I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
While environmental activists played their part yesterday during demonstrations at the capitol building, going so far as to dress up as solar panels and to sing the tune of “You Are My Sunshine,” their counterparts, the anti-cap-and-trade contingency who has…
Roughly one quarter of University of New Mexico students are unimpressed with the state’s flagship public school, according to a survey that questioned college students about their higher education experiences.
States are grappling with “nightmare scenarios” but history suggests there won’t be catastrophic results, says a Stateline report today. The report goes back in time to look at how states and the federal government responded during the recession of the early 1980′s, the Great Depression, the Panic of 1837, and even the Revolutionary War period, to illustrate the options facing state governments today.
Arkansas defaulted on its bond payments during the Great Depression. Bond defaults happened during the Panic of 1837 in eight states, plus the territory of Florida. Alexander Hamilton persuaded Congress to assume the Revolutionary War debts of the original 13 colonies. But the last “turndown” that comes close to the Great Recession of today came in the early 1980s, a generation ago, so many of today’s lawmakers lack experience in how to deal with a fiscal crisis of this magnitude.
Examining the Great Recession through the lens of history led Stateline to draw a few conclusions:
Bankruptcy, at least the scenario where a judge would take control of a state’s finances, is off the table. Bond defaults, the cardinal sin of public finance, seem highly unlikely for states. Another federal bail-out is plausible. Some state governments may even be fundamentally overhauled. But the worst for most states will sound familiar: service cuts, tax hikes, IOUs, layoffs, furloughs and political gridlock.
Bankruptcy is off the table because states don’t have the legal authority to declare bankruptcy, the report states. It’s assumed that states can raise taxes or cut services to find the money to pay their creditors. Bond defaults are highly unlikely because states have an incentive to keep their credit flowing. The report sites California state treasurer Bill Lockyer saying that the only scenario that would cause California to default on its bonds would be a thermonuclear war.
So bankruptcy is impossible and bond defaults are improbable in New Mexico–but service cuts, tax hikes, IOUs, layoffs, furloughs and political gridlock are all still possibilities here. One thing to keep an eye on is whether the state legislature and the governor can work together to avoid gridlock and a shut down of government.
