The Senate majority leader is prioritizing the Republican Party rather than the American people during this crisis.
American states are abruptly facing their worst fiscal crisis since the Great Depression. The Center on Budget and Policy Priorities estimates that more than 25 percent of state revenues have evaporated because of the pandemic. Demands on state health-care budgets, state unemployment systems, and state social-welfare benefits are surging. By the summer of 2022, the state budget gap could total half a trillion dollars.
States need help. Senate Majority Leader Mitch McConnell does not want to provide it. On The Hugh Hewitt Show on April 23, McConnell proposed another idea. Instead of more federal aid, states should cut their spending by declaring bankruptcy:
I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available. My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that. That’s not something I’m going to be in favor of.”
McConnell expanded on the state-bankruptcy concept later that same day in a phone interview with Fox News’s Bill Hemmer:
We’re not interested in solving their pension problems for them. We’re not interested in rescuing them from bad decisions they’ve made in the past, we’re not going to let them take advantage of this pandemic to solve a lot of problems that they created themselves [with] bad decisions in the past.
McConnell’s words instantly attracted attention, criticism, even some derision. New York Governor Andrew Cuomo blasted the idea as “dumb,” “irresponsible,” and “petty”:
How do you think this is going to work? And then to suggest we’re concerned about the economy, states should declare bankruptcy. That’s how you’re going to bring this national economy back? By states declaring bankruptcy? You want to see that market fall through the cellar? … I mean, if there’s ever a time for humanity and decency, now is the time.
Cuomo’s fervent rebuttal grabbed the cameras. It did not settle the issue. State bankruptcy is not some passing fancy. Republicans have been advancing the idea for more than a decade. Back in 2011, Jeb Bush and Newt Gingrich published a jointly bylined op-ed advocating state bankruptcy as a solution for the state of California. The Tea Party Congress elected in 2010 explored the idea of state bankruptcy in House hearings and Senate debates. Newt Gingrich promoted it in his run for the 2012 Republican presidential nomination.
To understand why Republicans want state bankruptcy, it’s necessary to understand what bankruptcy is—and what it is not.
A bankruptcy is not a default. States have defaulted on their debts before; that is not new. Arkansas defaulted in the depression year of 1933. Eight states defaulted on canal and railway debt within a single year, 1841. The Fourteenth Amendment required former Confederate states to repudiate their Civil War debts
A default is a sovereign act. A defaulting sovereign can decide for itself which—if any—debts to pay in full, which to repay in part, which debts to not pay at all.
Bankruptcy, by contrast, is a legal process in which a judge decides which debts will be paid, in what order, and in what amount. Under the Constitution, bankruptcy is a power entirely reserved to the federal government. An American bankruptcy is overseen in federal court, by a federal judge, according to federal law. That’s why federal law can allow U.S. cities to go bankrupt, as many have done over the years. That’s why the financial restructuring of Puerto Rico can be overseen by a federal control board. Cities and territories are not sovereigns. Under the U.S. Constitution, U.S. states are.
Understand that, and you begin to understand the appeal of state bankruptcy to Republican legislators in the post-2010 era.
Since 2010, American fiscal federalism has been defined by three overwhelming facts.
First, the country’s wealthiest and most productive states are overwhelmingly blue. Of the 15 states least reliant on federal transfers, 11 are led by Democratic governors. Of the 15 states most reliant on federal transfers, 11 have Republican governors.
Second, Congress is dominated by Republicans. Republicans controlled the House for eight of the last 10 years; the Senate for six. Because of the Republican hold on the Senate, the federal judiciary has likewise shifted in conservative and Republican directions.
A state bankruptcy process would thus enable a Republican Party based in the poorer states to use its federal ascendancy to impose its priorities upon the budgets of the richer states.
When Cuomo protested McConnell’s bankruptcy idea, the New York governor raised the risk of chaos in financial markets. But McConnell does not advocate state bankruptcy in order to subject state bondholders to hardship. Obviously not! When McConnell spoke to Hewitt about fiscally troubled states, he did not address their bond debt. He addressed their pension debt. State bankruptcy is a project to shift hardship onto pensioners while protecting bondholders—and, even more than bondholders, taxpayers.
Republican plans for state bankruptcy sedulously protect state taxpayers. The Bush-Gingrich op-ed of 2011 was explicit on this point. A federal law of state bankruptcy “must explicitly forbid any federal judge from mandating a tax hike,” they wrote. You might wonder: Why? If a Republican Senate majority leader from Kentucky is willing to squeeze Illinois state pensioners, why would he care about shielding Illinois state taxpayers? The answer is found in the third of the three facts of American fiscal federalism.
United States senators from smaller, poorer red states do not only represent their states. Often, they do not even primarily represent their states. They represent, more often, the richest people in bigger, richer blue States who find it more economical to invest in less expensive small-state races. The biggest contributor to Mitch McConnell’s 2020 campaign and leadership committee is a
- PAC headquartered in Englewood, New Jersey. The second is a
- conduit for funds from real-estate investors. The third is the
- tobacco company Altria. The fourth is the
- parcel delivery service UPS. The fifth is the
- Eli Lilly pharmaceutical corporation. The sixth is
- the home health-care company, LHC Group. The seventh is the
- Blackstone hedge fund. And so on and on.
A federal bankruptcy process for state finances could thus enable wealthy individuals and interest groups in rich states to leverage their clout in the anti-majoritarian federal system to reverse political defeats in the more majoritarian political systems of big, rich states like California, New York, and Illinois.
No question, many states face serious problems with their unfunded liabilities to state retirees. Illinois’s liability nears $140 billion, and its municipalities are liable for additional billions. California’s state and local unfunded liabilities amount to $1.5 trillion.
Those liabilities are often described as “pension” liabilities, but they are driven above all by faster-than-expected increases in retiree health-care costs. They need to be addressed, and addressing them will be a tough policy challenge. It will be a tough legal challenge, too, since those liabilities are often—as in Illinois—inscribed into the state’s constitution.
Difficult and important as these problems are, they are not urgent problems. They existed 24 months ago; they will remain 24 months from now. From a strictly economic point of view, McConnell’s schemes for state bankruptcy are utterly irrelevant to the present crisis. Reducing future pension liabilities will not replenish lost revenues or reduce suddenly crushing social-welfare burdens.
But McConnell seems to be following the rule “Never let a good crisis go to waste.” He’s realistic enough to recognize that the pandemic probably means the end not only of the Trump presidency, but of his own majority leadership. He’s got until January to refashion the federal government in ways that will constrain his successors. That’s what the state-bankruptcy plan is all about.
McConnell gets it. Now you do, too.
Or at least he won’t let Congress do anything to stop it.Why won’t Mitch McConnell protect our elections from outside interference?
His Republican colleagues in the Senate want to do something. That’s why some of the most conservative members of his caucus are working with Democrats to improve the nation’s election security.
One proposal, according to The New York Times, would “require internet companies like Facebook to disclose the purchasers of political ads.” Another, devised by Senators Marco Rubio of Florida and Chris Van Hollen of Maryland, would “impose mandatory sanctions on anyone who attacks an American election.” Yet another, the brainchild of Senators James Lankford of Oklahoma and Amy Klobuchar of Minnesota, would “codify cyber information-sharing initiatives between federal intelligence services and state election officials.”
House Democrats have already introduced legislation to bolster election security and would most likely work with the Senate to put together a compromise proposal should a bill pass that chamber. But McConnell refuses to consider any legislation on election security during this congressional term. For the Senate majority leader, the problem has already been solved, and this rare show of bipartisan cooperation doesn’t matter. “I think the majority leader is of the view that this debate reaches no conclusion,” Roy Blunt of Missouri, a McConnell ally, said.
The easiest explanation for McConnell’s opposition to the various election security proposals is captured in one word: Trump. Only recently has the president acknowledged foreign interference in the 2016 election. “Russia has disappeared because I had nothing to do with Russia helping me to get elected,” Trump said last month on Twitter, blasting Robert Mueller’s investigation. “It was a crime that didn’t exist.” Later, however, he returned to his usual position of denying any assistance or interference at all. “Russia did not get me elected,” he said.
The president’s endless denial makes sense: To acknowledge any election interference on his behalf is to undermine the legitimacy of his victory, even if the hacking and disinformation were not decisive.
McConnell works closely with the White House to put conservative judicial nominees on the federal bench. It’s his key priority. “I love the tax bill and a lot of the other things we did,” McConnell said in an interview last year. “But I think lifetime appointments — not only to the Supreme Court but to the circuit courts — are the way you have the longest-lasting impact on the country.” He needs a good relationship with the president. Why, then, would he give this legislation a chance to pass? Why antagonize an ally?
But McConnell’s relationship with Trump isn’t the only way to explain his opposition to these proposals. For the past two decades of his Senate career, McConnell has been a tireless opponent of openness, accessibility and transparency in elections. He stood against the McCain-Feingold campaign finance law, praised the Supreme Court’s ruling in Citizens United and, more recently, blasted Democrats for their push to expand access to the ballot. He’s driven by a simple calculation: that secure, open elections are elections that McConnell — and the Republican Party he leads in the Senate — are less likely to win.
McConnell’s career makes clear that he has few, if any, political and ideological convictions. As Alec MacGillis, a reporter for ProPublica, observes in “The Cynic: The Political Education of Mitch McConnell,” McConnell was reliably pro-choice until it became inconvenient and pro-union when it would get him votes. But his most revealing turnaround was on campaign finance.
As chairman of his county Republican Party in the 1970s, he backed aggressive campaign finance reform. He wanted “drastically” lower contribution limits, full donor disclosure, a ceiling on overall spending and public financing of elections. “Many qualified and ethical persons are either totally priced out of the election marketplace or will not submit themselves to questionable, or downright illicit, practices that may accompany the current electoral process,” he wrote in a 1973 op-ed for The Courier-Journal in Kentucky.
In 1990, as the junior senator from Kentucky, he introduced legislation to abolish political action committees. In 1993, he backed a ban on funds collected outside the contribution limits for individual candidates — what had come to be known as “soft money.” “Soft money should be banned,” McConnell wrote at the time. “All campaign spending should be on the top of the table where voters can see it.” By the end of the decade, however, McConnell would be a reliable foe of virtually every limit on the ability to raise and spend money in politics.
The reasons for his reversal were straightforward. At heart, McConnell is a partisan. When he thought campaign finance reform would harm Democrats or help him win higher office, he backed campaign finance reform. When he thought Democrats relied on soft money, he tried to ban soft money. But when those funds began to fill his campaign war chest, he changed his tune. By 1997, he had nothing but good things to say about soft money. “Soft money is just a euphemism for free speech,” he said. For McConnell, winning was the only thing that mattered, and anything it took to win was fair game.
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.. Over the past decade, the Senate Republican leader has emerged as a skilled legislative warrior, obstructing President Barack Obama’s agenda and enabling President Trump’s. But what does Mitch McConnell himself actually believe in?
.. Background reading:
“McConnell aspires to be not the bloody and maybe tragic hero in a revolutionary drama but one among a short list of undisputed masters of the machinery of American government,” Charles Homans writes his profile of the senator for The New York Times Magazine.
Mr. Homans interviewed Mr. McConnell for several hours over the course of two months, and also spoke to dozens of staff members, senators and cabinet members from the Obama and Trump administrations. Here are six takeaways from his reporting.
- [Paul von Hindenburg]