But should it be?
Article VIII, section 1 of the Washington Constitution establishes a limit on the debt that the state government may contract. The limit is based on the average revenue the state has collected for the past three years. This is a very wise part of the state constitution because it prevents the state from getting in over its head. Just as American citizens must work within the confines of a family budget and be careful not to borrow more money than they can pay back, so must the government be fiscally responsible. As we have seen recently with the federal government and with numerous state governments, politicians are all too eager to borrow and spend money with little regard to how that money will be paid back.
Through a new federal program called Build America Bonds, the federal government actually pays a portion of the interest on certain types of state bonds. In response to this, SJR 8225 wants to modify how the state's debt is calculated by adding the following sentence to subsection (d):
In addition, for the purpose of computing the amount required for payment of interest on outstanding debt under subsection (b) of this section and this subsection, "interest" shall be reduced by subtracting the amount scheduled to be received by the state as payments from the federal government in each year in respect of bonds, notes, or other evidences of indebtedness subject to this section.The effect of this change, as explained in the state voter's guide, would be to lower the amount of debt the state thinks it has, thereby allowing it to take on even more debt, despite the fact that the constitutional debt limit would not change.
Proponents, such as the official Statement For and this Seattle Times editorial, seem to suggest that this amendment will yield substantial "savings" or that the state will receive "free money". These arguments are misleading for couple of reasons.
First, the state will receive money from the federal government regardless of whether or not this amendment is approved. In order for the amendment to allow the state to receive more money from the federal government, the state would have to issue more bonds. More bonds means more interest owed, which means more money from the federal government. But it also means more debt! What happens if the scheduled payments from the federal government don't materialize? There have already been instances where states assumed the federal government would give them money but it never actually happened. Granted, this situation is a bit different in that a law was already passed. Still, if you are in debt, and someone offers to pay a portion of what you owe, the responsible thing to do is to be grateful and take what they are giving you. You don't go out and spend even more money in the hope that they will cover you further and then call that "savings".
Second, money from the federal government is not free! Perhaps from a naive state government's point of view it is "free". However, federal money is taken from federal tax receipts, and the last time I checked, Washington state residents pay federal taxes. Whether the money is handed over with the left hand or the right hand, it still comes out of your wallet. Or to be more precise, it comes from your wallet and your children's and grandchildren's wallets.
And that's really what the amendment is all about: Adding more debt that has to be repaid by someone else in the future. Hopefully the people of Washington state will see past the accounting gimmickry and realize that there is no such thing as a free lunch.
Update: November 3, 2010 - Looking at the election results for Washington state measures shows that SJR 8225 passed by a very narrow margin with 51% to 49%. I have to admit I thought it would be a blowout approval, but perhaps this shows that people can be more perceptive than I gave them credit for. It's still too bad the measure was approved.
No comments:
Post a Comment