob us (ie big banks, Halliburton, drug companies etc) ought to have the least infuence doesn’t it?

I believe that somehow government DID build a vast majority of the infrastructure we all enjoy. Like Universities, the interstate highways and basically all roads and bridges, NASA, Homeland Security, the Military, libraries, schools, medical research etc etc. I believe somehow we’ve gotten our money’s worth. But of course the GO-Pee-er’s would rather use all the infrastructure for free and when its time to rebuild and expand those systems they want to pull all the money away and let it all go to dust. And we wonder why our country is going to hell?

Hey, have you seen the story about small towns all over the US that are removing their paved roads and leaving them dirt? We’re reverting to third world status because we don’t want to pay for it.

Michael

January 27th, 2011
3:04 pm

They just want to bust pensions and blame labor unions (democrats). Georgia and Atlanta’s pension issues surely didn’t come from unions. Catchwords for “liberal” include democrat, gay, labor union, environmental, black, minority, trial lawyer, and California.

When they made bankruptcy laws more stingy in 2005 and stopped mortgage cramdown in 2009 they invoked the “sanctity of contract” with your credit card company and bank. Bankruptcy deform passed the house and senate easily because of bipartisan payments by the banks to both parties.

JP

January 27th, 2011
3:05 pm

“The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health”

Pretty typical – politicians give state workers generous pay and retirement packages, then blame them for the financial mess they are in, then job them over and take away their benefits.

Centrist

January 27th, 2011
3:07 pm

Politicians who pandered for votes are the ones who kept adding goodies to government employees contracts/pensions. The current pay rates and pension liabilities are way out of line with the private sector and ability for taxpayers to pay, so something has to give. It won’t happen voluntarily unless the unions are forced – the only way is via bankruptcy or at least the plausible threat. There are certainly possible fair ways to phase in pension changes now, but they will be a lot more draconian if this problem is kicked further down the road – which is the likely political way.

Blaming the GOP for such past largess and pointing out the most logical solution is typical of most readers here.

poison pen

January 27th, 2011
3:13 pm

Centrist, you are absolutely correct, I am against letting states off the hook for all of their poor decisions. To all the liberals out there, please be advised that it was the Dems who pander to the unions in order to get their votes, so don’t put all the blame on the Repubs.

Marlboro Man

January 27th, 2011
3:16 pm

The federal gov’t should bail them (read loan) like they did the big banks.

I sang Dixie...

January 27th, 2011
3:21 pm

Good. I hope it passes, then that cesspool named the City of Atlanta can get their pension mess straightened out. 20% of the annual revenue is spent on pensions and retirees, and that’s a crock. Enough is enough. People in the private sector don’t get pensions that often in today’s times. Something needs to be done about it now. And to those who whine about it, sometimes life isnt fair.

killerj

January 27th, 2011
3:27 pm

I have a better idea,lets do away with government taxes and install a fair tax that everyone pays from food to clothing to roads etc and get rid of the most wasteful products of all, politicians!

Truth

January 27th, 2011
3:28 pm

The pensions are too rich. The states need this to get their financial house in order. I hate it for the state workers but the math doesn’t add up.

Truth

January 27th, 2011
3:29 pm

Killerj:
I agree 100%. We need the Fair Tax immediately. Everyone needs to pay taxes. How can the state or federal government function when 40+% of the population doesn’t pay any taxes.

markie mark

January 27th, 2011
3:39 pm

@ Centrist – well stated

Rural Educaiton

January 27th, 2011
3:42 pm

Can we please dispense with this 40% don’t pay any taxes, it is not true. Everyone pays taxes in the form of sales tax, fees, ect… . We do have people who don’t make enough money to pay the minimum tax, but be also have wealthy citizens who throught the use of expensive accoutants who also avoid paying income tax. When Warren Buffett pays less tax per dollar (dividends) than his secretary does (salary) we have a problem.

Just Wait

January 27th, 2011
3:51 pm

If people would take the time to investigate, they would find that the majority of government employees are not paid the huge salaries the Republicans proclaim. Most are barely above the poverty rate. It is the few managers, directors and specialty areas that garner the bigger pay checks. It was the promise of a decent retirement that keep these people working to pick up your trash, fix your sewers, and protect your homes on the job. It was the politicians that you elected that chose to underfund the programs that are to blame. Lets put the blame where it belongs.

slk

January 27th, 2011
3:52 pm

Sure…………..just as soon as Jeb and good ole’ newt have an ofice and recieve NO pay, NO health isurance of anykind…….take rides to work(not their own),rent not own a home……..their kids won’t be able to afford school…….I guess they could flip burgers……no unemployment, not set to recieve social security………..no food stamps…..no doctor visits……..but then remember who newt is…….the one who left his dying wifes’ side……..so compassion????????????????yeh, right.

john H.

January 27th, 2011
3:53 pm

This idea of allowing states to file for a new Bankruptcy Code is a horrible idea on so many levels. The Bush legacy. California needs to raise property taxes or the Feds need to bail them out.

deegee

January 27th, 2011
3:54 pm

What happens to the state’s credit rating after it declares bankruptcy? When will they be able to float a bond again?

Isn’t this issue with the states a precursor of what’s to come on a national level? The population is getting older. We aren’t doing a good job of educating our young so that they can compete for high paying jobs. We won’t allow an estimated 10 million illegal immigrant workers a chance to become a part of the mainstream. We are doing our best to discourage educated immigrants from entering the country with our antiquated immigration system. Who do they think is going to support a large population of old people? We need more bright, industrious young people. That’s the way the world has always worked regardless of whether there was government assistance or not.

Centrist

January 27th, 2011
3:56 pm

While it is true it was (and is) the politicians who underfunded platinum pensions (and grant golden contracts), what is the solution at this point? The “raise taxes” crowd ignore how this results in less economic activity and actual revenue. At some point the bubble has to burst if it is not purposely deflated.

blue dog

January 27th, 2011
3:57 pm

Georgia is a ‘right to work state’, where employees can be fired “without cause”, as long as it was not due to “discrimination”. This includes state employees. Beginning with new hires in 1996, state employees can be fired “without a hearing”. Georgia state employees salaries are among the lowest paid in the nation…there is nothing generous about our salaries or our pensions. Employees paid 8 1/2 % of their salary to fund their pensions, then in 1982, the legislature absorbed the employees contribution in lieu of a one time pay raise…so, we still paid for a large portion of the fund out of our salaries…it is just that now we do not get credit for those contributions.
I worked for over 30 years to earn my pension…which, as I said, I was a major contributor to the funds health. Now, for the first time…I feel vulnerable…my security blanket…my pension is subject to the political whims of a few…I guarantee you these politicians are not even aware of our contributions to the fund…they think it is fully paid for out of the state’s treasury. So, it is OK to steal the money I paid into the fund…because the state refuses to pay their share of the contribution to make the fund fully solvent. I don’t know California’s funding formula…but you on this blog that think it’s OK to bankrupt our pension fund in Georgia needs to think again…we paid for most of this pension ourselves. Again, This is not California…

khc

January 27th, 2011
4:03 pm

for all you folks agreeing with newt, how bout the slate gets wiped clean for everyone…let’s take newt’s pension accrual and everybody’s 401k or company pension and social security pension …that should about do it…..

balancing the problem on one group what a truly remarkable lack of understanding of what caused the meltdown…

will top 1% be happy when they have 99%of income and wealth…..can you say french revolution

GENE MCDANIEL

January 27th, 2011
4:05 pm

Yep, come to work for us for 25 years and you can retire with a full pension. Because they spent to much on people not working, now you want to cut me loose cause you spent all the money on crap. Rule of the Thunderdome – “Bust a deal, face the wheel!” This is BS!!

Bob Walling

January 27th, 2011
4:18 pm

Hey Y’all: A Northern Boy Here. This is my first time reading your area’s paper and the your comments. WHO YA! I am glad to find people with common sense in the South (not the Mob Mentality that we have here in Arizona). I am with all of you who see the ultimate danger the Conservatives are preparing us for.

JP

January 27th, 2011
4:22 pm

Let’s make sure ALL politician’s pensions are wiped out too if a state declares bankruptcy.

atlmom

January 27th, 2011
4:26 pm

The solution is no pensions. why is that so difficult? there is a reason that companies have stopped having pensions. People should be responsible for themselves, companies should contribute (or not) to individuals’ 401ks, and let’s be done with it. This is just crazy. Whoever thought the govt could keep their hands off money – or properly fund something – forever? no, they are always going to raid someone else’s money when they have the chance, that’s what they do.
So stop with the fallacy that the govt can possibly manage a pension fund – they can’t just like large companies can’t. let’s get our act together and face reality.

No Dog in this Hunt

January 27th, 2011
4:26 pm

At the state, it takes 30 years to reach ‘full’ retirement. Not 25.

Also, when GM went bankrupt, its creditors (including the employees)ended up owning the assets and the share owners (for a state, that would be citizens) were wiped out. The leadership (elected officials)were all fired. As long as we can seize and sell of the assets of the state to replace our pensions, I am okay with it. Especially the roads. This is an odd way to achieve privitazation but as a future stockholder, I’m all for it. Tolls for everyone.

atlmom

January 27th, 2011
4:29 pm

Better yet, JP – if you don’t allow elected politicians to have pensions at all (they are ‘exempt’ from soc sec. now – where do I get that deal?) _ and have them rely on Soc sec – then they won’t really want to serve for 30 + years, they will go get a ‘real’ job!

blue dog

January 27th, 2011
4:35 pm

Atlmon

Georgia State employees paid for their pensions our of their salaries as I mentioned above. New hires beginning jan 2009, get 1/2 pension, 1/2 401K.

No Dog in this Hunt

January 27th, 2011
4:35 pm

atlmom: Until the Perdue administration, the state’s pension fund was well funded and ran smoothly. People accepted lessor pay to work for the state with the understanding that their compensation included a pension. The state has changed this for new employees by ending the pension plan but has not replaced it with competitive salaries. That is why the state had 14,000 ufilled jobs when Governor Deal took office.

Look at the advertised positions and you will see that things like food inspectors make $20,000 per year, less than $2,000 per month. Under the old plan, that person could expect a pension of $1,000 per month after 30 years of service. Under the new plan, they get $500. I bet that food inspector feels guilty for robbing the state while they keep you and your kids from getting sick.

RetiredSoldier

January 27th, 2011
4:53 pm

Folks there is no more money to bail anyone or anything out. We are over 14 trillion dollars in debt with the federal government adding another 1.5 trillion this year. This madness has to stop.

Remenber if the law is changed it can only be done if the democratic senate votes for it and Obama signs it into law. If that happens don’t just blame the republicans.

At some point sanity must come into play and stop the crazy spending or we are all doomed. Shouldn’t we expect govenment to handle their monetary affairs like you and me? Is that unreasonable?

Tosh.No

January 27th, 2011
4:56 pm

LOL, know the left right blame game would be one of the first comments. It is both Democrats and Republicans fault for these problems, not one or the other.

RetiredSoldier

January 27th, 2011
5:05 pm

Absolutely Tosh, but it has to stop.

atlmom

January 27th, 2011
5:20 pm

@no dog: i was talking about Atlanta, actually, I wasn’t aware the state was as bad, but from what i understand, they still do get soc sec too, right? But 20% of the CURRENT atlanta budget goes to pensions. I doubt the state’s budget for pensions was EVER that high.

khc

January 27th, 2011
5:25 pm

let’s end military pensions too….all federal pensions….yea, that’s the ticket

khc

January 27th, 2011
5:38 pm

atlmoron…yea they get ss too because they paid into it you da

I sang Dixie...

January 27th, 2011
6:01 pm

File Chapter 7 and start over. Stick it to the “man!”

atlmom

January 27th, 2011
6:07 pm

@khc: ATlanta employees DO NOT pay into soc sec….all I’m saying is that if atlanta screwed up so much – AND – atlanta employees don’t get soc sec – then atlanta employees are DOUBLY screwed…i.e., AT LEAST state employees ALSO get soc sec (not that that’s some comfort but still) – thanks for the name calling when I was just asking for clarification.

khc

January 27th, 2011
6:23 pm

“I wasn’t aware the state was as bad, but from what i understand, they still do get soc sec too, right?”

cannot believe you do not understand that to receive ss retirement pension, you have to pay into it….state employees paid part of their paycheck for social security/medicare, state retirement, and health insurance……just like folks in private sector…..they also got paid below market salaries for many many years in lieu of decent retirement…..and so now because political leaders & financial leaders messed up it is all the fault of some poor govt worker….give me a break…..

with that kind of logic, how bout we stop all pension payments, public and private…..you in favor of cutting all military pensions, after all, they are part of the problem too……

don’t like your attitude toward government employees, most of whom are just as hard working as you