Those who remember John Hood’s January 2011 National Affairs article documenting state governments’ disturbing levels of unfunded liabilities might be interested to read a new Bloomherg Businessweek article. It explains how some state and local governments across the country hope to address their debt problems … by borrowing money.
While borrowing money to pay off large-scale debts might sound a bit like turning to the hair of the dog that bit you, there might be some circumstances in which the idea makes sense. For instance, some North Carolina leaders have discussed borrowing money to pay off their $2.8 billion debt to the federal government for unemployment benefits.
Why would this idea have any merit? Paying off the feds could free the state from harmful federal restrictions on restructuring its unemployment insurance system. The John Locke Foundation has documented several changes that would help put the state’s system on a better financial footing.
