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IPFS News Link • Government Debt & Financing

Gasparino On The Real Politics Behind The Meredith Whitney Report

Why yes, there is more Meredith Whitney commentary today. Funny that you asked. In a column up at the New York Post, Charlie Gasparino argues that both left and right are using her doom predictions to advance a cause. The left, obviously, is pushing for more Federal aide for the states, with the goal of bailing out the public unions And the right is eager to cheerlead the demise of the states for the same reason. Gasparino's commentary on the right's idea for state bailouts is right on: But bankruptcy is a legislative cop out. It would relieve profligate state governments of the consequences of their actions, namely the difficulty of telling municipal workers and others living off the public trough that there isn't enough money to give them everything they want, and of making the unpopular choices of cutting budgets drastically or raising taxes. It's also pretty dumb. What investor would buy a bond of a bankrupt state that will at least postpone paying off its debt? And if a state can't issue debt, how will it build roads, bridges and schools? Quick answer: It won't. Just look at what happened to New York City in the mid-'70s during the fiscal crisis that led the city to default on some debt. Infrastructure spending nearly halted, and the city's economy suffered a massive recession.