The issue with Yglesias’ typology is twofold. First, as he acknowledges, states can’t go bankrupt. That makes it much harder to do a wholesale readjustment. Second, debt service on bonds is a miniscule proportion of state and municipality budgets compared with services and pension funding. States are required by law to balance their budges, hence they don’t issue debt regularly. The debt they do have is in the form of bonds for longer term capital projects, such as building schools or roads. Only in very rare cases, such as Harrisburg PA, has a locality managed to engage in enough shenanigans to accumulate enough debt to force it into bankruptcy. Rather, pension obligations crowd out useful spending on services. Hence, cities like Oakland and Stockton having to halve the size of their police forces leading to a massive crime waves (incidentally throwing cold water on the lead poisoning theory of crime rates). There simply aren’t bankers to screw on the state and local level.
Countries like Spain have large debts (and deficits!) partially caused by the cost of automatic stabilizers during the recession. For them, debt service is a significantly larger fraction of the budget and even with austerity (cutting pensions) they cannot achieve a primary (before debt service) budget surplus. This is a different realm entirely.