Bankrupt States


There’s beginning to be a bit of noise about the possibility of states going bankrupt, but current bankruptcy law doesn’t provide for state bankruptcies. A state could default on its debts, but its creditors only real recourse would be to stop providing goods or services to the state government.

There have been several proposals floated for Congress the enact a new chapter in the Bankruptcy Code that would allow for state bankruptcy. However, the Eleventh Amendment prohibits citizens of one state suing another state in a federal court. IANAL, but that seems to prohibit out-of-state creditors from having standing in Bankruptcy Court. Also, Article IV, Section 4 requires the United States to guarantee “a Republican Form of Government” to each of the states. Placing a state under the control of a receiver in bankruptcy would likely violate that requirement.

So it may be that states can’t go bankrupt. But perhaps a territory can because territories don’t have the protections of the Eleventh Amendment and Article IV. Maybe Congress could enact legislation to allow for territorial bankruptcies and to allow insolvent states to revert to territorial status to go through bankruptcy. Of course, a state using the process would become a territory and lose its Senators and all of its Representative, but it should be allowed a non-voting delegate in the House, and after it had put its affairs back in order, it could apply for readmission to the Union.

Given that the states with the greatest insolvency problems are blue states, … oh, never mind.

Standards of Living


Bookworm has a post up about a couple of topics. The first part deals with the similarities between 21st-century China and the 16th-century Aztec Empire. It’s well worth reading, but second part about the difference between blue state and red state economies hit home with me.

I was born and raised in Tennessee. During the early part of my career, I lived and worked all over the world, but I returned home to settle down. Then, a career opportunity took me to California. I spent most of a decade there until another opportunity took me to Maryland. I’ve been in Maryland for almost 30 years. I’m in my 70s, and as I plan for retirement over the next few years, going back home to Tennessee seems to make more sense than staying here.

Bookworm writes—

If I’m on a fixed income (which you should assume I am, so donations to the blog are always welcome), I’m a much wealthier person in Tennessee than I am in California. Here in Tennessee, my apartment costs 1/5 of what it would in California, my gasoline costs 1/2 of what it would in California, and my utility bills are 1/3 what they are in California. Produce is more expensive here, but I can only eat so many apples. In addition, the roads throughout Tennessee are better maintained than those in California, the people are delightful, and Nature’s fecundity is glorious. I’m no longer living in an elite Blue community, but I feel I’m getting a lot of bang for my buck.

Just so.

I have a few more interesting things to do before I retire, but the call to go home keeps getting stronger.