Bankrupt States

First I want to note that we still don’t have an opinion in Bilski.  You would think that means the opinion will either be deeply theorized or incredibly fractured.  Tune in again next week to see if it comes out then.  Now on to the main point.

There are many states right now (most notably California) that are under fiscal stress.  Some people, like Sandy Levinson, argue that this is because those states have dysfunctional constitutions.  This leads me to wonder if a state could be deemed “not republican” under the Guarantee Clause if it goes bankrupt.  Suppose that California came to Congress seeking a loan.  If Congress said, “OK, but only if you amend your constitution to do X, Y, and Z,” that could pass muster under the Spending Clause if the reform proposals were sufficiently related to fiscal issues.  But suppose California just defaulted on its debt.  Would Congress then be justified in putting the state into receivership for some period of time?  An invocation of the Guarantee Clause would not be justiciable, of course, but that doesn’t answer the constitutional question.  What do you think?  Does the Tenth Amendment protect a state’s right to default?

(Given the reaction to my post about vice-presidential ticket splitting, maybe I should just declare this “Crazy Idea Week.”  Some might say, though, that every week is crazy week when it comes to my posts.)

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5 Responses

  1. Joe Miller says:

    Wouldn’t either the Commerce Clause or the Bankruptcy Clause justify a receivership statute? (Especially after Raich and Comstock?
    As for the 10th Amendment question, would the anti-commandeering principle from New York / Printz prevent responding to one state’s collapse if nonresponse would threaten other states?

  2. Logan Roise says:

    Now this is an interesting post (not that the VP one wasn’t). I would assume the 10th Amendment would technially protect a State’s right to default but my guess is that the State & the federal government would come to an agreement before that were to happen. Something along the lines of the EU bailout in Greece. State X would ask the federal government for emergency help and the federal government would have to help. If the federal government didn’t step in, there would most likely be damage to the Dollar, credit ratings for individual states would tank (thus cost of borrowing would go up), etc. Eventually this would spread to county and municiple governments.

    Here’s to hoping we never have to find out the answer to this constitutional question.

  3. Rhadamanthus says:

    Could Congress deem that a State “lacked a republican form of government” if the State government was completely in thrall to public-employee unions, who had persuaded the politicians in their pockets to sign sweetheart contracts with insanely generous pension commitments which they (unions) claimed were insulated from revision or repudiation by the Contracts Clause (Art. I, Sec. 10, Cl. 1)?

  4. Bruce Boyden says:

    I’d be willing to place a bet that Bilski will be reargued. Not at even odds, mind you, but I think it’ll beat the spread.

  5. Gerard Magliocca says:

    Wow, that would be a nightmare. Though I suppose it would increase the odds that my article would get cited.