A fair amount of state and municipal finance requires ongoing rollover of bonds, which requires that bonds be sold. Interest rates on those bonds are, to say the least, important considerations in government financial operations. You start talking about government bankruptcies, you make it much harder to market the bonds that they need to sell in order to roll over the old ones, and, even if you succeeded in getting the suckers to buy 'em, the interest rates would be close to unaffordable short and long term. That would jeopardize governments far more than bankruptcy would. Not only would investors in current bonds take a huge hit. Reorganization after bankruptcy would be difficult, to impossible. Unless, (er, I hate to even bring it up) newly issued securities were backed up or insured by the federal government.
The odd bond, too, resides in the odd investment portfolio of the odd rich person and institutional investor. Were those bonds worth pennies, if that, to the dollar after a bankruptcy, there'd be a bit of unhappiness consequent to it. Too, assets nominally valued in the hundreds of billions of dollars turning to crap would remove a little value from the economy. Only a churl would point out that deflation, recession/depression and a reversal of even the current anemic recovery might supervene. In which case, a sane macroeconomic approach would be to expand the money supply with, say (prepare yourself for a shock), deficit spending and money creation. Not the most politically viable stance, these days.
Worth noting, by the way, that federal laws sheltering municipal bond interest from taxation is, in fact, a subsidy, fiscally identical to a direct payment to those holding them. Ah, the endless cornucopia of the free market, at least, for those with the intelligence, initiative and coupon-clipping scissors enough to lift themselves up by their own bootstraps.
There's only so much fun you can have in one day, but they really, really might want to rethink this one...
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