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Default Positions

A state-government default would have all sorts of unpleasant consequences, writes James Surowiecki, but, luckily, U.S. states can count on help from the federal government.

Like the crises in Greece and Ireland, a state-government default would have all sorts of unpleasant consequences in the U.S., writes James Surowiecki. But unlike the struggling European countries, U.S. states can count on help from the federal government, which can generally be counted on to step in and bail out a failing state during a fiscal crisis. This increases the moral hazard for state governments, but it makes more sense than canceling building projects and laying off workers in a recession.


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