Coronavirus: Cash-strapped states should consider bankruptcy, McConnell advises

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A top legislator involved in helping the US avoid economic calamity due to the coronavirus outbreak is urging state governments to declare bankruptcy, saying Republicans won’t take on more debt to bail them out.

Senate Majority Leader Mitch McConnell told radio host Hugh Hewitt: “I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated. You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programmes.

“There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”

Some states are starting to open up their economies, but others remain hard hit by the pandemic. Two of those suffering are California and Illinois, with Deborah Birx, one of Donald Trump‘s top federal public health officials, saying on Tuesday evening that federal authorities are closely monitoring the Chicago area as a potential next hotspot.

Mr McConnell noted California and Illinois, along with Connecticut, have spent ample amounts on their pension programmes. That could add up to major financial shortfalls for state capitals.

The Kentucky Republican offered some financial advice.

“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,” Mr McConnell said. “That’s not something I’m going to be in favour of.”

But he nudged governors worried about fiscal failure in another direction.

“I would certainly be in favour of allowing states to use the bankruptcy route,” Mr McConnell said Wednesday. “It’s saved some cities, and there’s no good reason for it not to be available.”

All three states mentioned by the Republican leader mentioned are overseen by Democratic governors.