Public Finance

A long time ago, I read an article put out by SPUR on how bond initiatives are irresponsible fiscal policy. By paying for public projects with a bond, we are, in a way, paying 3 times. The government issues the bonds. The public buys the bonds. The government pays the bonds back to the public with interest. Essentially, it’s a transference of funds (in the form of interest) from the tax base to the people who can afford to buy bonds. Instead, the article argued, we should increase taxes and save for the investments we wish to make in the future, planning ahead. Sort of like when individuals save money for a retirement or a down payment on a house.

But the public doesn’t want to pay more taxes. They don’t trust the government, and they don’t want it to have any “savings”. Do people think that a balanced budget is just a sign that they’ve paid too much? I admit that this is a gross simplification with many imprecisions. It’s also the way our tax system functions.

In addition to bond measures, we have sales and other taxes to cover our many many capital and operating needs. We pay gas tax (which is regressive – poor people pay more than rich people, and not just in proportion to their income), out-of-state-drivers’-license-car-rental tax, and transit fare. From our tax base, we pay the interest of the bonds we’ve issued for the expenses we didn’t want to tax ourselves to save up for. For this reason, I am always reluctant to vote for any bond measure. But I have to admit to myself that this is our financial reality. Sometimes, if we want the parks maintained, we have to issue another bond.

Another thing we’ve been exploring recently is engaging the private sector in providing public infrastructure (esp. in Europe where taxes are higher). Private companies will help provide public services only do it if they can make some money. But maybe projects where there’s money to be made don’t belong in the public sector? These private companies, I learned today, are also at a disadvantage for acquiring debt to fund… anything. We issue so many government bonds, and the government is, by definition, more stable than 99.9999% of private companies. The public isn’t stupid. They know they should get a higher return on riskier privately-issued bonds. So, private companies have to make an even higher return on their partnerships on public projects.

It’s a little bit like robbing Peter to pay Paul. Money moves around. What bothers me is that every time money changes hands, everyone who touches it needs to make a profit. (Sometimes called an economy.) When public transit agencies lack operating funds and social services are being cut, does this system still make sense?

I used to get upset by any kind of waste: food, time, money, love, flowers, sunshine, gasoline…. I’ve come to accept waste as a necessary part of life. Food turns into soil and love into learning. Money goes from individuals to organizations and back again. The rich get richer; my people try to stay middle class; and we worry about the underdog. But if there’s no one to step on, how can we climb? (You know I don’t believe that of course.) I could make myself crazy like a puppy chasing its tale trying to figure this one out, but I’m too old and tired for that. Instead I try to do things that keep my soul from spoiling, being the very best person I know how to be. I hope that that will be enough.