Senate Majority Leader Mitch McConnell suggested this week in a radio interview that bankruptcy was an option for cash-strapped states facing multi-billion-dollar revenue losses due to the pandemic.
Let's be clear right off the bat: No, New York is not going to declare bankruptcy. For starters, it's illegal.
Gov. Andrew Cuomo on Friday even dared McConnell to push for a law that would allow states to do so.
"You want to send an international message that the economy is in turmoil?" Cuomo said.
"Do that, allow states to declare bankruptcy legally because you passed the bill. It will be the first time in our nation's history that that happened. I dare you to do that. And then we'll see how many states actually take you up on it. I know I wouldn't. But if you believe what you said, and you have the courage of conviction because you're a man of your word, pass that bill if you weren't just playing politics. We'll see how long it takes him to do it."
Yes, New York is strapped for cash. The pandemic has cost New York alone $2.8 billion in the response. Cuomo on Friday said the state has lost an estimated $13.3 billion in revenue and could have combined multi-year shortfalls of more than $60 billion.
The $178 billion budget approved this month is largely a placeholder document, and adjustments will have to be throughout the year based on what money does or does not come back to the state.
Yes, there was a $6 billion hole to fill at the start of the year, largely based on overspending in the Medicaid program and spending targets that had to be pared back.
The pandemic hole, created by a frozen economy, is something entirely different and wholly unprecedented for New York.
Some pain is already being felt: The Cuomo administration earlier this month moved to temporarily halt 2 percent raises for 80,000 state workers in a bid to save money.
But, and thank you Robert Moses, New York can still borrow. Indeed, the state is moving forward with a short-term borrowing plan and could still raise cash through its myriad public authorities.
So, the financial situation is very bad, but it's not bankruptcy bad.
Aside from the legal issues, a major state like New York declaring bankruptcy would send the bond markets into a profound spiral. There's a reason why the state debt bill goes first in the budget voting -- gotta keep those creditors happy.
But it's also important to take a step back here about what's happening and why Cuomo, for two days now, has been latching on to the McConnell comments.
Cuomo wants the federal government to provide more relief to the state in the form of direct aid. Endless borrowing would be, objectively, bad for the state's finances in the long term.
Cuomo has also warned tough spending decisions are going to have to be made on spending for hospitals and schools -- the two costliest items in the budget -- if the money from the federal government doesn't come through for New York.
Combined, he wants $500 billion for states and the governor wants the lion's share to go to New York given that so far the pandemic has hit here the hardest.
McConnell is also a useful punching bag for Cuomo. The Kentucky Republican is reviled by the left, and it's much easier to knock him than telling anti-shutdown protesters to get essential jobs, like he did on Wednesday.
The Cuomo-McConnell fight is, in essence, a negotiation ahead of the next relief package from the federal government: Cuomo wants to get a piece of the pie that's being carved up every few weeks by Congress.