Currently, states are not allowed by federal law to go bankrupt, a situation David Skeel seeks to change, in an important article in the Weekly Standard. He argues that this is far preferable to the inevitable federal bailouts for spendthrift states like California, New York, and Illinois, which have been so generous to their employees in pay, benefits, and pensions that they are unable to raise enough revenue to meet their obligations. The idea that taxpayers in more sensible states like Indiana and Texas should have to bail out wealthy Democratic strongholds unable to operate responsibly is explosive. Mark Steyn has even warned that secession talk could get serious in the face of such looting of the prudent.There are several issues with federalism that Skeel discusses, and with voluntary bankruptcy, they can be overcome. The main objection to bankruptcy for states is that it would interfere with state sovereignty-the Constitution's protections against federal meddling in state...(Read Full Post)