There are two main ways to fund a government: through taxes or through debt. The difference is that, by using debt, rich people get to collect interest on the money they provide.
Which came first historically, government bonds or corporate bonds? From Piketty I'm guessing the former.
"...how about that clusterfuck in Louisiana?"
I lived and worked in Louisiana for two years at LSU. It was always a clusterfuck so I can't see that this is anything new. I headed back to the Northwest as fast as I could. (not that we don't have our own clusterfucks but compared to Louisiana...)
I can't see that this is anything new.
Oh, but clusterfucks can be and have been! replaced with new, clusterier, fuckier clusterfucks. Excelsior.
Well, probably not so much replaced with as supplemented by.
The first rule of clusters is if you're in one, start fucking.
2. European royalty borrowed to raise armies-- Froissart mentions loans to Philip of France made in order to pay his troops.
1. With taxes, the money to build the bridge will be available later, after years of saving. With a bond issue, it's available now.
The mechanics of forcing partial repayment of defaulted bonds are pretty intricate and IMO worth following. If shitty local governments borrow with no intent of repayment, who should lend in the future?
I actually read up on the LSU situation and it will be interesting to see how it plays out. I remember when I was there 16 years ago they were spending 50 million to build box seats in the stadium but we could not get enough computers in the computer lab to conduct class.
Recently we've gone from governors having an advantage in the presidential nomination battles to senators having an advantage.
I guess this makes sense since the accomplishments of Republican governors now amount to "Destroy the state's economy by pursuing policies that appeal to Republican primary voters", and the accomplishments of Democratic governors amount to "Deal with $500,000,000 budget shortfall caused by failure to fund pension funds between 1970 and 2005", and "Stop the Republican legislature from destroying the state's economy".
At the local level, I'm fine with bonds for capital expenditures- building bridges, infrastructure etc. but not for ongoing operating expenses. I wouldn't mind, however, if my state government were allowed to operate a deficit during a recession. Provincial governments in Canada can.
Allowing States to go into deficit would sure take a lot of hurt off of recessions, because it would provide valuable counter-cyclical spending and assure the availability of social services when they are most needed. But figuring out the governance model would be tough: State governments would have lots of incentives to cheat, and keep on deficit spending right through the boom times.
Countercyclical federal assistance, like ARRA but formulaic and automatic, would be a good start.
Yeah, that would be a pretty good way to handle it. Built-in federal transfers to states that kick in based on unemployment/GDP growth formulas. The state doesn't need to run a deficit if it has fallback income that it can rely on.