3 ms·
US states are forbidden (with some exceptions and loopholes) from issuing debt. I would guess that one of the main reasons why this limitation has never been li
by occamrazor 7y ago
US states are forbidden (with some exceptions and loopholes) from issuing debt. I would guess that one of the main reasons why this limitation has never been lifted is exactly to avoid a situation like the one you describe. The Puerto Rico debt crisis has shown that this is not a purely theoretical concern.
- paxswill 7y agoActually curious on this, my knowledge of financial theory is sorely lacking. To my understanding, states can (and do) issue debt through municipal bonds. Is this one of those “exceptions and loopholes”? My understanding of the Puerto Rican debt crisis is that their bonds were made more attractive because income from their bonds is tax exempt by federal law from most US income taxes. By (artificially) increasing the attractiveness of those bonds PR was able to borrow more money than they would otherwise.