Newt Gingrich, the Former House Speaker and possible GOP Presidential Contender wants the federal government to pass laws allowing states in financial difficulties to file for bankruptcy and avoid paying state workers pensions and other financial benefits. Other supporters of this same move include Americans for Tax Reform, a Washington-based lobby group that fights tax increase. It says such a move would preclude the federal government having to dish out massive bailouts to financially ailing states because it allows these states to reduce their costs before it’s too late.

Gingrich brought up his proposal at a speech at the Institute for Policy Innovation on November 11 last year. A transcript of a part of his speech goes, “I … hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy, so that states like California and New York and Illinois that think they’re going to come to Washington for money can be told, you know, you need to sit down with all your government employee unions and look at their health plans and their pension plans and, frankly, if they don’t want to change, our recommendation is you go into bankruptcy court and let the bankruptcy judge change it, and I would make the federal bankruptcy law prohibit tax increases as part of the solution, so no bankruptcy judge could impose a tax increase on the people of the states.”

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