The only problem is federal law doesn’t permit a state to file for bankruptcy!
According to a story released first by Newsweek, the largest share of unemployment claims filed in he U.S. during the COVID-19 pandemic is in the commonwealth of Kentucky. Approximately a third of Kentucky’s labor force has sought benefits since the start of the pandemic in the United States.
The US Department of Labor released its weekly claims report on May 7. It indicated that 33-percent of Kentucky’s workforce has applied for unemployment benefits in the month of April. US Secretary of Labor, Eugene Scalia, released a statement after the April numbers were disclosed. According to Secretary Scalia, “Today’s report reflects the massive impact that measures to contain the coronavirus has had on the American workforce.” He called the employment situation, “exceptionally fluid.”
The scariest part of the report, which was plenty scary standing alone, is that it failed to account for additional layoffs occurring in late April and early May. The report said re-opening safely provided the capacity to avoid permanent job-loss.
A large percentage of Americans who had lost their jobs viewed the loss as temporary. Of course, that view may be optimistic.
Senate Majority Leader, Kentucky’s Mitch McConnell, suggested at a news briefing at the Capital on April 21, 2020 in Washington, D.C. that some state’s should declare bankruptcy over using federal aid. Critics wondered aloud if his home Kentucky isn’t one of the states to which he was referring?
McConnell went on to tell The Hugh Hewitt Show concerning the bankruptcy route that bankruptcy has “…saved some cities, and there is no good reason for it not to be available.” Well, there is one fairly good reason.
Presently no federal law exists allowing U.S. states to declare bankruptcy. Cities and other local municipalities are permitted federally to seek bankruptcy protection but not States, according to online research undertaken by the Times-Voice.
Michael Clark, the associate director for the Center for Business and Economic Research at the University of Kentucky told CNN, some jobs are “harder to work remotely, and, maybe, simply impossible…” States where those jobs most regularly occur are “...going to be subject to great job losses during these times of restrictions.”
In the last week of April alone, 3,169,000 unemployment claims were filed nationwide. This is actually a 677,000 decrease from the previous week’s revised numbers.