Government Borrowing

When the Federal government spends more than it takes in, the US Treasury issues Treasury Bills.  Like Bonds, these are loans to the government that require fees and interest payments. Foreign governments, Investment Institutions and the Federal Reserve hold the Treasury Bills for the National Debt and now own over $17 trillion in U.S. government debt.  These funds are “parked” and unavailable for investment in the private sector.  The 3% interest paid on Treasury Bills is low enough to give investors the incentive to buy stocks, but these are not stable times. The promise of the declining value of the US dollar also makes Treasury Bills unattractive, so the Federal Reserve has become the “buyer of last resort”.  High Rollers have $trillions in hedge funds.  US corporations have parked their money overseas, because of draconian US taxes.  All investors agree, the US is set to decline.

The Federal Reserve is a private corporation, but is authorized to print all the dollars it wants to lend. Most of this lending in past years has been accomplished by purchasing Treasury Bills and toxic mortgages.  It is the reason the Federal Government never runs out of money.  The dark side of this blessing is that the Federal government always overspends and has absolutely no reason to stop.  Our current bout of overspending began in 2001 with the Gulf Wars and doubled down after the 2008 Meltdown with UN Agenda 21 implementation. 

Bond Debt

Bonds act like mortgage loans.  Cities, Counties, States, Public School Systems, Redevelopment Authorities, Development Authorities and Special Districts can sell bonds and, in effect, borrow the face amount of the Bonds for their construction projects.  A 30 year Bond at 5% interest costs double the face amount of the Bonds. If Cobb County sells $400 million in Bonds, the actual cost would be $800 million after you take interest payments and fees into account.

Young families are able to purchase homes is they qualify for mortgage loans. Despite having to pay double, they normally have no other option.  Government entities have no excuse to sell Bonds unless they are faced with having to replace a water or sewer system and even these should be paid for with reserve funds, set aside and accrued to fund this maintenance.  Although State and local governments have laws that require them to balance their budgets, their path to overspending is funded by borrowing.

The maximum amount a city or county can borrow in Georgia is 10% of the value of all property within its borders.  That includes all private property on the tax registry including your property.  Your local government is using your equity to borrow money.  In Cobb County, the tax registry is about $26 billion, so Cobb can borrow up to 2.6 billion.  Cities and Counties should be limited to borrowing up to the value of their own assets, not 10% of ours.

Bonds with No Voter Approval

Not too long ago, Bond Issues were voted on by city and county voters.  This is no longer the case.  State laws now enable cities and counties to borrow without voter approval.  These laws need to be challenged and revisited to protect voters’ rights to prevent reckless overspending, the corruption that accompanies it and bankruptcy.

Norb Leahy, Dunwoody GA Tea Party Leader