From: markh@csd4.csd.uwm.edu (Mark)
Newsgroups: sci.econ,talk.politics.theory
Subject: Re: What happens when USA goes bust?
Date: 16 Oct 1992 01:09:37 GMT
Organization: Computing Services Division, University of Wisconsin - Milwaukee
NNTP-Posting-Host: 129.89.7.4

In article <9298@ncratl.AtlantaGA.NCR.COM> mwilson@ncratl.AtlantaGA.NCR.COM (Mark Wilson) writes:
>to inflate away the deficit.  Leading quite possibly to the collapse of
>the current constitution.  Result would be similar to Germany, circa
>1930's.

In article <1b2n4vINN5ue@uwm.edu> markh@csd4.csd.uwm.edu (Mark) writes:
>I don't agree.  The result would be similar to the US in 1787 with the collapse
>of the Confederacy.  Namely, we will, in a bottom up process, by our own
>ingenuity, compromising spirit, come up with something even better, under the
>pretense of calling a convention to "fix" the current system.

In article <BvvFGv.2uz@apollo.hp.com> nelson_p@apollo.hp.com (Peter Nelson) writes:
>  This sounds hopelessly naive and optimistic.  I mean, sure it *might*
>  happen that way, but consider:
>
(If I may summarize your points)
>1. We don't have the extraordinary constellation of leaders to guide us
>   through this process.
>   1.b. Look at history.  We were lucky in 1787.

>2. Our institutions are largely in disarray.  We can't handle the change
>   in a peaceful manner.

>3. We can't get any kind of consensus or unity with 50 states running about.
>   compared to the mere paltry 13 of then.

Well, now that you got the naive doomsday despair out of our systems, in
reality is nothing but same tired old cliche that went out of style long
before the likes of Bladerunner, Terminator and RoboCop, let's discuss reality.
 
Historical precedents are indeed on the side of peaceful, but turbulent
transition -- namely Budapest, Prague, Warsaw, Moscow, Managua, Manila, and
even Berlin and Luanda.  Washington will be no different.
 
First of all, a distinction has to be made between the American *Federal*
government and Americans, and American culture and identity.  Just because the
Federal government and the Republic die does not mean that people suddenly
run about screaming like headless chickens in a perpetual state of rioting.
Americans strive to compromise even with their mortal enemies.  That's what
defines us.
 
State governments will remain intact.  The genius of our system's design is
that it is a compromise between complete centralization and complete
decentralization.  And though there was a distinct trend toward centralization
after the Civil War as part and parcel of the Industrial Era, we still have the
backup of 50 functioning governments.  This serves as an ideal backup that
serves to hold everything intact at that time when the central system fails,
as it is about to do.
 
American Pop Culture, the national media, reknowned mediators like Koppel will
still be here.  NBC, ABC, CBS, and Fox ain't going anywhere.  The AL and NL
aren't going to die.  World Series won't be discontinued.  You won't suddenly
see 50 leagues emerge in place of the NFL.  This, in fact, will be one of the
crucial things that holds the culture intact and smoothes over the transition
and provide a sense of continuity, and, in the case of the media, provide a
vehicle for the moderation of the transition.
 
What will most likely happen is this.  There will be a clamor for a
Constitutional Convention shortly, at first on relatively minor issues like
term limits or balanced budgets, or abortion or flag burning.  But this
pretense will rapidly fade away as events proceed in full swing and we find
ourselves with a full-fledged Second Constitutional Convention.
 
All over the nation, you will see town meetings involving people like you.
At higher levels you will see state legislatures convening to discuss the
issues dealing with the new Constitution.  The media will become heavily
involved with a plethora of call-in radio shows, televised town meetings
and the like.
 
Each of the 50 state legislatures will meet to vote on dissolving the Union.
This formal declaration will take place and be completed in 1995, it may start
as soon as next year.
 
Work will then proceed on establishing a new union, and this will involve you,
meaning all of you.  What makes this new union different, radically different,
in fact is that it will not be a Federation, but rather a Confederation.
 
What this means is the following: the power to enact budgets, and to issue
taxes will pass entirely to the state governments.  Executive branches will
exist only at the state levels.  Common pools of funds for national programs
will have to pass through the states respectively, and funds will be drawn
directly from the states, not the people.  However, most of what you see on
the present day Federal Budget will not exist anymore at the level of the
Confederation.
 
All the powers will pass to the states, most likely with the following
exceptions: a common currency, a very small subset of the current regulatory
agencies -- now under combined control of the states, a common justice system,
and a relatively small subset of the military.  And yes, there WILL be a
substantial demilitarization.
 
The flag will remain the same, and the name of the nation too.
 
A national Social Security will not exist.  Income taxes might not be levied
even at the state level.  Then again, they might.  Entitlements will become
locally administered, and uniformity will not exist between states in terms of
what these programs will look like.  But make no mistake, there's going to be
a heavy layoff of professional bureaucrats with no replacement jobs reappearing
at the state level.
 
The vote for Dissolution will also be a vote for Default.  That means the Debt
will be eliminated, and investors will take a big hit.  However, this will be
more than offset by the lifting of the enormous 35-40% tax burden that currently
is being levied on the population, and the result -- ultimately will be a
drastic rebounding of the economy back into prosperity.  BUT only after a 2-3
year period of economic Depression -- as always happens anytime an old
government dies and is replaced.  It won't really be seen as a loss, however,
because our Recession of 1990 will already turn into the Depression by the
time Black December hits anyway.  This, in fact, will turn out to be one of
the driving forces of the political change.
 
So.... this is all of what would happen when the US declares bankruptcy.

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