Aside from the complete and utter immorality of this, what makes Skeel think this wouldn't cause massive economic damage? Not only would public employees suffer - so would contractors. Who would ever again do business with a state that reneged on its word?While the recognition by states that they are in crisis is the first step to recovery, a new bankruptcy law for states is the help they really need.Is there anything states can do in bankruptcy that a well-motivated governor can't do without it? You bet there is.First, the governor and his state could immediately chop the fat out of its contracts with unionized public employees, as can be done in the case of municipal bankruptcies. In theory, the contracts could be renegotiated outside of bankruptcy, and many governors are doing their best, vowing to freeze wages and negotiate other adjustments. But the changes are usually small, for the simple reason that the unions can just say no. In bankruptcy, saying no isn't an option. If the state were committed to cutting costs, and the unions balked, the state could ask the court to terminate the contracts.
Bankruptcy is a last resort. The states have another option: raise taxes on the wealthy who get away with not paying their fair share. Any sane court would tell them so.
Of course, this whole exercise in stupidity is predicated on on the notion of public employees living the high life on the taxpayer's dime, what with those "Cadillac" benefits that allow them modest retirements and the chance to take their kids to the hospital without going bankrupt themselves.
Maybe doing something about health care costs would help? Like taking the profit motive out of basic care, like every other OEDC country?
Oh, sorry - this is from Wall St. Journal. Can't talk about those things there. My mistake.