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In My Opinion
Stop Issuing Bonds Already!
By Jon Coupal
Back in 2010, then Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen, said that “the most significant threat to our national security is our debt.” At the time, our national debt was “only” $14.3 trillion. Today, it is more than double that. Debt service ― payment of interest on the debt ― is expected to cost Americans $1 trillion annually. That amount is larger than our annual outlays for defense.
California has its own debt crisis but, unlike the federal government, it cannot print money. Instead, California reacts to high levels of government debt by spending more money, proposing more debt, and papering over the problem with opaque budget gimmicks.
If there is any good news, it appears that California voters are starting to appreciate the scope of the problem. The recent statewide bond measure to address homelessness, Proposition 1, barely passed. This was notable because the assumption among political observers was that it would easily pass given all the advantages it had: A sympathetic cause, a broad-based coalition of nearly all the interest groups, and the personal backing of Gov. Gavin Newsom and his prodigious fundraising apparatus.
Another stroke of luck for the governor and other Prop. 1 proponents was the fact that the election was held just prior to the release of a scathing report from the State Auditor questioning the effectiveness of the state’s expenditure of $24 billion over the last five years on the homelessness crisis. Had voters been aware that the state fails to track whether all that spending on the crisis is doing any good at all, Prop. 1 would likely have failed.
Proving that the close call on Prop. 1 hasn’t satisfied politicians’ appetite for more debt, Assemblywoman Buffy Wicks, D-Oakland, has introduced Assembly Bill 1657, which proposes a $10 billion bond to fund existing housing programs, including those funding rental and supportive developments, home loans and farmworker housing. Although the language of AB 1657 is a moving target, it appears to reflect the same infirmities as Prop. 1 including a lack of specificity in how the bond proceeds will be used and whether debt financing that takes 30 years to repay should be used for anything other than a “single work or purpose” as required by the state constitution.
AB 1657 isn’t the only bond proposal bouncing around inside the Capitol. New debt totaling billions is being proposed for campus modernization, climate change and drug addiction.
Speaking of addiction, a real problem for debt addicts is that this November’s election will look a lot different from March when there was only one bond measure on the ballot. Assembly Speaker Robert Rivas has justifiably expressed concerns that too many bond proposals could sink them all.
From the perspective of taxpayers, there have been very few worthwhile state bond proposals since Jerry Brown’s father, Gov. Pat Brown, built much of the infrastructure in California that we use today. But those “brick and mortar” projects like dams, aqueducts, and highways were built quickly and efficiently at a cost palatable to voters. Can that be said of the High Speed Rail bond or the $5.5 billion Regenerative Medicine bond?
Another difference between Prop. 1 and any bond that may appear in November is that voter anger is only growing. The Auditor’s report is one thing, but Public Policy Institute of California polling reveals that voter perception of the level of government waste is off the charts.
And the bitter icing on the cake is ACA 1, a proposal to make passing bonds at the local level even easier by repealing the requirement that such bonds need approval by two-thirds of the voters—a requirement that has been in the state constitution since 1879. If ACA 1 remains on the ballot—the Legislature could remove it—don’t be surprised by a hostile response from the electorate on a level reminiscent of 1978.
©Howard Jarvis Taxpayers Association