Saturday, June 09, 2012

Politicians Team With Bondealers to Push Debt

Politicians love debt.   They get to spend the future now, buy lots of love, and then leave the next guy or gal to pay for it all.     It's an instance where smart politics and good government are diametrically opposed.    It's no wonder government on all levels has taken to using debt as much as possible.  Most tax increases these days do not go directly to fund whatever they were earmarked for.   Rather, they go to finance a bond issue, and the bond money is used for whatever the special project was, minus interest and brokerage fees.

Here is an example of an extra twist to this already bad deal.    The Mayor of Rogers selected Morgan Keegan and Stephens to float any bond issue that might be needed if a certain tax increase passed.   Those firms, either just before or just after being selected, donated at least $1,000 each to a fund whose purpose was to purseuade the people of Rogers to vote for the debt.   Since they are making over $500,000 in bond fees on the deal, it's a pretty good return on their money. 

So we have a situation where a politician knows he can use debt, buy love now and let someone else pay for it later.   Not only that, the bond houses will help him push those bonds.   The debt sellers are funding a politician-backed campaign to load on more debt.    Who funds the other side of the issue?   It usually does not get funded.   And of course Stephens owns a lot of the print media around here, so don't expect the papers to cover it.   It would not surprise me if politicians who like to use debt wind up getting some campaign contributions from the bond peddlers as well.   It's all good- except maybe for the taxpayer.

Breaking the cycle of debt starts with knowing what's really going on.


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