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House GOP leader says no federal bailout of states

A top House Republican said Monday that the federal government will not bail out fiscally ailing states and said he opposes a proposal that Congress allow states to declare bankruptcy as a way o...

A top House Republican said Monday that the federal government will not bail out fiscally ailing states and said he opposes a proposal that Congress allow states to declare bankruptcy as a way of handling their growing piles of debt.

Though there has been little discussion of Washington bailing out states, some congressional Republicans and conservative groups are suggesting that states be allowed to seek protection in federal bankruptcy court, which they are currently barred from doing. Public employee unions, liberal groups and some lawmakers of both parties oppose the bankruptcy idea.

House Majority Leader Eric Cantor, R-Va., told reporters Monday 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."

Supporters of allowing states to declare bankruptcy say it is the only way for states to dig themselves out of debt. Opponents say the idea will drive up borrowing rates for states and make it easier for states to cut government workers' pension benefits, even though those benefits are just a minor cause of states' budget problems.

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