State bankruptcy furor shakes up McConnell reelection bid

Democrats are seizing on Senate Majority Leader Mitch McConnell’s (R-Ky.) suggestion that states should be able to declare bankruptcy as the party looks to bring his Kentucky seat into play.

The GOP leader has made his outsized influence in Washington a key pillar of his campaign, positioning himself as the driving force behind Congress’s coronavirus relief  bills and touting his efforts to score critical federal aid for his state.

But Democrats believe McConnell’s remarks — that states facing budget shortfalls amid the pandemic should be able to “use the bankruptcy route” — blow a hole in his reelection argument.

“I would anticipate seeing them in a lot of campaign ads,” said Ryan Aquilina, the executive director of the Ditch Mitch Fund, a Democratic-aligned outside group. It was “the single stupidest thing I have seen him say in quite some time. … I think in a state like Kentucky it really is an attack on pensions, it’s an attack on the Medicaid program, on cops.”

A national Democratic strategist argued that McConnell’s stance was “problematic” and that the “disparity in [GOP] priorities” gave the issue legs.

“McConnell has made clear that he’s happy to hand out massive corporate bailouts … and he now wants all these strings attached for state and local governments who fund essential services,” the strategist said.

The flare-up comes as the GOP leader has positioned himself as a breadwinner for Kentucky, which received roughly $2.7 billion under last month’s bill. A 2019 USA Today study ranked Kentucky second highest in the amount of federal money received per resident.

While his Senate office has touted money being sent to Kentucky institutions, his campaign has also launched ads calling him a “steady hand” throughout the pandemic.

A McConnell campaign aide said they expect “the overall coronavirus response will be an issue” heading into November and “we’ll make sure to tell our side of the story.”

McConnell is running for his seventh term in the Senate, where he’s served as majority leader and top Democratic antagonist since 2015. He’s the favorite to win, according to election handicappers like the Cook Political Report, which rates the race as “likely Republican.”

“McConnell has done some things for Kentucky that remind people just what it means to have the Senate Republican leader,” said Scott Jennings, a Republican consultant and former campaign adviser to McConnell, adding it wasn’t “news exactly that Democrats are mad about something Mitch McConnell did.”

“What I’m hearing from a lot of people is that somebody has to step up to the plate here and start to ask some hard questions about all the money we’re spending,” he said.

But McConnell sparked days of backlash when he said he supports allowing states to declare bankruptcy as they face budget holes amid the coronavirus pandemic.

“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that. That’s not something I’m going to be in favor of,” McConnell told radio host Hugh Hewitt.

McConnell added during an interview with Fox News Radio this week that there will “probably” be additional aid for state and local governments and that he had thrown out bankruptcy as an “option” for states but wasn’t “necessarily recommending it.” States can’t declare bankruptcy under current law.

But the comments still sparked tension with national Democrats, his potential Democratic opponent and Kentucky Gov. Andy Beshear (D).

Amy McGrath, McConnell’s top Democratic challenger, unveiled a statewide TV ad buy this week accusing McConnell of bailing out large corporations and wealthy investors while refusing to back additional aid for Kentucky and suggesting that the state “should just declare bankruptcy.”

“Special interests win. We lose,” a narrator says in the ad spot. “Same old Mitch.”

Beshear, meanwhile, told CNN that he “strongly disagrees” with McConnell’s initial comments, adding, “Bankruptcy for a state would be disastrous.”

Beshear indicated during a local press conference that he wanted additional aid in the next package passed by Congress, warning that without it “we will be hit with a rougher recession, it will last longer and it will be harder to dig out of.”

Underscoring the state’s financial difficulties, the Louisville Metro Council sent a letter to McConnell warning that state and local governments are facing “significant revenue shortfalls” even with the $150 billion already appropriated as part of last month’s $2.2 trillion bill. The Pew Charitable Trusts reported in 2016 that Kentucky had more than $23 billion in unfunded pension costs, though that had grown to nearly $26 billion in unfunded liabilities by mid-2019, according to Kentucky Retirement Systems.

A McConnell campaign aide noted that while the two would inevitably have policy differences, the governor had recently “praised” McConnell.

But, the aide said, Beshear “should agree that Kentucky taxpayers shouldn’t be on the hook for what’s going on in those states who haven’t been good stewards of tax dollars.”

Democrats believe if the state’s senior senator and the governor get involved in a tussle, the blowback will land on McConnell. Beshear, who defeated GOP Gov. Matt Bevin last year, has gained national headlines for his handling of the coronavirus.

“His approvals are off the charts. … If I were Mitch McConnell I would not want to be on the opposite side of Andy Beshear,” Aquilina said.

Unseating McConnell won’t be easy as Democrats try to win back the Senate. They need a net pickup of three seats if they win the White House or four seats for an outright majority.

McConnell has history on his side. Kentucky hasn’t elected a Democrat to the Senate since 1992, and President Trump’s presence at the top of the ballot in November could give McConnell a boost, as well. Trump carried the state in 2016 by roughly 30 points, nearly double McConnell’s 2014 margin of victory.

“I don’t think McConnell has to kowtow to Andy Beshear all year to prove his worth as Senate leader, to prove his worth as our senator and to win reelection,” Jennings said.

Unlike GOP incumbents in states such as Colorado, Arizona and Maine, McConnell isn’t considered particularly vulnerable. His campaign operation is among the best-funded in the country, and he ended the first quarter of 2020 with nearly $15 million in the bank.

But Democrats believe McConnell’s low approval numbers and the early fundraising strength of McGrath, their recruit for the seat, could put the Bluegrass State in play.

McGrath outraised McConnell in the first three months of 2020, bringing in $12.8 million compared to his $7.5 million. She only narrowly lags the GOP leader in cash on hand, finishing the first quarter with more than $14.7 million in the bank.

Republicans have taken notice of McGrath’s early fundraising success. The Senate Leadership Fund, the super PAC aligned with McConnell, has booked nearly $11 million in fall advertisements through a state-based affiliate group — an early reservation that GOP operatives privately acknowledge is intended to counter expected heavy Democratic spending down the road.

In addition to McGrath’s new ad hammering McConnell, the Democratic Senatorial Campaign Committee (DSCC) is putting money into the race. The group dropped a new digital ad this week taking aim at McConnell’s bankruptcy comments and putting pressure on other Republican incumbents to either back the majority leader’s suggestion or break with him.

“This is a problem for McConnell, whose own governor said he strongly disagrees because this would be disastrous for Kentucky, and it’s a growing liability for the Senate Republicans,” said Stewart Boss, a spokesman for the DSCC.