And that bad advice is all the help states can expect from Patty:
McHenry criticized states for not preparing better for the end of the 2009 stimulus funding that the federal government poured into state budgets in the past two years.
"The era of the bailout is over," McHenry said.
More nonsense from the king of nonsense. This bankruptcy "solution" will erode states' abilities to prepare better, by making one of their tools (borrowing) harder to access and more expensive. But that second thing might be exactly what McHenry is trying to bring about:
But the point isn’t to actually pass legislation to allow states to go into bankruptcy. It’s to talk about it, therefore raising interest rates, which acts as a pure subsidy from state taxpayers to investors and banks. The more nervous investors are leaving the muni market entirely, with $30 billion coming out of the market since November. Part of this is the stability and success in the stock market, but it’s certainly also being driven by this hysteria about defaults which is completely unfounded.
Someone will buy those bonds, probably the TBTF banks. And they’ll get a nice subsidy for their efforts. McHenry, who represents bank-heavy North Carolina, knows what he’s doing.
An interesting footnote to this story: McHenry opposed efforts to rewrite (individual) bankruptcy laws to help filers avoid foreclosure on their homes. Helping regular folks, and the state governments that provide most of the services to those folks, will never surpass helping banks on McHenry's list of priorities.