As you know, on Tuesday we are all going to vote on local issues. Today, I would like to inform you on this word that government likes to throw around called “bonds”.
Now let’s say that your local government wants to build a park, or a school. Sounds good right? And besides they want to pay for it with these “bonds”, what ever they are… There couldn’t be anything wrong with that, could there? Wrong, there is.
What is a Government Bond?
A government bond, is an “IOU of the United States Treasury; considered the safest security in the investment world.” (Definition from here.) And by the way, local bonds functions in much the same way.
How it Works
Step one: Government wants to build/buy a park or school, etc. One important thing to notice is that the government needs to build this park now. Of course, they need money. So, they make a “government bond.” They sell this bond to the banks in exchange for money. That’s the IOU part.
Step two: So now they build their, whatever. And now it’s time to pay the bank back. Where does the government get the money? From you, the taxpayer. Also known as, a tax increase.
So a government bond is a tax increase plus interest. But, why does the government need this park anyway? Why do we need this now? Why can’t they just save up our money, and tighten their belt during this economy? Because, “Government is like a baby, an alimentary canal with a big apatite at one end. And no sense of responsibility at the other.” (Ronald Reagan)
Okay, so the government pays back the bank. But where did the bank get the money? From your deposits. And where did the Government get the money? From your taxes. So the government is borrowing money from you and paying you back later with your money. “Because this must be done now..” It’s a vicious circle. But along the way somebody made a bundle on the interest.. was it you?
So when you’re voting on Tuesday keep this in mind: “Government Bond= More taxes + Interest!”
And thats a bad deal no matter how nice a park.
Oh by the way, many times the bonds are issued to raise money for Schools. According to the National Education Association the United States spends an average of $9,963 per child per year. Which ends up at about $50 per child per day. If that’s not enough, what is?
It’s you who decides whether or not the government will increase your taxes (plus interest) on Tuesday. You who decides whether a lack of planning on the governments part calls for an emergency on yours.