And it’s not just New York, Illinois, and California with the spendthrift ways. Across the nation taxpayers owe a lot more local debt than they think they do because of end runs by local governments around debt restrictions.
Taxpayers owe the money, bond holders own the debt. Taxpayers in many cases won’t be able to pay and bold holders won’t be able to collect. This situation is coming and it’s all because we have long wanted something for nothing, which is impossible. There is always a cost.
Debt is a drug and Americans (really the world for the most part) is terribly addicted. Detox, which will have to happen sometime relatively soon, is going to be very difficult.
Texas, like New York, amassed all this debt by pushing the limits of the law. Though taxpayers must approve most government borrowing, Texas provides an exception for localities that need to issue debt quickly: a “certificate of obligation,” borrowing that doesn’t require approval unless 5 percent or more of local voters petition to have a say on it (a rare occurrence, since most don’t even know that they have that power). Since 2005, Texas localities have issued nearly $13 billion worth of these certificates, often for dubious ends. In 2010, for instance, Fort Worth borrowed nearly $35 million through certificates of obligation to build a facility for horse shows.