Is the GOP right? Should states just declare bankruptcy?

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Is the GOP right? Should states just declare bankruptcy?
Senate Majority Leader Mitch McConnell and President Donald TrumpDrew Angerer/Getty Images

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SUMMARY: Republicans who just bailed out thousands of private companies and supported a vast increase in federal deficit-spending now want states to declare bankruptcy. Is that a smart idea? Can we save our cities when the pandemic ends, or will they now decline for decades? Biden needs to respond personally to the sexual-assault allegation.

Should states just "declare bankruptcy?"

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As states shell out billions of dollars on unemployment and other responses to the coronavirus—and as business shutdowns and payroll and sales tax declines whack tax revenue—state budgets are being blown apart.

New York State, for example, foresees at least a $10 billion to $15 billion budget shortfall this year.

To address this, many governors and economists are recommending that the federal government put emergency funding for the states into the next coronavirus response package. Some members of the GOP, however — including President Trump, Senate Majority Leader Mitch McConnell, and Florida Sen. Rick Scott — have responded by saying that states should instead just "declare bankruptcy."

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Is this a smart idea?

No.

Forcing states to declare bankruptcy right now would have the same effect as forcing dozens of giant airlines, hotel chains, and other companies to declare bankruptcy — namely, triggering millions of additional layoffs as states are forced to cut spending and, thereby, radically worsening the country's overall economic crisis.

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The federal government has rightly chosen to extend lifelines to private companies hit by the crisis, and these bailouts have helped stabilize the economy. The GOP and White House helped design and pass these emergency funds to the private sector. So the suggestion that states should declare bankruptcy, when companies should not, stems mostly from political ideology rather than economic common sense.

Another argument put forth by the GOP — in particular, Florida Sen. Scott, himself a former governor — is that solvent states shouldn't have to bail out insolvent ones.

This argument sounds reasonable at first. Some states do have persistent fiscal challenges. And it is fine and reasonable for states that run tight ships to complain about having to support profligate neighbors. But the argument ignores the fact that some of the states that need help now normally subsidize the states that are now complaining.

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An analysis by the Rockefeller Institute of Government found that, in fiscal 2018, 8 states sent more money to the federal government than they received back. The 42 other states, meanwhile, ran a deficit with the federal government, meaning that they received net subsidies.

In Rockefeller's chart below, the orange states—including New York—sent net money to Washington. All the others received it.

Is the GOP right? Should states just declare bankruptcy?
Rockefeller Institute of Government

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Given the deficit the federal government is running — an annual deficit that has ballooned to nearly $4 trillion in recent weeks with the passage of massive emergency spending plans approved by members of both parties — it's also hypocritical for national leaders to lecture state leaders about being fiscally responsible.

The federal government doesn't have to think about "declaring bankruptcy," because we citizens have given it the power to print and borrow money. The federal government is supposed to use this power to help us, and it is.

The next important way the federal government can help us is to enable our state and local governments get through this crisis without having to cut services and fire millions of Americans.

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Then, once the crisis is over, if the GOP still feels passionate about it, we can have a discussion about how and when states should subsidize each other. — HB

How to save our cities as the pandemic ends

Is the GOP right? Should states just declare bankruptcy?
Wong Maye-E/AP Photo

Post-pandemic cities will be depressing places.

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The disease is already undoing the density that's made downtowns so bustling, active, walkable, energy efficient, and rich. Post-pandemic, many who can afford to work and live remotely will likely shy away from the urban core.

The decline in workers, shoppers, and tourists will devastate the restaurant and retail economies. Theaters and art galleries will close. There will be a drop in new immigrants remaking neighborhoods and enriching urban culture.

It will suck.

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There's almost universal agreement about how cities are likely to suffer. (Read these excellent stories if you want to feel really gloomy.) But there's less certainty about how they can recover.

The Atlantic's Derek Thompson notes that there's a natural boom-bust cycle in American cities: They get dense and rich, then empty out because of some unexpected societal upheaval (deindustrialization, urban unrest). This eventually lowers rents, which draws immigrants and cultural pioneers, and that in turn attracts money and more people, and the cities thrive again. If COVID-19 hollows out downtowns, they will eventually come back,

But "eventually" is a mighty long time — probably decades. That's not solace for city lovers today. Is there any way to speed up the post-pandemic cycle?

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I think there is.

The post-pandemic city won't work until people feel safe, and for now, they won't feel safe without a transformation in the urban environment. Israel's an instructive example: After a spate of terrorist bombings 20 years ago, Israel began placing guards at the entrances to malls and markets. Israelis quickly felt safe shopping and gathering again. It was costly, but a lot cheaper than abandoning the markets.

Post-pandemic, American cities will need to make an even more sweeping physical transformation, and fast. Handwashing stations at every storefront; cleaning teams to wipe down surfaces; the spreading out of tables in restaurants and chairs in classrooms and seats in theaters; touchless pickup of groceries; touchless thermometer stations...the list goes on and on. And we don't yet know which of these changes will make people feel safe from infection (or actually make them be safe).

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So here's a free idea for a billionaire tired of cocooning in a New Zealand bunker. Pick a single block in a city you love and fund every restaurant, apartment building, school, police station, day care, and office on that block to make themselves safe. Retrofit the restaurants to be less dense, and build a separate pickup entrance. Pay the daycare center to have a full-time cleaning person. Install handwashing stations in every classroom and office.

Create a model for a post-pandemic urban neighborhood, where people live and work together in the new way. If it works, it will quickly be copied in other neighborhoods and other cities, and cities will recover much faster. —DP

Pressure increases on Biden to personally address sexual-assault allegation

Yesterday, Insider published more corroboration of the 1993 sexual-assault allegation against former Vice President Biden.

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Biden's campaign responded by pointing to its previous assertion that the allegation made by former staffer Tara Reade is false.

But there is now corroboration for this allegation, as there has been for similar allegations against other high-profile government figures, including Supreme Court Justice Brett Kavanaugh and President Trump.

Kavanaugh directly responded to the allegations against him. President Trump has directly —and dismissively—responded to the many sexual assault allegations against him.

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So Biden will likely have to respond himself to this one. And how he does so will be revealing.

Even as Democrats cringe at the idea that their leading hope to win back the White House has been hit with an allegation like this, they should want to hear what he has to say about it.

Will the allegation hurt Biden's chances of winning the Presidency? Or, like the plans of the latest corroborator of the allegation, Lynda LaCasse, will Democrats decide to vote for Biden? — HB

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A silver lining… Miami just went seven weeks without a homicide.

Is the GOP right? Should states just declare bankruptcy?
An empty Ocean Drive amid the coronavirus pandemic.Taylor Borden/Business Insider

That's the longest stretch since 1957, and it is a rare bit of good pandemic news.

But is COVID-19 the universal crime fighter? The effect of the pandemic on crime is surprisingly erratic, and not yet clear. Murders are down in some places, but up in others. Property crime is surging in some cities, while drug crimes are down. Authorities expected a rise in domestic violence since people are cooped up at home, but are unsettled to find that some cities, including Los Angeles, are experiencing a drop in domestic violence calls, leading to fears that victims are afraid to call the police because they can't get away from their abusers. — DP

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Blaming the victims of COVID-19

Last week the New York Times profiled a Fox-News-watching bar owner in Brooklyn who died after expressing skepticism about Covid-19. This week, the Washington Post took a turn: "A Virginia preacher believed 'God can heal anything.' Then he caught coronavirus."

In neither story was the victim the actual target: The purpose of the Times piece was to smack Fox News, especially Sean Hannity, for downplaying the disease. (Hannity is now threatening to sue the Times about it.) And the Post paints a subtle, sympathetic portrait of preacher Landon Spradlin, and criticizes others for mocking Spradlin. But the nut of the story was: Spradlin —"an avid Trump supporter" posted something on Facebook about "mass hysteria" around the virus, then caught COVID-19 and died.

I don't get the point of these stories, which reduce rich, complicated lives to an ironic punchline. I also suspect they infuriate the very people they are intended to reach. — DP

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