Borrowing costs would go up if states were authorized to go bankrupt, so we should raise taxes and cut spending, say the authors.
Comment: But how, and is there a ‘how’? That’s the key the authors ignored. What possible combination of tax increases and spending cuts would put Illinois (including all levels of municipal government, because this is a consolidated problem) on a sustainable path?
And about borrowing costs, you have to distinguish between pre-bankruptcy costs (which indeed would go up) and post-bankruptcy (which would go down dramatically). Remember that Detroit now has an investment grade bond rating while Chicago is junk.