David Skeel, a professor of law at the University of Pennsylvania, has written a book called, “The New Financial Deal:Understanding the Dodd-Frank Act and its (Unintended) Consequences.” Any critic of that piece of legislation is a friend of mine.
Professor Skeel argued in the Wall Street Journal that states should have the ultimate bargaining tool to renegotiate union contracts, bond debt, and pension benefits. He makes a compelling case that this is the best way to avoid a federal bailout of deeply troubled states like California and Illinois–and that it is constitutional. And what about Minnesota and other states that are deep in the red but have not gone off the cliff? If Congress does not fend off profligate states like California (aka the Lindsay Lohan of states) and bails them out, more responsible states like Minnesota will pay the price and line up, as well, for a bailout. One of the lessons we should have learned long ago is that you have to let people and markets take their hits. Bailouts delay the pain and punish the responsible. Here is another article by Skeen in the Weekly Standard.
We checked with Professor Skeel; there is no pending federal legislation but drafts are in the hopper. This is a long term solution to addressing the steep price we are paying for the unionization of our public workforce. More on that later.