California passed a gas tax last week to help make up for its nearly $20 billion budget gap, the latest in a series of measures to right the state's teetering economy. The country of Greece is in even worse shape, with accumulated debt higher than 110 percent of GDP, set to reach 125 percent this year. Can a state declare bankruptcy? Can a country?

No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn't include states. (The statute defines "municipality" as a "political subdivision or public agency or instrumentality of a State"—that is, not a state itself.)

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Filed under: * Economics, Politics • Economy • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • Politics in General • State Government

1. Cennydd wrote: This explains why I’m paying 5 cents more per gallon for gas over last week.  Now it’s $3.04 for a gallon of unleaded regular. March 9, 2:11 pm | [comment link]

2. graydon wrote: I have visions of the DC taking it over, and selling it off bidders at an auction.  Some oil-rich state buys it and decides to manage it like Saudi Arabia.  I doubt if they could muck it up any worse than Sacramento has done. March 9, 4:09 pm | [comment link]

3. Dilbertnomore wrote: Selling off California could make sense. The new owner could start by drilling for oil off the coast and build nuclear power plants along the coasts to make a ton of energy money filling the expanding needs of the remaining 49 states of the USA. Lots of valuable resources laying fallow in California under the current management. A takeover could make real economic sense. March 10, 10:38 am | [comment link]

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