fiscal federalism

July 19, 2016|

State Bankruptcy and the Federal Order

In response to: Extending Bankruptcy Law to States: Is It Constitutional?

Illinois State Legislature

While a federal bankruptcy law for states might be a desirable policy, its constitutionality is doubtful. Now, I am not a constitutional lawyer and cannot speak to the details of United States case law, but I do study fiscal federalism in comparative context: its conditions, operations, and consequences. Accordingly, I will analyze how a federal law for state bankruptcy would tend either to support or to undermine the values one might seek to protect by means of the federal, constitutional order in the United States. The main points of the argument are as follows. First, federal bankruptcy law for cities reaches…

Sovereignty and Orderly Defaults

by Jonathan Rodden

In his illuminating and timely Liberty Forum essay on the constitutional impediments to a state-level bankruptcy procedure, Michael McConnell emphasizes the importance of the sovereignty of the states in the framework of American federalism. Unlike Detroit and San Bernardino, and perhaps unlike Puerto Rico, the states are considered fully sovereign with respect to taxation, expenditures,…

In What Circumstances Would the Threat of State Bankruptcy Be Credible?

by Stephen Slivinski

Michael McConnell’s Liberty Forum essay does an excellent job of outlining the legal case that enabling states to declare bankruptcy is not necessarily inconsistent with constitutional principles or with existing case law. From the perspective of a public choice economist, however, there is another salient issue. What those who study the outcomes of institutional arrangements and…

A State Bankruptcy Policy and the Constitution: Michael McConnell Responds

by Michael McConnell

The 1840s approach of letting insolvent states default in their own juices is unlikely to withstand political pressures for bailouts today.

February 9, 2012|cartel federalism, fiscal federalism, James Buchanan, New Deal

Kling, Greve, Salam Discuss Fiscal Federalism’s Failure

by Richard M. Reinsch II|

Arnold Kling, blogger at Liberty Fund's EconLog, posted the following interview with Michael Greve on fiscal federalism and other insights from his upcoming book, The Upside-Down Constitution. Greve's thoughts on this subject can also be read in the three posts he did on fiscal federalism recently. Kling writes: Below is an excerpt from a video conference with Michael Greve, Reihan Salam, and me on the problems with fiscal federalism in practice. The full half-hour video is here. And, yes, I also created a podcast. It is a good discussion, but quite depressing. A naive view of federalism is that it encourages robust competition…

February 1, 2012|fiscal federalism, Obamacare, pension obligations, state debt, transfer payments

Greve on the state debt trap in three parts

by Richard M. Reinsch II|

In case you missed it, here are Michael Greve's 3 provocative posts that outline the ruinous nature of our "cooperative federalism." In rich detail, Greve argues that our transfer payment system from the federal governments to the states has fostered the $4.5 trillion in unfunded pension obligations of the states. Also, Obamacare doubles down on this system by implicitly bailing out states in allowing them to shift their state employee healthcare costs on to Medicaid and get reimbursed for doing it. Finally, the 3rd post looks to Argentinian federalism as a possible and depressing future course for our federalism. Have a…

January 26, 2012|cooperative federalism, fiscal federalism, local debt, Mitch Daniels, state debt, State of the Union

The Debt Trap, Part (1)

by Michael S. Greve|

President Obama didn’t discuss the nation’s massive, swelling debt in his State of the Union address. Mitch Daniels did, and good for him: the flood of red ink really is the Niagara. Our accelerating drift toard the cliff, moreover, entails not only fiscal and economic but also institutional and constitutional consequences of grave import. State and local debts are a comparatively small tributary to the great stream, but they illustrate the point.

State and local debts are composed of about upwards of $4 trillion in unfunded pension obligations; upwards of a half-trillion in other pension benefit obligations (mostly for health benefits), also unfunded; and about $2.9 trillion in municipal (state and local) bonds. These debts will not be paid (at least not in real dollars), because they cannot be paid. The question is how and to whom our federal system is going to administer the haircut—and what changes it is likely to undergo in the process.

Today’s post deals with the background causes and conditions of state debt; tomorrow’s, with federal bailouts; Monday’s, with fiscal federalism’s future. (It’s not the EU. It’s Argentina.)

A Mirror of the 20th-Century Congress

by Joseph Postell

Wright undermined the very basis of his local popularity—the decentralized nature of the House—by supporting reforms that gave power to the party leaders.

The Graces of Flannery O'Connor

by Henry T. Edmondson III

O'Connor's correspondence is a goldmine of piercing insight and startling reflections on everything from literature to philosophy to raising peacocks.