| What is a bond? A bond is an IOU from the
government, backed by the taxing power of the state.
By definition, a bond is deficit spending and it
allows politicians to spend tax money that they have
not yet collected in taxes. Legally, the repayment
of bonds has priority over all other state spending
and federal law does not permit states to file
bankruptcy. Once bonds are issued, they must be
repaid with interest according to their terms,
regardless of whatever other emergencies may arise
in the future.
Generally, bonds more than double the cost of
public works, due to the compounding of interest,
plus the fees charged by bond traders, bond
attorneys, and other middlemen. Thus, bonds are the
most expensive way of paying for government
projects. A pay-as-you-go approach is not only more
fiscally responsible, it prevents the current
generation from mortgaging the future of the
generations to
come.
How much money have we approved in bonds
already?
California voters have already
approved more than $76 billion in bonds at the state
level. Taxpayers are also on the hook for a great
deal more in municipal bonds, school bonds, and
redevelopment bonds issued at the local level.
We are in such dire fiscal
straits that the Treasurer has not been able to
issue $32 billion of the $76 billion dollars in
statewide bonds that have already been approved.
California’s bond rating is already the lowest in
the nation and we are already forced to pay the
highest interest rates of any state. Flooding the
volatile bond market with additional debt will have
a disastrous effect on our credit-worthiness for
decades to come. |
