Saturday, October 01, 2011

Highway Debt Plan Not Adding Up (Part II)



Barely over a month from now (November 8th), Arkansans will be asked to go the polls over the question of whether or not we will allow the Arkansas Highway Commission to add over half a billion dollars of public debt.    Voters and reporters have been given outrageously conflicting answers over whether or not the plan will result in new construction or whether it is simply to maintain existing roads.   The Pulaski County Tea Party, The Washington County Tea Party, and Secure Arkansas have come out against the plan for a number of reasons, including the lack of clarity about how the money will be used.
A group which calls itself “Move Arkansas Forward” is lobbying for the plan.   The group is chaired by, and mostly funded by entities connected to, the man who also chairs the State Highway Commission, Madison Murphy.  In other words, the guy who runs the group lobbying to give the Highway Commission this pile of money is the same guy who runs the Highway Commission- the group that will get to spend the money.  I don’t question his right to do that, I question the appropriateness and seemliness of such behavior.  And I am curious as to why the media has glossed over it like they have.
“Move Arkansas Forward” has hired Craig Douglass of Douglass Communications to handle the PR for this campaign.   When the Washington County Tea Party issued a press release opposing the debt issue, Mr. Douglass wrote WCTP Chairman Jeff Oland a letter purporting to address some of Mr. Oland’s concerns.    I found the letter brazen in its claims.  I’d like to examine one of them here, and a couple more in latter articles.  Here is an excerpt, with the Tea Party statement in italics and his response following.….
“Just because the government says we need an increase doesn’t mean we do.”There is no “increase” in this program. It does not increase any existing tax, nor does it propose a new tax. Further, there is no increase in the amount of bonds to be issued. They will be the same as in 1999, $575 million.
First of all, the increase that Tea Party Chairman Oland referenced was an increase in public debt, not an increase in taxes.  So the part about taxes is a distraction, but even still, while technically correct it is misleading and I will explain why shortly.   The main point is that Douglass claims that there is “no “increase” in this program.”   Please!  Why are we even having an election to authorize more debt if there is no more debt?  Hmmmmm?  We are very short on straight answers and coherent explanations.   He is asking us to believe something that appears obviously untrue.
Suppose you had a credit card with a debt limit of $10,000.   You max it out, and then spend the next 15 years paying it off.   Just as you are about to pay it off a member of the family suggests that you borrow another $10,000; that you max it out again and pay it off in another 15 years.  Would you consider this proposal to be an increase in debt?   Of course you would.  How is that any different than what is going on here?  
Mr. Douglass seems to think that as long as they are not asking for an increase in maximum amount on their credit line then adding more debt on that same line of credit is not an “increase” in debt.   I regard that as absurd.   We almost have the old $575 million almost paid off don’t we?   That means we are close to a zero balance on that line of credit.  Of course maxing it out again is adding more debt, to the tune of about $2,000 per taxpaying household in the state.    I don’t want to give the powers that be to put another $2,000 of debt on my family.   We have enough already, thank you.
I am sorry to have to waste your time with this, but these are the claims that the powers that be are making, and the corporate media, owned by some of the same people who will get a share of the money if we used debt, does not seem interested in pointing out how those claims can’t possibly be true.
Let’s go back to his claim about taxes.   He says that no taxes will be increased for this program, nor will there be any new taxes levied.   If the federal government avoids a fiscal crisis for the next 15 years then he is probably right about that.  Most of the debt will be repaid by diverting our federal highway funds over the next 15 years to paying off the debt, which means it won’t be available in out-years.  Even if they can sell the bonds with a 3% interest rate, about 25% of the money will go to interest payments rather than into roads- and that does not include bond brokerage fees and legal fees.  
So if all goes well, we won’t have more taxes, but we may very well have less roads than we could have had!   And while we could be pretty sure in 1999 that the federal government would come through with expected road payments, the federal government is already in a fiscal crisis.  Is it wise fiscal policy to lean on the most indebted institution in human history to avoid a tax increase?  If the feds don’t come through, the taxpayers will have to.
But even that does not reflect the full duplicity of Douglass’ statement.  You see there is also a four cent a gallon tax on diesel fuel that has been dedicated to paying off those bonds, and that they plan to continue to use to pay off the next round of borrowing.  If we vote the plan down, there is nowhere for that diesel tax money to go.  That tax could be used to fund road maintenance on a pay-as-you-go basis.  Alternatively, the legislature could retire the tax since the program it was created to fund had gone away. 
I don’t know why the Highway Commission can’t post a clear and complete plan showing the numbers for where they expect the money to come from and to whom and for what it is going.  Increasingly, I suspect it is because there is something to hide, and that something is to the benefit of some insiders at the expense of the rest of us.

5 Comments:

Blogger Mark Moore (Moderator) said...

I consider "part I" to be the article I published yesterday on a different one of Douglass' claims- that this program was maintenance only, not new construction. I link to that article in this one.

2:35 PM, October 01, 2011  
Anonymous Anonymous said...

I hope people show up for this one and vote against it.

9:04 PM, October 03, 2011  
Anonymous Max Edison/De Queen said...

It is not a good idea to let the interstate highway system go to hell. If we don't maintain the roads, they will go to hell. It is not a conservative position to let the things built by previous generations go to hell just to avoid a few bucks a year in taxes. Then the toll roads will come, because that makes the user pay directly.
If you that is what you want, maybe you would be happier in Costa Rica or haiti.

1:40 PM, October 12, 2011  
Anonymous www.huelva-3d.com said...

It can't work in fact, that is exactly what I believe.

10:37 AM, October 30, 2011  
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