Monday, November 28, 2022
Hawai'i Free Press

Current Articles | Archives

Tuesday, November 4, 2014
Your Ballot Explained: Issuing New Bonds
By Grassroot Institute @ 1:33 PM :: 5710 Views :: Agriculture, Development, Hawaii State Government

Your Ballot Explained: Issuing New Bonds

by Kelsey Winter Grassroot Institute November 3, 2014

When Election Day comes, voters never seem to get a chance to reduce government spending. Yet, there are always many options to increase it.  One of the most common ways to increase expenditures is through authorizing the selling of bonds. This election is no exception. Two of the proposed amendments to the Hawaii Constitution allow the issuance of bonds. One will aid reservoir owners in improving their facilities and the other will expand aid to agricultural enterprises.

The issuance of bonds by the state is not new. Throughout the nineteenth century, many U.S. cities used bonds to fund new infrastructure.  After the Civil War, many states used them to fund the development of the railroad.  Though they are regulated by complex investment regulations, the premise is basic. If a state or local municipality needs money for a project, it must find a source to borrow from. A bond is simply the state borrowing from willing investors. The purchaser of a bond will receive the apportioned interest.  In most cases, revenue from bonds is not taxable and thus provides some benefit to the holder over investments in the private sector.

Despite being an established practice, selling bonds increases the amount of debt held by the state while harming private investment. Without embarking on a complex economics discussion, let us consider a few important things to know about bonds and the practice of using them to raise money for state projects.

1. Unnecessary Spending

While there are exceptions, in many cases the spending being funded by the bond is not a proper function of the state. For example, in both of the proposals on this year’s ballot, the money will go to fund private endeavors. This is not a case of Hawaii needing additional funds to maintain its own property but that of private owners. As such, it is simply a subsidy.

2. Budget Pressure

Public debt is best understood by making a comparison to personal debt.  Most of us know what it is like to have increasing numbers on a credit card bill. So long as you make your minimum payments, you will not face a collection agency. Yet, you will continue to accrue interest and your ultimate payoff date will be long in the future.

Likewise, a municipal bond is only increasing the line of credit on the state of Hawaii’s metaphorical credit card. It does not put more money into the state coffers.  Greater debt and greater interest puts a strain on the budget and ultimately destabilizes the economic climate of the state.

3. Artificial Development

Private investment does not take place on a whim.  Businesses and investors carefully consider the direction of the market and the path that consumer demand seems to be taking. They then invest resources in projects that will yield the best possible return. While making calculated decisions designed to reap the most profit for themselves, they are also ensuring that consumers will have the best possible product.  Fulfillment of consumer demands creates profit. Hence, voluntary exchange is a win for both parties.

When a politician decides to spend money on a private project, it has nothing to do with the economic forecast or consumer satisfaction.  State-funded projects are often influenced by lobbying and political favors. Even with the best possible intentions, however, it is not possible for the government to know where money should be properly invested. As a result, money is not allocated efficiently or according to the needs of the economy. Such spending falls more in line with welfare than investment.

For example, the expansion of bond use in agriculture will insert money into particular crops and methods, determined by the state rather than the market. As a result, certain crops may be planted regardless of consumer demand, cost of production and current supply. This is a classic example of economic inefficiency. The market, left to itself, will always funnel investment and development to create an equilibrium point (the ideal supply to meet the current demand and the right price).

It is easy to look at a measure on a ballot or consider a public policy issue and only see it at face value. No one will deny that dam safety is important or that the stability of the agriculture industry is vital.  Yet, we should always step back and consider where this responsibility lies and who should foot the bill.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Back da Blue Hawaii

Ballotpedia Hawaii

Better Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Life Alliance

Hawaii March for Life 

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT