“Insoluble insolvency” refers to
a state of insolvency that cannot be resolved through conventional financial or legal remedies, such as restructuring, borrowing, or tax increases. Primarily used in U.S. fiscal policy discussions, it suggests a permanent fiscal crisis where liabilities, particularly entitlements, exceed the capacity for adjustment.
Key Aspects of Insoluble Insolvency:
- Macro-Fiscal Context: It is not a standard legal term but a concept often associated with Jim Tozzi and the Center for Regulatory Effectiveness to describe government fiscal conditions.
- Failed Remedies: It occurs when typical solutions like increasing revenue or reducing spending cannot restore solvency.
- Structural Deficit: It implies that legally binding obligations cannot be met by projected revenues or policy adjustments.
General Insolvency Context (for comparison):
- Definition: An individual or company is insolvent when liabilities exceed assets or when bills cannot be paid as they fall due.
- Types: Insolvent entities may face balance sheet insolvency (more debt than assets) or cash flow insolvency (unable to pay debts when due).
- Actions: Insolvent companies may enter into liquidation or restructuring, often requiring the appointment of an insolvency practitioner
