Passing The Buck To Our Kids

Passing the buck to our kids has become the American way of doing things. We elect and reelect people to our federal government who continually pass programs  for which our taxes are insufficient to pay the cost. In this manner, the United States has accumulated, in the name of future generations of Americans (our kids) a debt that is now $16 trillion and growing at over a trillion dollars each year. The left likes to tell us not to worry because we never have to pay off the  debt, as long as, we pay the debt service cost (interest) each year. But, what they don’t tell the public is that even at the low-interest rates our bonds carry right now, the annual debt service cost is over $400 billion and growing as the principle keeps growing.

Well, our federal government has been setting a very bad example for our states and our cities. California is a good case in point. If my memory serves me correctly, California is now $16 billion in debt and counting. Cities in California are falling like dominoes into bankruptcy. Future generations (the kids) will pay the price of this foolishness one way or the other. And now, it seems that some California school districts have found a way to pass the buck to the kids.

Typically in America, we fund our public schools through our property taxes. When an extraordinary cost is foreseen, the appropriate government entity will ask the voters to pass a bond issue. If the voters approve the bond issue they are committing to pay some millage rate increase in their taxes for a fixed number of years. The government entity then collects the increased taxes and uses it to pay off the bonds (loan) in the time frame specified. The total cost to the taxpayer over that time (principal plus interest) is typically two to three times the amount borrowed. It’s a pay as you go approach. According to the Voice of San Diego, some school districts have found a way to borrow money such that  the kids get to help pay the money back. Let me explain how it works.

There is a type of bond called Capital Appreciation Bond, where by, public entities can borrow money today but not have to start paying it back for say twenty years and they have another twenty years to pay  the loan after that. The link above gives a couple of examples. One is the Poway Unified school district in the San Diego area.

…Poway Unified borrowed $105 million last year using a form of financing called a capital appreciation bond. The district won’t start making payments on the loan until 2033, and by the time it’s paid off in 2051, taxpayers will have paid back almost $1 billion, or almost 10 times the original loan.

Isn’t this great? Poway will borrow and spend $105 million today and way down the road the taxpayers will pack back over a bullion dollars. Do you see how clever this is? The children whom will benefit from this school bond will have graduated highschool and possibly college by the time the bond repayments begin. So, the children get to help  their parents and grandparents repay the loan.

I’m trying to imagine a conversation between a daddy and his little boy. It might go something like this: (You van assume the little boy interrupts his father several times with “Yes, daddy”.)

Daddy: Son, we need to have a man-to-man talk. You know that your mommy and daddy love you very much, don’t you? All parents and grandparents love their children and grandchildren. Well, you’re  a big boy now. You are going to start kindergarten in a few months. And, because everyone loves children, we all want you kids to have really nice schools. And, we want your teachers and pricipals and all the school staff to be to be paid really well and we want them to be able to retire early with big fat pensions and have the very best health insurance. That’s only fair, don’t you think? So, all the parents and grandparents in our area have voted to have the school district borrow a bunch of money to pay for all that good stuff needed for your education. Well, here’s the thing, son. We parents and grandparents don’t want to spend our money now to pay back that loan. No, we have other things we want to buy with our money now. So, we all think that when you kids are out of school and college, you can help us pay back the loan. It’s only fair. After all, it is you kids who are getting the education. Well, actually you won’t be learning very much that is useful and you probably won’t be able to get a good paying job. But, not to worry, son. We have a federal government way off in a place called Washington D.C. and they are going to take care of you. Do you understand everything I’ve told you, son?

Little boy: Yes, daddy. I love you, daddy.

Daddy: I love you too, son.

Well, that sounds like some “tough love”, don’t you think? But, we Americans have been practicing that kind of tough love with our children for years at the national, state, and city level. Now the school districts are learning to do the same thing. But hey!. As the liberals are always saying: It’s for the children. They deserve it! What is it exactly that our children deserve? Getting stuck with the bill? Will we ever learn? I doubt it.

Well, that’s what I’m thinking. What are your thoughts?

17 thoughts on “Passing The Buck To Our Kids

  1. It makes me wish this newest generation of adults would stand up and say “We’re not going to pay your bills!”

    I don’t know how it would work, but a generational revolt is needed.

  2. The only people who should even consider voting Democrat are aging hippies. The young are staring straight down the barrel of a gun that combines incredible amounts of debt with no jobs available with which to earn the money to pay that debt. Look at the youth unemployment rate in the big social welfare states of Europe. How would you like to be in your 30s and find you still don’t have the experience necessary to hold a good job because you still haven’t worked yet? So the government will come in and try to fix the problem with work rules… which will be disincentives for employers to hire at all. Because that’s how the government fixes problems.

    Kids are standing on the ledge, and rather than help coming, a wrecking ball has begun its arc toward the precarious place where they are standing.

  3. The people who allowed Poway Unified to get away with such a rip-off deserve the tar and feathe treatment.

    It should happen today and then again thirty years from now.

  4. It is amazing how creative the government mind can be. But thats right, they are the creators of all that is.

  5. The CAB was intended to be a zero coupon bond with the principle and interest due in one payment at the end of the term. Now, some genius (probably with a degree in education administration) thinks it is cool to finance that princely sum to defer paying the piper as far into the future as possible. Is this the mentality of our education establishment.

    What a bunch of idiots.

  6. Wow. Well, I guess this school bond situation isn’t any different than everything else government does …across the board. I keep asking, who are these people and what the h e LL are they doing in my country? Who would vote to borrow on that basis? Idiots? Can they really think that is a good thing? Or is it more of the same plan to take down and later?
    No chance our children and grandchildren will manage to live half as well as we have. But…that is the goal right? First they dumbed down generations, now they are breaking everyone’s future economically.

    Neither a lender nor a borrower be…

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