McConnell, WTF?: McConnell Says He Favors Allowing States to Declare Bankruptcy in response to coronavirus revenue drops...

Bruce Plante editorial cartoon, Tulsa World, 4/17/2020, Trump Stimulus Check as a campaign device.

Rather than provide financial assistance to state and local governments facing massive deficits because of coronavirus-related economic downturn, according to Politico ("McConnell pushes 'bankruptcy route' as local governments struggle"), Bloomberg ("McConnell Says He Favors Allowing States to Declare Bankruptcy", and other media, Republican Senate Majority Leader Mitch McConnell recommends that states and local governments declare bankruptcy.

This is un-@#$%^&*-believable, astounding, and totally irresponsible, just like when wacko Congressman Ted Yoho stated that the US government defaulting on debt would be no problem in the face of Republican intransigence on either funding government or increasing the debt ceiling ("The Tea Party's Government Default Fantasy," Rolling Stone).

Although his comments are couched in "not wanting to bail out states and their pension problems."  Granted pension problems are a huge issue and overhang, but completely irrelevant to the extraordinary pressures on local and state government financing presented by the response to the coronavirus.

Others smarter and more observant than me have made the point that the reason the Republicans and the Trump Administration don't want to provide funding to states and localities is to coerce them to reopen the economy earlier than public health measures warrant (Trump Wants to Starve States Into Opening Before It's Safe," New York Magazine). From the article:

Trump’s plan to coerce the states into reopening has at least three discernible elements. The first is, or was, the formation of a task force to reopen the country. The purpose of the council was to give Trump cover. The council would prod governors to reopen businesses, and because it would be seen as coming from the business community, Trump himself would not bear the blame for future outbreaks that might result. ...

The second element is the mobilization of protests. The appearance of flag-waving and sometimes gun-toting demonstrators in a handful of state capitols this weekend seems to have come as a shock to the news media, but Trump’s allies signaled this was coming. ...

The protests apply pressure to state governments, mobilizing conservatives to oppose lockdowns and raising using the threat of either passive resistance (by flouting social-distancing rules) or open violence (which Trump teased by linking the cause with the Second Amendment). ...

The final element of the plan is using fiscal starvation to bring the states to heel. Republicans have refused to allow any additional funding for state and local governments in the latest economic relief package. “The thinking among some Trump administration officials is that many states should be reopening their governments soon and that additional funding could deter them from doing so,” ...

It's even been suggested that Georgia is reopening its economy as a stratagem to deny unemployment benefits claims, which are projected to be much higher than the state has funds to pay

These people have to be turned out of office decisively.  I call them anarcholibertarians, almost completely against sound government and governance, except as a way to benefit their financial benefactors.

It's no way to run a country.

Also see by Paul Waldman, Washington Post:

-- "Mitch McConnell to states: drop dead"
-- "The coming GOP plot to sabotage a Biden presidency"
-- "The war against the states."

Should the Federal Reserve purchase bonds of state and local governments during a recession? (Yes)

In a hearing yesterday, Democratic Party Representative Rashida Tlaib asked Federal Reserve Chairman Jerome Powell about extending counter-cyclical anti-Recession responses of purchasing of debt of corporations and the federal government to debt issued by local and state governments ("AOC Is Making Monetary Policy Cool (and Political) Again;," New York Magazine).

Powell responded that it isn't legal, but apparently it is.

A big problem during recessions is that even if there is new federal spending aimed at stoking demand during a recession, along with increases for unemployment funding and sometimes other types of social support payments, states and local governments and related agencies tend to contract significantly for two reasons:

1.  Property, income, and sales tax revenues contract
2.  By law, state and local governments can't run deficits.

This cancels out many of the benefits of increased federal spending during recessions and in fact, extends by multiple years recessionary pressures.

Apparently, the Roosevelt Institute released a report, A NEW DIRECTION FOR THE FEDERAL RESERVE: Expanding the Monetary Policy Toolkit, a couple years ago that included this point:

3. PURCHASING STATE AND LOCAL DEBT
Unlike the federal government, state and local governments do face meaningful financial constraints. Perhaps the single most powerful tool the Fed has to support aggregate demand and direct credit in socially useful directions is to purchase the liabilities of states, cities, and other subnational governments. This would greatly reduce the pressure for pro-cyclical cuts in public spending during recessions.

The balance sheets of state and local governments are complex—unlike the federal government, most have substantial financial assets, as well as liabilities, and the sector as a whole is a net creditor (Mason, Jayadev, and Page Hoongrajok 2017). But many individual governments do face acute limits on their access to credit, and concerns over credit are a constraint on spending and revenue decisions, even if their access to bond markets is currently unimpaired. These concerns become especially serious during downturns—exactly the period when, from a macroeconomic perspective, state and local governments should be increasing spending and avoiding tax increases.

From a social standpoint, public investment is less costly during a downturn, when a larger fraction of labor and other resources are unemployed. So it is perverse that borrowing constraints cause many governments to cut back investment spending in recessions.

Financial constraints on state and local governments impart a substantial pro-cyclical component to their budget positions, acting as a kind of “automatic destabilizer” that offsets countercyclical fiscal policy at the federal level.

Half the US population is in 146 large population counties in and around center cities

Thinking about how the politics and governance of "states" typically screws cities and urbanized metropolitan areas, such as how the State Legislature in Georgia is making it almost impossible to have votes on raising sales taxes for transit ("Fulton leaders hope to avoid repeat transportation sales tax defeat," Atlanta Journal-Constitution), the reporting of various election results in the primary process for the 2016 Presidential campaign and looking at national and state maps, such as the one for New York State showing the distribution of votes for Bernie Sanders vs. Hillary Clinton, it's easy to forget how much of the US population is centered around urban metropolitan areas.

Cities and metropolitan areas continue to be screwed in how the the federal and state electoral system is organized.

Half of the US population lives in 146 counties in the US.  Business Insider map via the Daily Mail ("The 146 counties where HALF of the U.S. population lives.. with the other 157 million Americans scattered across 3,000: Population clusters gathered around major cities including Los Angeles, New York, San Francisco and Chicago")

New York Times graphic, Democratic Primary election results, New York State.  Total vote: Hillary Clinton, 1,054,083; Bernie Sanders, 763,469