Conservatives: States and Municipalities Have to Balance Their Budgets, So the Federal Government Can Too

Wait a Minute, Where Did The Trillions of Dollars of State and Local Debt Come From?  Oh, Here’s How They Do It

One of the great disappointments Conservatives are going to have when they finally get their much cherished balanced budget amendment passed is that the government will not have a balanced budget.  Americans have two requirements of government fiscal operations.  (1) they want the government to operate under a balanced budget and (2) they want the government to provides lots of goods and services by borrowing part of the cost so the American people don’t have to pay more in taxes.

The purpose of the Balanced Budget Amendment is not to balance the budget but to give the appearance of balancing the budget.  That’s all it needs to do, that way Americans can go ahead with massive government borrowings, confident in their belief that the government is operating on a balanced budget basis.

There are just so many ways that government at all levels can get around the balanced budget requirement that there is not time and room to discuss them all.  In the news recently is a story about how some governments are able to borrow money by mortgaging buildings under so-called “green initiatives”.

Cities Deep in Red Turn to Green Deals

Financing Strategy Skirts Laws on Using Bonds for Deficits

In Providence here is how the work-around works

“The Providence deal was structured as a sale-leaseback: The city handed over three buildings, including City Hall, to the city's Public Building Authority, a local agency that is usually involved in school construction projects.

In April, the building authority sold a $35 million bond, using the city buildings as collateral.

For the next 15 years, the city will lease the buildings from the authority and its rent payments will go to repay bond holders. About $5 million of the bond proceeds will be used for upgrades such as "solar-tracking skylights" and efficient lighting.

The remaining $30 million went to help cover the city's budget deficit for the fiscal year ended June 30.”

           

So Providence is able to finance its operating deficit by borrowing, exactly what it is NOT supposed to do.  But the alternative was raising taxes, you know, really operatng a balanced budget.  And as it turns out nobody, not Democrats, Republicans, Progressives, Moderates, Conservatives nor Liberals wants that.