State Bailouts; Will They Come?
Over the last 110 years, we have chipped away at the Constitution and the founding structure of America. We are a republic, but some of those changes have altered how that republic actually functions.
One important example is the 17th Amendment, which established the direct election of U.S. senators. Under the original Constitution, senators were chosen by state legislatures and were therefore accountable to the states themselves—not directly to the popular vote.
That change fundamentally altered the Senate. In some respects, it turned the Senate into a second House of Representatives, albeit with longer terms and different constitutional powers.
Why does that matter?
Look at the fiscal condition of states such as California and Illinois. The United States itself is carrying roughly $40 trillion in debt. These are not abstract numbers. Eventually, someone has to pay the bill.
During my foray into politics, I learned something else: a surprising number of people involved in government and politics are not particularly good at basic financial math. In fact, Nevada Treasurer candidate Drew Johnson couldn’t even calculate the price of a bond. He said, “Bond prices are just out there. You know what you are going to get.”
And that matters because government finance ultimately comes down to math.
Consider what happens when a state or municipality becomes financially distressed.
There are numerous municipal-bond ETFs, mutual funds, and institutional investors that hold municipal debt. Many investment mandates require them to remain invested in the asset class. As a result, they can continue purchasing small amounts of debt from financially troubled issuers such as Illinois or Chicago.
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Madison taxpayers have long supported far above average k-12 tax & $pending. This despite our long term, disastrous reading results. May, 2026: 7,095 Staff for 25,003 students; $pending > $26k per student!
