What should the federal government do as states and cities go belly up?

Many of the states with the most aggressive shutdowns came into the coronavirus epidemic with massive deficits. Now their revenue is collapsing as income and sales tax disappear, and their expenses are increasing rapidly as millions are thrown out of work.

The 800-lb gorilla in the corner is what happens as the state governments go insolvent?

The federal deficit is already ballooning to record levels. Should the federal government step in to help the states?

Or should they let the states’ creditors and pensioners get pennies on the dollar for investments?

Can states afford to continue the shutdowns?

For background, Illinois is the first state to beg for a bailout:

New York state has a huge deficit. It may not be far behind:

The state of California had a large surplus with a growing economy. It looks like that is turning to massive deficits and economic depression:

https://www.msn.com/en-us/news/politics/coronavirus-crisis-could-trigger-huge-california-deficits-lawmakers-are-told/ar-BB12KFqF

Bail them out. Too big to fail.

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Yep, and somehow it seems that the states with the biggest problems have Democrats as governors.

I would not be surprised if Trump will use the looming insolvency as a club to get them to end the lockdowns.

Let’s hope so.

Next phase begins.

It will be interesting to see how the “nation-state” of California fares:

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The key difference between the Federal Government and the States.

The Federal Government has a magic money machine.

The States do not.

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California has issued IOUs as de facto currency in the past. It may crank up the presses again:

https://money.cnn.com/2009/07/02/news/economy/California_IOUs/

Of course that flies in the face of the US Constitution:

No state shall . . .make any Thing but gold and silver Coin a Tender in Payment of Debts Article 1, Section 10.

But when you are a “nation-state” who needs the constitution?

What condition was the NYC hospital system in a year before the panicdemic?

Silwy wabbit…only the red states. You do know there’s an SB loan attack going on right now that will lead to that end. :rofl: :sunglasses: