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So Little to Show
By Tara Ross
Published: 10-30-07
Well, I never thought I’d say it, but I agree with Dennis Kucinich. His opening statement in a recent House subcommittee meeting was exactly right.
State and local governments are imprudent and wasteful in the items that they choose to finance with tax-exempt government bonds. The public finds itself deep in debt, often with little to show for it.
As Kucinich noted, a bridge in Minnesota should not collapse while the baseball team down the road gets a new publicly financed stadium. Nor should New York, Baltimore, Philadelphia, and Chicago have publicly financed sports stadiums when nearly 200 structurally deficient bridges can be found in or near these cities.
Everyone bears a portion of the blame. Congress has left too many loopholes in tax laws, quietly allowing frivolous and nonessential projects to be financed at public expense. Closer to home, state and local officials rely on bonds to finance all sorts of projects—whether these projects properly belong in the governmental realm or not.
These elected officials want credit for, say, curing cancer or creating a park. Let’s face it: A new Cowboys stadium makes for a snazzier campaign commercial than fixing potholes. But when it comes right down to it, voters have only themselves to blame. Virtually any time bond propositions are presented, voters seem to have an automatic “FOR” voting reflex.
Sadly, this auto-FOR is likely to rear its ugly head again during the impending November 6 elections.
Voters apparently believe that tax-exempt bonds present one never-ending stream of income. Money grows on the tax-exempt bond tree. Worse, voters seem unable to differentiate between items that are appropriately the target of tax-exempt public financing and other items that should instead be financed by private enterprise. Voters seem oblivious to the fact that tax-exempt financing ensures that future generations will be in debt, complete with the high tax burdens required to repay these bonds.
In two weeks, voters will be asked to cast ballots on several bond propositions. One has to wonder why bonds are being proposed—at all—when Texas has such a big surplus. Future generations should not be saddled with nearly $10 billion in new debt. Texans should prioritize their spending and use the money that they already have on hand.
The most emotionally appealing bond proposition on the ballot is Proposition 15, which promises $3 billion over ten years toward cancer research. Who doesn’t want to cure cancer? And, of course, Lance Armstrong’s appeals on behalf of the bonds are hard to resist. But don’t fall prey to the automatic “FOR!” reflex.
Instead, give some thought to whether this initiative is properly handled by the government, particularly when so many private research facilities already exist. If the bonds are approved, the funds would be used to create the Cancer Prevention and Research Institute of Texas. Do you hear that giant sucking sound?
That’s the sound of cancer research dollars being sucked into overhead for yet another government bureaucracy. Count on many dollars being wasted because the legislature has not created a structure to hold researchers at the Institute accountable.
Indeed, medical research, by its very nature, can’t be effectively benchmarked for success in the way that other projects can be. Finally, even assuming that this item is properly financed with public money, there is no need for taxpayers to take on debt to finance it. Use of the budget surplus would allow taxpayers to save as much as $1.6 billion in interest that would otherwise need to be paid to bondholders.
Another emotionally appealing bond proposition is Proposition 2, which would provide money for student college loans. Again, voters should stop and think before going with the automatic “FOR” reflex. Student loans are already available from many sources, including the federal government. Indeed so many loans are available that the supply/demand curve in higher education has been thrown off.
Tuition rates have skyrocketed in part because one factor that should control these rates—the affordability of education—has been compromised by the ease with which students can obtain loans. No matter how high the cost of education, students can borrow enough to pay the bill. In no other area can so much be borrowed, practically at will. Schools thus have little incentive to keep prices reasonable. Making more government loans accessible would undermine the supply/demand curve even more. Must Texans go into debt over this?
The final bond propositions on the ballot would pay for various repairs, maintenance projects, highway improvements, and developments in distressed communities (Props 4, 12, and 16). These propositions at least arguably fall into the realm in which the government may appropriately act. Unfortunately, the propositions are too vague regarding the intended uses for the funds. Taxpayers deserve to know, specifically, what the government intends to do with their money.
Bond proposals should not operate like blank checks. And one continues to wonder why so much debt is being accumulated when the state has a surplus. The legislature should at least consider whether the surplus can finance these projects. Americans for Prosperity has suggested financing any cost over and above the surplus by redirecting a portion of the gasoline tax. Moreover, the Texas Department of Transportation can still issue up to $3 billion in bonds from a referendum passed in 2003. These funds should be used before taxpayers are asked to authorize still more debt.
Voters these days like to complain that federal and state governments are spending too much money. And they may sympathize with Kucinich’s observation that the vast amount of spending has not greatly benefited taxpayers. November 6 is a chance to hold the line on at least a little governmental spending, if voters choose to take advantage of the opportunity.