Watch this. Many states with large union presences, with exorbitant pension obligations for state employees, don’t really see a way out of their situation without cutting pension payouts. No one will say it officially but the promises made many of these people by politicians (who were funded by state employee unions by the way) won’t be honored because they were BS from the very beginning. The unions knew it. The politicians knew it. But now reality has come knocking and Puerto Rico offers a preview of what is to come. The Feds are going to try to put taxpayers on the hook just like they put taxpayers on the hook for GM pensions.
I’m sorry if this sounds harsh but I really don’t care if your government employee pension gets cut. You knew it was a pipe dream. We’re not paying more for you. We are trying to take care of our own families.
“It would be unprecedented in the American context,” said Robert Shapiro, the former undersecretary of commerce for economic affairs. “We don’t have a provision for states going bankrupt.”
There’s one big argument for doing this: Puerto Rico’s economic malaise makes its debt unpayable. Puerto Rico’s economy has been contracting for nearly a decade straight and its population has been fleeing to mainland United States, eroding its tax base. That makes it all but impossible for the government to provide adequate services to its residents and pay its creditors in full—and may require an extreme measure to help it get out from under.
The White House’s proposal immediately drew fire, and not just from the bondholders who would lose money under the deal. “I think it makes no sense,” Luis Fortuño, the former governor of Puerto Rico, said in an interview.
Fortuño has been a strong voice in favor of giving chapter 9 protection to the island, but worries that this new proposal—so-called “super chapter 9”—goes too far. “It could be viewed as a precedent,” he said. “And the question a number of people would ask [is] if the territories can have a super chapter 9, why not Illinois or California?”
Most of this country is run reasonably well. But there are big pockets on both coasts which have embraced unrealistic levels of government. The part of America which for the most part balances its books shouldn’t have to pay for the profligate parts of the country. We do still have states. I’m OK with Puerto Rico, California, Illinois, New York paying the piper. I’ll bet most taxpayers who don’t live in those sorts of states are just fine with it too.