Before Washington and state capitals get too far ahead of themselves in bailing out profligate states, David Skeel provides three arguments in favor of bankruptcy.


First, the governor and his state could immediately chop the fat out of its contracts with unionized public employees, as can be done in the case of municipal bankruptcies. …

Second, the state could reduce its bond debt, which is nearly impossible to restructure outside of bankruptcy. …

Third, state bankruptcy could even permit a restructuring of the Cadillac pension benefits that states have promised to public employees.