Libertarian Perspective
Bonds are Taxation Without Representation
Anthony Gregory
May 16, 2006

It has become a common cause of progressives and deficit-spending Republicans to rally their rank and file around bond initiatives. The appeal is understandable. The left gets its share of huge new government expenditures and the Republicans can act compassionate without raising taxes on their constituents.

So, the Sacramento legislators, forever conniving new ways to spend money and taking their cue from the governor, have put together the largest bond package in California history. Scheduled to appear on the November ballot, the bipartisan proposal promises to borrow and spend a staggering $37.2 billion-$19.9 billion for roads and transportation, $10.4 billion for education infrastructure, $4.1 billion for flood control and $2.9 billion for new housing programs.

Gov. Arnold Schwarzenegger has been pushing bonds on the public since he came into office. The Democratic-controlled legislature largely has gone along, approving a $25 billion bond package in early 2004. The two parties appear more than eager to spend borrowed money, joined in a bipartisan resolve we rarely see. For politicians playing with other people's money, there's little risk in treating every new multi-billion-dollar plan as some sort of national security matter. Speaking militantly, Senate President pro tem Don Perata, D-Oakland, said the new bond plan will "help fortify California's middle class."

It appears, however, that many citizens don't understand what a bond really is. The government offers voters a chance to approve billions of dollars in new spending, but since the money is borrowed, it doesn't have to be paid back until sometime in the future. It is a tempting installment plan for an electorate accustomed to exorbitant credit card debt. Getting goodies now always seems better than waiting. Paying later is always better than paying today, and seems worth the interest premium.

Any comparison between government debt and personal debt has its problems, however. Most important, when you borrow money on your behalf, you are promising yourself to pay it back. When you borrow through government debt and bonds, you are promising that others will help you pay it back over a period of years or decades. Many of those whose wealth is being spoken for are not old enough to vote yet. Some are not yet even born.

Here we see the foundational evil of government bonds. They are a form of taxation without representation.

The perversity comes when a politician claims that a bond package is "for the children," when in fact a large portion of the spending goes to present projects and will be financed by those very same children once they grow up and many of the projects have become obsolete. Even for long-term infrastructure plans, the immediate beneficiaries, the government contractors and the politically-connected corporations, will feed off the loot while the next generation picks up the tab. Twenty years from now, much of the infrastructure will be dilapidated and, taking an example from their parents, the new crop of voters will likely elect to push the burden on their own children.

There are a million reasons not to approve new government spending that must be financed in the future. The political and economic effects include inflation, corruption and misallocation of resources. And who knows what needs our children will have when they grow up? Perhaps they wouldn't have accepted an extra debt of $37.2 billion-more than $1,000 per Californian, and that's not counting interest-as readily as today's voters.

It would be wrong to exclude women from voting and vote to raise their taxes. It would be wrong to do it to an ethnic group, or any other demographic. And it is especially wrong to do it to the children. Robbing from future generations might be easy, like stealing candy from a baby-only more effortless and in silent comfort, without even having to face the crying child. But it still is terribly wrong.

Bonds are a lien on future generations. They are taxation without representation, and taxation without representation is tyranny. America's founding generation revolted against the British over lesser exploitations. If the next generation revolts and refuses to pay up, it will be impossible to fault them. They might be turning their back on their parents' bad example, but they would be observing the nation's proud tradition of resisting tyrannical taxation. We can save them the trouble by declaring an Independence Day from all new government bonds, starting with California's latest.