Posted on 12/14/2010 9:26:01 AM PST by Nachum
When state and local governments want to spend more than they collect in revenues, they issue bonds. Such bonds are a longstanding feature of the American landscape, going back at least as far as 1812, but during the last decade they have spun out of control, as states and cities have increased their borrowing to indulge in more and more spending on new stadiums, schools, bridges, and museums. They have even started borrowing to cover their basic operational expenses.
Since 2000 the total outstanding state and municipal bond debt, adjusted for inflation, has soared from $1.5 trillion to $2.8 trillion (see chart). The recession didn’t slow the spending.
(Excerpt) Read more at reason.com ...
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And ya gotta wonder what are the municipal obligations for derivatives that went south?
There is nothing wrong with issuing bonds for capital projects, so long as its a valid expenditure, the life of the asset exceeds the bond term, and there is a revenue stream to pay for it. Bonding operations costs or personnel? HUGE problem! That’s being “upside down” and a recipe for eventual disaster. Also, municipalities need to gauge how much they spend on operations and how much they spend on capital improvements. Once capital expenditures dip below 25%, your municipality just isn’t keeping up its infrastructure. Lots of cities have gone this direction and will never recover.
The problem with the federal government is that it doesn’t follow even these most basic fiscal policy concepts.
>> Bonding operations costs or personnel? HUGE problem!
Yeah, think household putting groceries and the electric bill on a HELOC.
Yet the disingenuous pukes on the school board and city council will look you in the eye and tell you that THERE IS NO PROBLEM with it!
How about cities, counties, states & USA pay for things as they go? Maybe, using taxes to pay interest on things which cannot be payed for this moment is unecessary; maybe more projects can wait.
Maybe the reason muni bonds are sold so often is because a significant portion of tax revenue is going to pay off previous year bonds?
I disagree that USA borrowing money at all levels of gov is ok. Paying interest for everything we have, isn’t okay. A bridge which should cost $30M, adds hundreds of thousands if not a million becasue we pay interest on bonds to build it.
Pay as you go?
How about a road improvement in a rapidly growing town; the cost of the improvement is $25 million (don’t gripe that it costs too much; that’s what they cost). The total annual town budget is $30 million. Would you care to double your taxes to pay for the road? My guess is that you wouldn’t find much support for your proposition.
yup its comming
yup its here...
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