No, we can't bail out the states

This is not a classic sovereign debt issue, where there’s a giant overhang of high-interest bonds that can be renegotiated at a haircut, or bought down by money from outsized sources. What the states have is a bunch of other obligations, especially to current and past employees. I don’t see how these can be bought down, and there are substantial legal and political (not to say moral) issues with asking, say, current pensioners to “take a haircut.”

If the feds bail out these states, they’re assuming an ongoing obligation–and encouraging other states to let their fiscal problems get as big as possible, so Uncle Sugar will have to pay off. Leaving aside any ideological questions about robbing Peter to pay Paul, and the proper size of government, the federal government simply cannot afford to take on all these new obligations–and if it did, its ability to borrow money would rapidly become unsustainable.