Home
In this issue
April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Apr. 4, 2013/ 24 Nissan, 5773

When the Government Goes Bankrupt

By Judge Andrew P. Napolitano



http://www.JewishWorldReview.com | What happens when the government goes bankrupt? This question is one that sounds like a hypothetical exercise in a law school classroom from just a few years ago, where it might have been met with some derision. But today, it is a realistic and terrifying inquiry that many who have financial relationships with governments in America will need to make, and it will be answered with the gnashing of teeth.

Earlier this week, a federal judge accepted the bankruptcy petition of Stockton, Calif., a city of about 300,000 residents northeast of San Francisco, over the objections of those who had loaned money to the city. The lenders — called bondholders — and their insurers saw this coming when the city stopped paying interest on their loans — called bonds. In this connection, a bond is a loan made to a municipality, which pays the lender tax-free interest and returns the principal when it is due. Institutional lenders usually obtain insurance, which guarantees the repayment but puts the insurance carrier on the hook.

The due dates of many of these bonds have come and gone, and the bondholders and their insurers want Stockton to repay the loans. But the city lacks the money with which to make the repayments. It borrowed money from the bondholders during good financial times, when its real estate-generated tax receipts were greater than today, and when its advisers predicted no foreseeable end to the flow of cash to the city. The expected flow of that cash, the natural inclination of those in government to want to give away other people's money, and the self-serving manipulations of those in power who rewarded their friends and themselves with rich pensions combined to cause the city to make generous pension commitments to its employees.

It is politically easier to offer generous pension payments to municipal employees in the future than it is to raise their salaries today. The promise to pay a pension to qualifying retirees upon their entry into the retirement system, just like the promise to repay bondholders the money they loaned, is a legally enforceable contract.

So, confronted with an obligation to repay more than $200 million in loans to bondholders and more than $900 million to the California pension system for its current and former employees, and confounded by a serious reduction in real estate tax revenue, so serious that Stockton cannot afford to pay either the bondholders or the pension system, let alone both, the city that over-borrowed and over-spent and over-promised has sought the protection of a federal bankruptcy court.

Bankruptcy in America is a strange bird. It permits debtors to be relieved of their financial obligations by paying less, often far less, than they owe. It compels creditors to accept less, often far less, than they are due. It is generally an orderly and mechanical process presided over by a neutral judge without a jury. Its goal is to get the creditors something, leave the debtors with something, and let all parties go home in peace and resume their livelihoods.

But it rarely happens to the government. That's because the government, which has no competition, creates no wealth, doesn't produce anything of value and needn't attract clients, has a monopoly on the use of force with which it can extract what it needs to pay for its mistakes in the form of higher taxes. These extractions, of course, are not voluntary transactions as when you buy gas for your car or food for your table. They are mafia-style transactions: Pay us more, or else.

But there must be a limit even to the Stockton taxpayers' willingness to part with their wealth in the form of taxes, hence the filing for bankruptcy. The Stockton case presents a rare opportunity for a federal judge to interfere with the contractual obligations of a municipal government and actually modify or even nullify them.

It also presents a confluence of a culture in California of high taxes and generous — often non-contributory — pensions for even short-term government employees and a federal system that when it faces a shortfall simply goes to its banker — the Federal Reserve — and asks it to print more cash. Stockton cannot legally print cash the way the Fed can.

How does this affect the rest of us? Currently, state and local governments owe about $4 trillion in pension benefits that they do not have to current and former employees, and they know they cannot politically acquire it by raising taxes. This affects all 50 states. So the odds are that the states and the similarly situated Stocktons in America will go to the Obama administration and ask for free cash. And the president will no doubt find it for them. That "found" cash will be borrowed from the Federal Reserve and, like all of the federal government's debts to the Fed, will never be repaid. But countless generations of American taxpayers will make enormous and endless interest payments on it.

Does that sound too apocalyptic for you? Well, consider this: The federal government is still paying interest on the $30 billion it borrowed to wage World War I nearly 100 years ago. So, to the feds, mortgaging your children's future to save the Stocktons of the country from the consequences of their own profligate ways is a no-brainer.

Should Americans yet unborn pay for all of this? Is this what you elected the government to do? What will it take to keep the government within the confines of the Constitution?

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

Your comments are appreciated. Please send them by clicking here.

Andrew P. Napolitano, a former judge of the Superior Court of New Jersey, is the Senior Judicial Analyst at Fox News Channel and anchor of "FreedomWatch" on Fox Business Network.



Previously:


03/28/12 Hope for the Dead
03/21/12 No More Asking for Permission To Speak
03/14/12 What if Nanny Is a Thug?
02/28/12 Obama's False Alarms
02/14/12 Obama's Secret Court for Killing
02/07/12 Obama Gives Himself Permission To Kill
01/31/12 Both sides in immigration debate overlook main issue
01/24/12 Guns and the President
01/17/12 Guns and the Government
01/10/12 Guns and Freedom
12/13/12 Government Spying Out of Control
12/06/12 Republicans for Big Government
11/29/12 Republicans and Taxes
11/15/12 Silencing General Petraeus
11/08/12 Four more years to crush personal freedoms
10/25/12 Silence on Libya
10/18/12 Who Is Responsible for the Mess in Libya?
10/11/12 Let Gary Johnson Debate
10/04/12 Two Failures
09/27/12 The Arab Spring Becomes a Western Winter
08/23/12 Abortion and Rape
08/16/12 November's Choices
08/09/12 Gazillions
07/19/12 The Rule of Law
07/12/12 We Are at a Turning Point
07/03/12 A Vast New Federal Power
06/28/12 Restraining Arizona, Unleashing the President
06/21/12 Can the President Rewrite Federal Law?
06/15/12 Squealing Versus Killing
06/07/12 Where Is The Outrage?
05/31/12 The Secret Kill List
05/24/12 What If We Have Only Memories of Freedom?
05/17/12 Is There a Drone in Your Backyard?
05/10/12 What Constitutes a Fair Trial?
05/03/12 The President's Private War
04/26/12 Rick Perry Was Correct
04/19/12 A Government of Waste
04/12/12 What If the Government Rejects the Constitution?
03/29/12 Can the Government Force You To Eat Broccoli?
03/22/12 Is the CIA in Your Kitchen?
03/15/12 Can the Secret Service Tell You To Shut Up?
03/08/12 Can the President Kill You?
02/23/12 What If Democracy Is Bunk?
02/16/12 Time To Tame the Federal Beast
02/09/12 Do Catholics Have Too Many Babies?
02/02/12 What Is a Just War?
01/25/12 A Few Words About Abortion
01/20/12 How Much Economic Freedom Do We Have in the United States?
01/12/12 What If Elections Don't Matter?
01/05/12 Big Government Cannot Pay Its Bills, Again
12/29/11 The Case for Austerity
12/22/11 New Ideas or Fidelity to Old Principles?
12/15/11 The Government as Lawbreaker, Again
12/08/11 What if our rights didn't come from the Almighty or from our humanity, but from the government?
12/01/11 Can Congress Steal Your Constitutional Freedoms?
11/24/11 What if the Constitution No Longer Applied?
11/17/11 Congress and Secrecy
11/10/11 Does the Government Work for Us, or Do We Work for the Government?
11/03/11 Look at What the Government Has Done with Your Money
10/27/11 What Have the Wars Done for You?
10/20/11 Is Freedom in America a Myth or a Reality?


© 2012, ANDREW P. NAPOLITANO

DISTRIBUTED BY CREATORS SYNDICATE

Columnists

Toons

Lifestyles

Quantcast