by BRUCE A. DIXON
Let’s suppose you’re a billionaire, and the city you live in needs a subway. Ultimately the thing is going to be built with tax dollars, yours or somebody else’s. Would you rather the government use its taxing power to just take the money from you? Or would you prefer that local government issue bonds to borrow it from you, and levy user fees or taxes on everybody else to repay your generous loan with substantial interest, carrying charges and handling fees of all kinds, often tax-free, for your and your platoons of lawyers and fixers.
Paying for development projects with bond issues has been standard operating procedure for so long that nobody questions why local city or county governments are unable to dig a hole, or lay a mile of light rail without adding thirty or more percent to make bankers and their favorite law firms richer. But it’s exactly the question that must be asked. Why? Why do a banker and two lawyers have to get paid before we can fire up a bulldozer?
It’s a fair question, and an important one. Local governments everywhere are neck deep or over their heads in debt, using substantial chunks of existing revenue to service current, rolled-over and restructured loans taken out for every purpose imaginable. And right now unemployment is higher than at any time since the 1930s. Millions of the jobless could be put to work rebuilding infrastructure, retrofitting homes, offices and public buildings for energy efficiency, or simplifying and rationalizing our food system with local and urban agriculture projects. That’s exactly how the Great Depression was addressed. The federal government didn’t borrow money from the banksters to put people to work. It simply drew up the projects, hired the people, and printed the money to pay for them.
It could be done today, in exactly the same way that the banking crisis of a few years ago was addressed. The Bush and Obama administrations, mainly the latter, simply had the Federal Reserve open its magic spreadsheets and credit the banks with trillions of dollars, which the government immediately borrowed from them at interest. If the federal government can create brand new money to give to its favorite banksters and borrow it back from them at interest, why can’t it eliminate the need to roll over local government debts at loan shark interest rates? If a project is to be paid for by multiple years of earmarked tax revenues, why can’t the feds just advance the county or city the cash and collect it back as tax revenues dribble in?
Financing local government with bond issues, to put it bluntly, is profoundly undemocratic and unless you’re a banker yourself, plain stupid. Local government entities under heavy debt restructure their operations not to provide services to constituents and communities, but to pay down that debt. They are frequently pressured and “advised” to consolidate, roll over or refinance their debt, for which they pay almost as dearly as folks who borrow from the payday loan people to cover their credit card debt. Creditors often demand privatization of local government assets, which they can acquire for pennies on the dollar. Michigan’s infamous “emergency mangement” laws, that let business interests take over local governments who hadn’t paid them, are a direct and eminently logical outcome of making local government go into hock to banks to provide services.
Imagine local urban economic development. Right now, the phrase means “gentrification” because bankers won’t invest in anything that doesn’t make big money, and you make that big money flipping neighborhoods, not stabilizing them. So take a leap — imagine urban economic development for the sake, for the betterment of those who live in urban neighborhoods NOW, not the upscale folks current “developers” want to attract. And if the banksters won’t fund it, why not use the power of government to get it done anyhow?
These are sensible questions. But they are questions our politicians, especially the black political class lack the imagination to ask. For the Corey Bookers, the Kasim Reeds, the Michael Nutters, and the Barack Obamas, the habit of subservience to the wealthy contributors who made their careers possible is simply bone-deep. This is the kind of subservience that led the mayor of Atlanta to promise business interests that from his first day in office, the city would take a “more muscular” approach to the very presence of the homeless. It’s the source of Barack Obama’s pronouncement that contrary to the New Deal, in which Democrat Franklin Roosevelt made the government the direct employer of millions of otherwise jobless Americans, that creating jobs was the exclusive duty of the private sector.
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