April 23, 2020
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to [resort to bankruptcy]. That’s not something I’m going to be in favor of,” McConnell said.
McConnell might be warning states to submit to Federal power. Under pressure from their citizens Governors have been flexing their sovereign state status to loosen lockdown orders.
Under Federal law states cannot declare bankruptcy.
This might be a vague threat that Congress might allow state bankruptcy in order to intimidate governors and to soften the impact of skyrocketing Federal debt.
This is probably a “trial balloon” – McConnell will use the reaction to guide future decisions. States declaring bankruptcy would probably be on the path to long term statewide depression. After getting burned once investors would be hesitant to invest in a bankrupt state.
Some states allow cities to file for Chapter 9 bankruptcy. Several have done so, with mostly disastrous results.
In any case, McConnell is giving states a strong message to share the burden of debt.
“Small business owners are demanding that fresh funding for their struggling sector be tightly restricted, amid rising anger at large corporations claiming millions in aid.”
“Banks handling the government’s $349 billion loan program for small businesses made more than $10 billion in fees — even as tens of thousands of small businesses were shut out of the program, according to an analysis of financial records by NPR.”
“This month’s rent may be paid, but next month represents an ever present problem for millions right now.”
Sounds like we are sliding towards Universal Basic Income. It might be an idea whose time has come. Or maybe it’s being forced upon us by COVID-19.
“…by the year 2035 [Social Security] will only have enough money to pay 79 percent of benefits.
“I see the terrible impact on public health as well as the pocketbook,” Georgia Governor Brian Kemp said.
WHO’S CONTAGIOUS? WHO’S IMMUNE? WHO’S AT-RISK?
But large groups of informed people generally make good decisions. Even better than small groups of experts.
“Consumers are in a crisis mode, consumer sentiment is in the doldrums,”
On a brighter note…
Air pollution is dramatically declining, the stars are brighter, open vistas stunning. Hopefully we ca embrace lifestyle simplicity as we move through these hardships.
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