New York Gov. Andrew Cuomo criticized Senate Majority Leader Mitch McConnell (R-Ky.) for proposing a change to existing law that prevents states from declaring bankruptcy, before daring the Republican lawmaker to adopt the idea.
“This is one of the really dumb ideas of all time,” Cuomo, a Democrat, said during a briefing in Albany on Thursday, warning that bankruptcy declarations by multiple states would lead to a collapse of the economy at a time when the country is in the grip of a pandemic. The U.S. economy has already sustained a historic hit to businesses and workers.
Some 26 million jobs have been lost in the past five weeks alone, according to unemployment data from the Labor Department, more than erasing all the job gains of the record-long economic expansion that started after the 2008 financial meltdown. That boom was cut short by social distancing measures and lockdowns imposed to contain the outbreak of the CCP virus, the novel coronavirus that causes COVID-19.
“Not to fund state and local governments is incredibly short-sighted,” Cuomo said. “They want to fund small businesses, fund the airlines, I understand that, but state and local governments fund police, and fire, and teachers, and schools. How do you not fund police, and fire, and teachers, and schools, in the midst of this crisis?”
Then, at a briefing Friday, Cuomo dared McConnell to pass a federal law letting states declare bankruptcy, saying, “I dare you, and let the president sign that bill.”
“I dare you. … You want to send a signal to the markets that this nation is in real trouble? … do that,” Cuomo said.
McConnell has suggested that federal aid to states could amount to bailing out cash-strapped states controlled by Democratic administrations.
“I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available,” McConnell said in a recent interview with radio host Hugh Hewitt.
Current law prohibits states from declaring bankruptcy.
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,” the Kentucky senator said. “That’s not something I’m going to be in favor of.”
“I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” McConnell said on the show. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”
At Friday’s briefing, Cuomo said that while New York was facing a $13 billion deficit, it would never declare bankruptcy.
“The state finances were very, very strong and then this economic tsunami hits and you shut down all the businesses, and everybody stays home,” he told the briefing.
In a later tweet, Cuomo suggested McConnell’s remarks were fueled by partisanship, saying that blue states and public sector workers were told to “go bankrupt,” while big corporations, the oil companies, chain restaurants, and airlines were not.
McConnell has also faced criticism for his comments within his own party.
Maryland Gov. Larry Hogan, a Republican and chairman of the bipartisan National Governors Association, said that McConnell “probably regrets saying that.”
“If he doesn’t regret it yet, I think he will regret it,” Hogan said. “The last thing we need in the middle of an economic crisis is to have states all filing bankruptcy all across America and not able to provide services to people who desperately need them.”