Read on Twitter
The real case for state bankruptcy is not only that it allows creditors to be impaired. It is that it provides a forum in which the harms imposed on different groups of creditors and service recipients can be adjudicated & justified in front of a neutral-ish arbiter. https://twitter.com/JohnArnoldFndtn/status/1295394854709661699
Any state or local fiscal crisis involves tradeoffs between moral hazard (bailouts), macroeconomic harm (austerity) and reduced investment (haircuts for creditors). Chapter 9 provides a forum and rules through which these competing harms can be balanced https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3649278
You can’t remove the trade offs but you can provide a system in which governments get benefits from publicly justifying their decisions (and limiting their discretion).
(Btw, great thread @JohnArnoldFndtn, and comments from @daskeel and @AdamLevitin, from who I’ve learned so much about this)
