The state bankruptcy debate

Veronique deRugy has a column in the upcoming edition of Reason Magazine discussing the idea of allowing states to declare bankrtupcy. It’s good to remember that bankruptcy doesn’t mean that states suddenly have an incentive to re-think and re-structure their budgets. It only means they get a chance to start over with a clean slate. Another question to consider is this: why can’t states straighten out their fiscal problems now? Do they lack the tools? In reality there are things states can do, but it must be in conjuction with federal spending reform. In short, there are no easy solutions to decades of structural budgetary problems.