Let the Bailouts Begin!

The House of Representatives passed a bill to bailout Puerto Rico a couple of days ago.  Will they do the same for states that are just as irresponsible?  According to the Mercatus Center at George Mason University, six states are just as bad as the little Caribbean island with a sweet tooth for spending cash.

With short-term budget troubles and colossal long-term debt, Kentucky, Illinois, New Jersey, Massachusetts, and Connecticut, in particular, are much closer to the basket case economic condition of the Caribbean territory on the Mercatus fiscal health index than they are to states such as Texas, the Dakotas, Florida, or Nebraska, where budgets are balanced and public pension systems may yet be salvaged.

For example, Connecticut, which ranks 50^th out of the states for fiscal health, has run up $67 billion in debt, compared to Puerto Rico’s $118 billion, while both have populations of around 3.6 million. But personal income in Puerto Rico is less than one-third of Connecticut’s. If that seems reassuring, consider that the Nutmeg State’s debt figure grows to $124 billion if you recalculate pension debt, assuming it will all be paid — an assumption one no longer makes for Puerto Rico, which gave up on funding its pension system a decade ago and is now just draining the balance.

Get ready folks.  States that are fiscally responsible will be the one’s holding the bag for a bunch of reprobates.  If bailouts occur, consequences should be meted out.  I believe states should lose representation in Congress and electoral votes for president disqualified until their debt is paid back in full.

Source:

http://watchdog.org/267047/puerto-pension-debt/

House Votes to Bailout Spendthrift Puerto Rico

Washington D.C. elites in the so-called House of Representatives have decided to bailout spendthrift Puerto Rico.  This tiny island has a $2 billion out of a $70 billion debt payment due on July 1^st.  Of course, lawmakers refuse to call it a bailout.  They say the federal government is “restructuring” its debt.  Speaker Ryan declared no “extra” money will go to Puerto Rico.  Yeah, right.

These people act like this hasn’t happened before.  During the 1830’s and 40’s, states ran up outrageous debt by issuing bonds for infrastructure projects.  An economic crisis ensued rendering irresponsible states insolvent and unable to pay back investors.  Foreign governments lobbied Washington D.C.  for a bailout.  They wanted the general government to guarantee states’ debts which, of course, it refused.  Our federalist system didn’t allow such an infringement upon self-government.

Eventually, states paid off their debt without federal government help and were the wiser for it.  Here is an excerpt from America’s First Great Depression by Alasdair Roberts.

“Self-government is no longer a theory, it has been demonstrated,” said John Pettit, an Indiana delegate who had served in both the state and federal legislatures.  And time had shown its frailties: “We have not that perfect confidence in ourselves…and we take our cool and calm moments to bind and restrict ourselves - to protect ourselves against the sudden and dangerous impulses of passion and prejudice…It is to prevent the evils resulting from excitement and passion, that we take our calmer and quieter hours to bind ourselves and our fellow man.”

Many states had, indeed, bound themselves in the years following the crises.  This was manifest in constitutional reforms and new tax policies, but a more important alteration, which both caused these changes and made them durable, could be seen in political culture.  Humiliated by the experience of default or near-default, pressed by angry lenders, and oppressed by new taxes, states had abandoned the internal improvements movement.  They had replaced their sunny views about popular sovereignty with a darker conception of the rationality of political processes.  The economic crisis seemed to have taught them a lesson: that liberty without discipline was a formula for ruin.

Indeed.  Puerto Ricans should have to suffer through a crisis they created; in the end, they will be the wiser for it.  Something tells me the United States will follow shortly.

 

 Source:

http://thehill.com/policy/finance/282895-house-votes-to-rescue-puerto-rico

https://www.amazon.com/Americas-First-Great-Depression-Political/dp/0801478863?ie=UTF8&*Version*=1&*entries*=0