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Let's dates go bust to bust those pricey pensions state government staring down a two and a half trillion dollar -- nationwide.
If nothing is done taxpayers will be footing the bill.
Now -- new calls to let states declare bankruptcy.
To stay -- Nolan -- got every contract to wipe out that debts.
I am sure Sony and -- and a passionate.
-- -- -- -- -- this week Jonathan Hoenig Tracy Byrnes John late build and course Wayne Rogers and don't forget to pick up a copy of -- new book may hero roles -- has the bookstores on February 8.
And also joining us this big democratic strategist Julian Epstein so welcome to all of you went on offense.
Isn't -- let the states is go bankrupt all that say tax payers money.
Well I'm Cheryl a reality exists in these states are.
As -- isn't any -- either at or near bankruptcy even look at some of the missile bond funds they're down 1520%.
In the last three or four months.
It's the entitlements it's the contracts to mention it's a social spending that up with this then -- then in this precarious position.
I think in many cases bankruptcy actually can help.
If it changes the behavior I think gives states a chance.
To restructure some of these pregnant on recommend comic deals because as it has since now they're gonna continue to tax the producers that he will actually create for a living as they're doing here in Illinois.
With a 67%.
Try to pay for these -- economic deals that will never work.
Well John you know -- -- individuals involved for bankruptcy businesses even local governments in some cases why Nat.
A state filing for bankruptcy edges starting over.
Well I don't because -- borrow they'll drop borrower calls through the roof you know you give the on it you take up the implicit guarantee of the United States and government.
Behind California Illinois New Jersey.
The raids that they have to borrow money to be a self fulfilling prophecy.
These guys will go bankrupt because he got to remember 432 billion highest ever was done last year in state and municipal bonds.
47% of those were by American -- -- -- program ended December 31 that's -- funding that is that is dried up.
The stimulus ends the first part of this year the Medicaid payments to the states.
Of states' budgets come -- from the federal.
Budget directly transfer payments to the State's 42% thing goes down to State's municipalities.
You have a strong -- -- but if you declare these base these states can declare bankruptcy.
Borrowing calls go through the roof and these states will go on -- we are first half of the year.
Here's the thing -- an obvious that the law would have to be changed to me that's one thing but you -- got the credit agencies going after states already and issuing warnings California New Jersey Illinois New York I -- all of his party on.
You have a bankruptcy would cause more problems than it would that would solve.
I think as John points out it would put all the the all the credit ratings into junk status.
It was in the bond market into a tailspin and it wouldn't -- with a fundamental issues as John points out that the state governments have to deal -- Which is health care costs are out of control.
The we need to get economic growth back up to 5%.
Should union contracts be on the table as part of the as part of that effort to balance -- budget absolutely but the idea of going to bankruptcy is is very.
Anyway look -- -- -- what do you think is we're looking at two and a half trillion nationwide an unfunded pensions already around -- are just.
The -- alcoholic another drink and that's -- we keep doing over and over again Illinois is the perfect example.
They raise taxes 6667%.
Debt now on an -- rated bond is up to six point 25%.
It is expensive to.
Never worried about cutting spending anywhere so doing were not fixing.
The problem we're feeding the monster and it's just gonna continue to get worse -- -- what is what is out there right now that would force states forced governors local legislatures to get on the ball and get our house in order.
I mean you have a a governor I didn't threaten them.
Well I'm I'm not sure there's anything that would but but you know we have -- -- success of the bankruptcy court.
In this sense that there is some order to witness something that you can in -- predict.
Both -- the local that the local level in municipalities and at the county level so if it works for them why shouldn't it work for the state.
The problem with this is that the bill that would be go to the congress will be so locked up.
-- all of these other things that they'll make exceptions about it and they will explode the bankruptcy court from doing what it's supposed to do which is to reorganize this.
That's the fly in the ointment otherwise it won't work yes of course it works it works -- the -- and before that local governments why should it worked for the.
And at the end of the day Jonathan I mean it is taxpayer money that we're talking about here this okay -- are working hard paying their state tax is only to see it getting wasted and I actually had.
Chris -- -- economic guy on this week on Fox Business he told me there's no way Chris Christie would ever ever consider bankruptcy.
It's hard to hear it because even as Julian pointed out and and I thought -- -- -- could go bankrupt but guys it's happening -- it is an open your -- the municipal bond market is getting killed State's borrowing costs are going up as it is here we never think that Portugal could go bankrupt.
That sovereign countries but this is their predicament bid that these contracts have gotten them into sort of Trace his point and -- the behaviors change.
Heck I'd love to see California go Bangkok.
And then he'll open office and -- -- -- privatize everything is becoming a song the song of America but that's not gonna have a.
It could think of -- and think outside -- but yeah this particular -- eight billion dollars in vendor debt that -- is playing right now.
And two -- point 88.
Properly done organized bankruptcy would actually get those people some money so let go bankrupt does do it right.
You know the thesis of this argument is that if you go back up you can get rid of the union contracts.
And I think trying to balance the state contracts on the backs of their -- police the fire that people keep us safe from terrorism.
People keep our streets -- I think it's the right way to do it I think you know if you haven't yet pointed out.
The primary problem that we have here is that health care costs are out of control the second problem that we have that weren't economic growth which is that 2% when you get a 5%.
If we could deal with those two problems than the state budget problems would evaporate.
Well played but.
That -- -- doesn't the pensions that we're talking about here.
-- meant nothing against safety we -- wanna be safe but those the pensions that are dragging the State's debt alone.
What's again if you don't have a a place for this to happen in other words they view this state is just got a default.
That you have a lot of lawsuits and everything else -- -- big changes under the aegis of the bankruptcy court you can do this in -- orderly fashion so that.
They are certain classes of -- credit -- who get paid out over a period of time.
That's the only way to do this it works in the local government it works at the county level.
Why not at the state level it's crazy not to at least you invest into the bankruptcy court.
-- power to do something that is in an orderly fashion something that is predicted right.
And you don't do that the congress is gonna mess it up to tell you we're trying to serve.
Yeah Julian is right about one -- these union obligations have to be negotiated had to be re done and -- and it's called police -- obligations going for which I understand the difference between the union heads -- big problem for years just like our politicians and the union workers shows over the last 45 years going to work who expects a pension it's not his fault.
That the government had unrealistic.
Return assumption and exacerbated by defined benefit -- -- defined contribution plans and it's not his fault that the government stole money.
From these pensions and put on the general fund because they can't balance -- budget.
-- now does say what is gonna declare bankruptcy and -- you guys under the bus I personally believe America is better that cannot business.
They won't -- of the regular had to take a breath -- late -- off.
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