Commentary

Insuring Bankruptcy
Richard W. Rahn | Cato Institute:

If you were in debt, would you be more or less likely to increase your liabilities if you knew someone else would pay them off? Many children can quickly figure out the answer to this question, but it seems to be a real stumper for members of the House Financial Services Committee, chaired Rep. Barney Frank, Massachusetts Democrat. They are considering having the federal government reinsure municipal bonds. Such fiscal madness likely would make even citizens of banana republics blush.

Many state and local governments are having difficulty because of the drop-off in tax revenues caused by the recession. Responsibly managed state and local governments established rainy-day funds during the boom of recent years to tide themselves over and also reduced expenditures. Other state and local government leaders foolishly did not put away reserves and are being forced to make deep budget cuts. Some are increasing taxes (a really destructive act, particularly during a recession).

California is the poster child for irresponsible management and, as a result, is about to run out .......