Bonds = Delayed Tax Increases

John Seiler:

For years now — even decades — I’ve called government bonds “delayed tax increases.” That’s because the bonds, eventually, must be paid off with money from the general fund. And if other government spending is to continue — the regular activities of government — then taxes must be raised.

Bond-backers replied: “Oh, no, the economy will grow and we’ll have plenty of money to pay for the bonds without tax increases.”

Last year I warned, right here on CalWatchDog.com, that the debt payments for the state amounted to $5.5 billion — and rising fast.

People finally are noticing this.  Just at the state level, according to the L.A. Times, the amount to be repaid next year will $7.65 billion.

That’s more than half of the $12 billion in tax increases that Gov. Brown is trying to get passed.

See what I mean? Bonds are delayed tax increases.

Put another way, if voters hadn’t been tricked by the politicians into backing these foolish bonds, it would be much easier to solve the state’s budget mess.

The Times continued:

Voters have approved borrowing in the last 10 years for such causes as stem-cell research ($3 billion), high-speed rail ($10 billion), and parks, water and the environment ($14 billion). They even took on $15 billion in debt to paper over a deficit that Gov. Arnold Schwarzenegger said would never reemerge — something economists have scolded the state for doing.

Arnold’s gone (finally!), but the debt he left behind is just one of his disasters that we’re still cleaning up.

All bonds should be opposed at all levels of government. Current bonds should be ended. All deficits should be ended by cutting spending (no new taxes!).

Government should adopt a 100% pay-as-you-go system.

March 2, 2011