Commentary: Let the Blue Cities and States Fail

by Scott McKay


A Wall Street Journal article on Sunday predicted the obvious: the Biden administration is on the verge of demanding yet another bailout of the failed, rotting Democrat machines that have destroyed every jurisdiction they run:

The Federal Reserve’s latest interest-rate hike paired with the continuing bank panic is causing credit conditions to tighten. State and local governments could be the next sinking ships that Washington gets called on to rescue.

The balance-sheet risks for mismanaged states and municipalities have been hiding in plain sight just as they were at Silicon Valley Bank. Continued financial-market turmoil and a prolonged economic downturn could cause some pension funds to collapse and cities to declare bankruptcy. Taxpayers will invariably wind up on the hook for politicians’ bad financial bets.

Now that credit is more expensive, states and localities have come up with a creative new way to finance their political investments more cheaply: Market their bonds as “ESG.” New York City last autumn floated $400 million in “social impact” bonds to fund construction of affordable housing. Enormous demand from investors reduced yields the city had to pay.

Taxpayers will be stuck paying debt costs on political pet projects for years to come at the same time as public worker pensions bleed them dry. A report by the research shop Equable estimated that the 228 largest public retirement systems were running a $1.4 trillion unfunded liability at the end of last June.

But stock prices haven’t increased much, and the values of other pension-fund investments are falling. Fixed-income assets such as government bonds used to make up about half of pension-fund portfolios but now are only about 20%. To meet their targeted investment return rates—typically between 7% and 8%—pension funds loaded up on higher-yielding stocks and “alternative investments” such as real estate, hedge funds and private equity, which rely heavily on leverage.

Yet Chicago’s four pension systems have only enough assets to cover about 25% of what they owe workers and retirees, which is less than Detroit’s pension funds had when the Motor City declared Chapter 9 bankruptcy a decade ago. Pension funds in states like Illinois, New Jersey and Connecticut aren’t in much better shape.

Insolvent cities could declare bankruptcy, but states as a matter of federal law can’t. That means their taxpayers will inevitably have to pay more to cover the pension shortfalls. In Illinois 25% of general tax revenues pay for pensions. Many states—including Illinois—can’t afford to bail out their underwater cities, but they also may not want the stain of allowing them to go bankrupt.

The most likely outcome: A cascade of bailouts by some combination of U.S. taxpayers, the Fed and municipal bond investors. Democratic-run states and big cities are simply too politically important for the Biden administration to let fail.

The Journal piece, written by Allysia Finley, isn’t wrong as a matter of conventional wisdom. The typical pattern is that Congress will agree to bail out the leftist lunatics who run Illinois, Chicago, New Jersey, Los Angeles, Michigan, Portland, and all the other places where America as we understand it no longer exists.

Congress will agree to this because the Republicans in control of the House, or at least the Republicans who have traditionally controlled the House, don’t have the stomach to let nature take its course.

Tuesday, Melissa Mackenzie and I kicked around a somewhat related topic in this week’s edition of The Spectacle podcast. We were talking about the Trump arraignment, and Melissa made the point that “those” Republicans are gleeful about Alvin Bragg’s atrocious 34-count indictment of the former president over activity that is not criminal. They think, she said, that this is exactly what they want because in this way Trump can be gotten rid of.

I’m not sure she’s right, but I don’t disagree with the sentiment behind it. I don’t think the Republican House majority has quite earned our trust yet. There is zero question but that Mitch McConnell and the Senate GOP leadership — and, let’s face it, the caucus as a whole minus a few firebrand exceptions — deserves absolutely none of the benefit of the doubt. Melissa is right, until she’s proven wrong, that zero faith should be placed in Senate Republicans — and their inability to gain seats in last year’s elections is directly related to the lack of faith the party’s voters have in McConnell, et al.

But with this bailout fight coming, and soon, perhaps even as part of the debate over raising the debt ceiling that so far is progressing better than anyone on the right could have seen coming, it’s time to explore the possibility of a different world.

Namely, the world in which Republicans woke up one morning and recognized the amazing amount of leverage they have over the Biden administration and the Democrat Party.

The GOP controls the House, and a year and a half from now a very, very unpopular Democrat presidential administration will be attempting to get reelected. That will make it exceptionally difficult for Democrats to regain the House majority, historically speaking. And with Democrats attempting to defend 24 of the 34 Senate seats up in 2024, things look a little bleak for them on that front.

Given that, you’re looking at a better environment for getting hyperaggressive on matters involving the federal purse strings than we’ve seen in some time.

Now is when you can rock the boat.

And it ought to be understood that bailing out blue cities and states and the institutions the Democrat machine controls will not save them. All it will do is prolong their collapse. Chicago will go bankrupt, just as Chicago descends into an urban hellscape that cannot save its quality of life. New York is a dead city that cannot be resuscitated with its current power structure and electorate. New Orleans doesn’t have a citizenry capable of making the kinds of collective decisions that result in positive change.

Perhaps the people of those places — or at least the majority of the people; we’ll try not to paint with too broad a brush — have been so beaten down and propagandized that it’s cruel to ask them for better than they’ve offered. Perhaps the real villains are the corrupt pols who’ve intentionally destroyed those cities and states for the express purpose of creating the pliable, bovine electorate they have.

I call this Weaponized Governmental Failure. Readers of this column are familiar with the term. Others might know it as the Curley Effect.

But the days of Jack Kemp and Colin Powell, in which Republicans arrive bearing gifts of enterprise zones and school vouchers in the vain hope that such showings of goodwill and optimistic policy might gain constituencies in inner cities and make life better for the masses, are over. And one hopes the current crop of GOP congressmen will recognize that fact.

Urban Democrats responded to the Kempian overtures with shouts of “Gentrification!” and “Racism!” It didn’t matter to them that this was nonsense. They knew if Republicans ever got a foot in the door with their core constituencies, then the game was up, so they were willing to do whatever it took to slam that door.

And they did.

Part of how they were able to do it was to get the federal government to throw grant money and other largesse at blue cities in order to replace the tax base they were chasing away. That has staved off the collapse their ideology inevitably brings on, but it won’t hold it off forever.

And in the cases Finley discusses in her article, it’s already here — or coming, in all likelihood, before the 2024 election.

So the answer is obvious: say no.

Let those cities collapse. Let those states collapse. Don’t bail them out.

If a GOP House majority responsible for originating the federal budget refuses not just to provide a bailout of blue cities brought on by the Fed’s tightening interest rates in order to cover for Biden’s profligate and irresponsible spending, but decides to roll back federal aid to dependent cities and states, the consequences won’t hurt the party at all.

You aren’t getting any votes in Chicago anyway, guys. Your votes come in the suburbs and exurbs. And the money you’ve been sending to Chicago is all being used against you.

Cut off that money and they’ll turn out LESS votes, not more. And your own people will reward you for showing a backbone.

And yes, Chicago will collapse. As Chicago has been collapsing for years.

No amount of federal money will stop Chicago from collapsing. The only thing that will stop that is leadership capable of doing different things than the current leadership does.

Leadership that looks like what runs the suburbs.

Why would you bail out a place like New York City where Republicans — hell, not just Republicans but normal, law-abiding Americans — can’t get a fair shake from the judicial system? Alvin Bragg’s New York City is a place where Donald Trump’s ordeal pales in comparison to the attempted murder raps he lays on people who defend themselves from criminal attackers. And in the city’s federal courts, they convict bloggers for making memes joking that Hillary Clinton voters can send texts in lieu of going to the polls.

Douglass Mackey’s case is the most egregious assault on the First Amendment I’ve ever seen. Tucker Carlson agrees. Fund that?


It’s time to wake up. It’s time to demand that Republicans representing Republican constituencies begin fighting the Cold Civil War that is clearly upon us. And the easiest, most obvious way to fight it is to stop subsidizing the enemy.

No money for bailouts. No money for block grants. No money for political welfare and graft for urban Democrat machines.

No more money. Cut it off. The blue machine will either learn to fend for itself, which means it won’t be all that blue anymore, or it’ll die as it must. And it’ll scream as it goes, and it’ll say horrible things about its enemies.

But it’s like this: your life as a Republican congressman will not be made worse by Cori Bush attacking your character. You can survive that. And once you realize that, this wonderful alternative world in which your constituents don’t have to pay for the failure of people who hate them now becomes tangible.

And it might just become a reality if enough of us make this desire clear to our representatives on Capitol Hill.

Let’s give it a shot. It can’t be worse than Biden Bailout Nation.

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Scott McKay is a contributing editor at The American Spectator and publisher of the Hayride, which offers news and commentary on Louisiana and national politics, and, a national political news aggregation and opinion site. Additionally, he’s the author of the new book The Revivalist Manifesto: How Patriots Can Win The Next American Era, available at He’s also a writer of fiction — check out his three Tales of Ardenia novels Animus, Perdition and Retribution at Amazon. Scott’s other project is The Speakeasy, a free-speech social and news app with benefits – check it out here.




Appeared at and reprinted from The American Spectator

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