Firstly, when you think of bankruptcy for a state, or big city you need to think what that really means. I am not talking about the people of the state or businesses within the states going bankrupt, I mean the state and local governments. I want all the individuals and businesses to remain solvent, and only the governments to go bankrupt. It is very important to separate the two.
There have been decades and decades of reckless, wasteful, stupid and harmful spending by Blue States and Big Cities. These governments were in horrible financial shape, despite a booming economy with 3% unemployment even BEFORE they locked down. This reckless spending has been on “public education” where there is ever increasing extravagant spending compared to Red States, yet yielding ever worsening results and lower test scores for decades, failed healthcare programs, perpetual welfare programs, spending on illegals, and outrageous government worker salaries, pensions, “free” healthcare, etc. that are little more than giant pyramid schemes that are not sustainable This reckless spending has caused their total debt (i.e. amount owed) to grow higher and higher. They have been able to continue this reckless spending, only because people continue to lend them money via the sale of Municipal Bonds or “Munis”.
States and cities owe a staggering 5 trillion in “Munis”, the bulk of which is owed by those places I list above, that they never have any hope of every paying off and they keep running the debt higher and higher every year and these voters/politicians keep selfishly passing it on to young people (who naively support the policies and vote for these politicians and yet are being handed the gigantic bill) and to future generations . Now these same Blue States/Big Cities have taken the final suicidal step with insane, foolish and failed extended lockdowns that have shattered their economies, will result in a massive loss in tax revenue, massive continued exodus of productive people/businesses from their states, and yet spending more wildly than ever during the lockdowns. What they are doing is incomprehensible to any sane person. Yet, as long as people keep lending them money, they will keep recklessly spending and keep the lockdowns going.
Exactly, who exactly are these people lending them all this money? There are 3 groups that loan 85% of the money via Munis (source: http://www.msrb.org/msrb1/pdfs/MSRB-Brief-Trends-Bond-Ownership.pdf ):
1) The largest group (45%) is the ultra wealthy and wealthy, but mostly ultra wealthy individuals, who are mostly over age 55. The top 0.5% wealthiest individuals own 55% of all Muni bonds. Contrary to media pushed mythology, more than 75% of these ultra wealthy people vote Democrat, mostly due to some warped/hypocritical guilt, but that is a whole different topic. source: https://www.debt.org/faqs/americans-in-debt/economic-demographics-democrats/ Think Buffett, Gates, Bezos, Zuckerberg, Fink, Page, Brin, Hastings, Diamond, Blumberg, etc. all staunch and forever supporter of the Democratic party.
2) The second largest group (25%) is Mutual Fund companies of which just 5 companies hold 95% of the debt. These companies are Nuveen (owned by the public teachers’ unions all across America, aka TIAA), Vanguard (Philadelphia, PA), American Capital Group (Los Angeles, CA) , Blackrock (NYC, CEO is Larry Fink “A life long supporter of the Democratic party”) and Fidelity (Boston, MA). source: https://en.wikipedia.org/wiki/Laurence_D._Fink Look at who runs these firms and where they are located and you can understand why they are so committed to propping up their beloved Blue States. Guess who the “investors” are in these funds? You guessed right, it is the same wealthy and mostly ultra wealthy individuals over age 60 who decided to buy muni bonds via mutual funds as opposed to group 1 who buys them directly. Again, more than 75% of these ultra wealthy people vote Democrat.
3) “Non Profits” own about 15% of debts. Most people think of Non Profits as “charities”. The reality is most of them are fronts for the Hard Left pushing extreme agendas, Source: https://www.wsj.com/articles/the-lefts-lucrative-nonprofits-11567723794) and corruptly paying themselves and their cronies working for them outrageous salaries (source: https://www.thestreet.com/markets/you-wont-believe-how-much-these-10-nonprofit-ceos-get-paid-12877842). These non-profits are funded mostly by democrats and some naïve republicans who never bothered to look at their true agendas and think these organizations are actually the “charities” they pretend to be.
So now you understand that it is the ultra rich democrat voting individuals, ultra rich and powerful mutual fund companies all located in hard left states, all the teacher’s unions, and corrupt, rich, left leaning “non profits” who are loaning all this money (5 trillion (!!!) and growing) to prop up these reckless spending Blue States and the East Coast corridor and West Coast Big Cities that have been one party Democrat controlled for 99% of the past 100 years.
These ultra rich people, are further enriching themselves via the tax free interest they receive from these Muni bonds and the interest they are receiving is from taxes paid by middle class people 9 to 5 working people. How can you not see the insanity of this unsustainable Blue State/Big City Muni bond scam?! It is clear this outrage needs to end and the only way to end it is Blue State/Big City bankruptcy.
What would state and big city government bankruptcy mean?
1) It would mean they would default and not pay back all the money they owe to these mostly ultra rich (top 0.5% wealthiest individuals), Democratic voting people. They would lose all those trillions, they collectively “invested” in these muni bonds (i.e loaned to the Blue States and Big Cities to keep them propped up all these decades).
Now I don’t wish any ill will toward anyone and I am certainly not a “screw the rich” type of person and I hate identity politics and politics in general, but these people losing this money would be no tragedy.
It would be no tragedy because they would still be ultra rich, but that is not the main reason. These people are supposedly the best and brightest, meaning they should know what they are “investing” in. They should have known that none of this was sustainable and eventually headed for a massive train wreck. They should have known that these Munis were no longer the “conservative, tax free, safe investments”, they were purported to be.
These ultra rich took the high risk gamble that it would go on forever, i.e. they could continue to keep the Blue States afloat while simultaneously further enriching themselves on the backs of taxpayers and future generations paying them tax free interest, and they will have lost that gamble.
2) It would free working people in the Blue States from all those trillions in debt. That would mean working people age 18-60 , i.e. the only non-special interest group in America, you know that group of people that actually produces everything, invents everything, creates the jobs, pays all the taxes, etc., would not be saddled with this insane debt and future generations of young working people would not have to pay the bills all the older generations of voters/politicians selfishly ran up and saddled them with for the rest of their lives.
3) Once the Blue states and Big Cities default, that means no one will ever loan them money again. That means (gulp) spending within their means. I know this is a radical, wild, unthinkable concept, but in reality this is what almost all individuals and businesses must do most of the time. If individuals and businesses can do it, why not governments? This means these governments would only be able to spend what they take in via tax revenues. Again, I know that sounds draconian and radical, but it is a perfectly sound way to operate. It also means, if they try to overtax, the mass exodus from Blues States to Red States and from cities to suburbs/rural areas that was going on BEFORE the lockdown and will accelerate after the Lockdown, will continue and force them to stop them from being the overspending/overtaxing hellholes they have become.
4) It means, these states would never again be able for future self created/perceived “emergencies” to trash people’s rights, and destroy their own economies, because no one would loan them the money again and there would never be another totalitarian lockdown ever again.
In the end, the bankruptcy will be a good thing and long overdue. Therefore it is critical, that the Federal government does not bailout these reckless Blue State governments and Big Cities (and create trillions more debt for future generations), these states be allowed to go bankrupt, their politicians be punished by being voted out office, and the ultra rich muni bond investors see their investments totally wiped out and go to zero.