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House majority leader opposes bailouts or bankruptcy for states

January 24, 2011 |  2:11 pm

The new U.S. House majority leader says he opposes federal bailouts of cash-strapped states -- and he won't support the idea of allowing them to seek bankruptcy, either.

Conservative factions in Washington, led by former House Speaker Newt Gingrich, have been pressing for legislation that would permit states to file for bankruptcy protection, a right they currently don't have under the Constitution (unlike many local governments).

But Majority Leader Eric Cantor (R-Va.) ruled that out Monday.

From the Associated Press:

House Majority Leader Eric Cantor told reporters that he believes states already have the tools they need to ease crushing budget deficits since they can cut spending, raise taxes and pressure public employee unions to renegotiate pension benefits. As a result, he said, he opposes letting states declare bankruptcy because he said they don't need that power.

While some conservatives say that allowing states to declare bankruptcy would stave off a federal bailout of states, Cantor said he disagreed. "There will be no bailout of states," he said. "The states can deal with this, and have been able to do so on their own."

Last week, Gingrich told Reuters that legislation was being prepared to let states seek bankruptcy, an idea he has been championing since at least November.

No state has asked for the legislation. Public-sector labor unions see the move as an attempt to bludgeon them into give-backs of pension and healthcare benefits as states seek to slash costs.

-- Tom Petruno

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