When Bob Lawless introduced me a couple of weeks ago, he promised that I would stir up trouble. If responses to my post on amending the Bankruptcy Code to permit states to file are any indication, I have kept Bob's promise.
While no one seemed especially interested in the merits–does Wisconsin's budget fight show that amending the Bankruptcy Code is unnecessary?–the post nevertheless brought out the mob.
Respondents attacked me and each other (sometimes pretty crudely) for, among other things:
- Writing about something too "political" for Credit Slips (yes, well, amending the Bankruptcy Code is political, as are state budgets);
- Allegedly having a conflict of interest for writing about this at all (not quite: I am not a member of a union, which is what the fight here is about); and
- Failing to use apostrophes correctly (sorry, but for some reason the blogging response function doesn't always pick up apostrophes or quotation marks).
While there were plenty of personal attacks, no one really responded to the basic observation in the original post: Why amend the Bankruptcy Code if states have the political will and ability to get their debt under control on their own?
My view is that negotiated debt restructurings usually preserve more value than other ways of dealing with distress. This, of course, is a principle underlying much of the Bankruptcy Code (see, e.g., chapter 11). It would likely be imputed to a "chapter 8" for state bankruptcies–if enacted–as well.
In Wisconsin, Governor Walker has said he won't negotiate with the unions. But all that tells me is that he has more power than a new chapter 8 would likely give him. He doesn't need state bankruptcy.
While I am suspicious of Governor Walker's claim that Wisconsin's fiscal "crisis" warrants severe reductions in public employees' power to bargain collectively, he was duly elected governor in a state with Republican majorities in both houses. I have little doubt that his proposals, unlike Newt Gingrich's on state-bankruptcy, will eventually become law.