Senate Majority Leader Mitch McConnell says he's open to the idea of states declaring bankruptcy.
In an interview with conservative radio host Hugh Hewitt, McConnell said Wednesday he would "be in favor of allowing states to use the bankruptcy route" instead of bailing them out with federal money.
McConnell suggested the idea after the Senate passed a coronavirus relief package to help small businesses and hospitals. The bill did not include relief for state and local governments, like New York, that have seen major revenue declines; lawmakers have promised the next bill will include that. President Donald Trump has also reportedly agreed to advocate for that funding.
Many lawmakers and leaders, including New York Gov. Andrew Cuomo, quickly shut down the idea of bankruptcy.
"This is really one of the dumb ideas of all time," Cuomo said. "That's how you're going bring this national economy back? By states declaring bankruptcy? You want to see that market fall through the cellar? Let New York state declare bankruptcy, let Michigan declare bankruptcy, let Illinois declare bankruptcy, let California declare bankruptcy — you will see a collapse of this national economy."
Republican Gov. Larry Hogan of Maryland also criticized the idea. He said, "The last thing we need in the middle of an economic crisis is to have states all filing bankruptcy all across America and not able to provide services to people who desperately need them."
According to current law, states can't declare bankruptcy. The federal bankruptcy code doesn't allow it, and the U.S. Constitution doesn't quite say states can or can't file for bankruptcy. And adding states to the bankruptcy-eligible list isn't so simple: Congress would need to amend the federal bankruptcy code, states would need to amend their own laws and the Supreme Court would have to rule that the Constitution allows states to declare bankruptcy.
Contains footage from CNN.
