Surprise, surprise. The New York Times reported that it is not only politicians at the local and national levels that can drive our cities and our country into bankruptcy. States can go bankrupt, too. And let’s face it: When they do, the federal government will bail them out just as they’ve rushed to prop up every other failure that bureaucrats deemed “too big to fail."
All of a sudden? How this—the fact that state governments are spending like there is no tomorrow—could catch anybody by surprise is bewildering to me. But the most remarkable aspect of this article is its uncritical adoption of the view that is evidently held by the politicians that caused the problems: namely, that things are not what they are until they are spoken of.
Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts . . .
'All of a sudden, there’s a whole new risk factor,' said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton Administration."
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. . .It would be difficult to get a bill [addressing state bankruptcy] through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.[1, emphasis mine.]
So, as long as nobody on Capitol Hill faces his problems—as long as everyone tacitly agrees to “tiptoe” past the mess and avoid talking about it—all is well? This is a glimpse into the nature of the welfare state. Because every policy flies in the face of reality, bureaucrats attempt to craft their own “reality” in the hopes that everyone plays along. (After all, it is absurd to think that “constitutional problems” represent an obstacle for most members of Congress.) The fact that The Times is complicit in this game of pretense is outrageous.
This brings to mind the scene in Atlas Shrugged in which Francisco D’Anconia confronts James Taggart, who is reluctantly shadowing Francisco at his (Taggart’s) wedding reception.
“What in hell do you think you’re saying?” Taggart cried furiously, seeing the tension on the faces around them.
“Be careful, James. If you try to pretend that you don’t understand me, I’m going to make it much clearer.”
“If you think it’s proper to utter such—”
“I think it’s funny. There was a time when men were afraid that somebody would reveal some secret of theirs that was unknown to their fellows. Nowadays, they’re afraid that somebody will name what everybody knows. Have you practical people ever thought that that’s all it would take to blast your whole, big, complex structure, with all your laws and guns—just somebody naming the exact nature of what you’re doing?”
1. “Path Is Sought for States to Escape Debt Burdens,” The New York Times, 20 Jan 2011,
2. Ayn Rand, Atlas Shrugged (New York: Signet, 1996, orig. 1957), p. 377.