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The Pesofication of America

Now available in print: Michael S. Greve, “Our Federalism Is Not Europe’s. It’s Becoming Argentina’s,” 7 Duke Journal of Constitutional Law & Public Policy 17 (2012). Alternative title: “We will pay our debts—in pesos.”

Among the more salient points and predictions: bailouts of lower-level governments in the U.S. won’t take the form of rescues of individual states (this isn’t Europe). Rather, they will take the form of across-the-board—and in that minimalist sense programmatic and rule-like—financial assistance, probably under some already existing statutory framework. A bailout of teacher pension funds under No Child Left Behind is an option, as is the federal assumption of state health care obligations for employees and retirees under the not-so-Affordable Care Act. Some such scheme will be coming soon to a theater near you, regardless of the November election outcome.

The Journal volume contains several other informative essays on state debt and bankruptcy.

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The Debt Trap, Part (3): Cristina Kirchner’s Constitution

There’s been a lot of talk that our federalism might come to look like the EU, with Illinois starring in the role of Greece or Italy. However, the institutional differences are far too great for meaningful comparison. For example, Chancellor Merkel can depose the Italian Prime Minister with a phone call; our Constitution does not give the President, the Congress, or for that matter the National Governors Association any such agency in the affairs of a member-state. For another example, the EU (outside the egregious but fairly small Common Agricultural Policy and a few other slush funds) isn’t a transfer union. Our federalism is or rather has become that sort of union. That doesn’t mean we have a smaller problem than the EU; it just means that we have a different problem. For purposes of comparison and instruction, you want to look at a federal system that shares our problem. Come visit Argentina: you’ll see the future, and it doesn’t work. Read more