Fiscal irresponsibility
Suppose your Big Brother approached you with the following deal: raise $50,000 by going into debt and he will match it by giving you another $50,000, so that you end up with a total balance of $100,000. The deal sounds swell until you consider one other condition: you have to spend all of the money on either illiquid and depreciating assets or fleeting services.
Under such an arrangement, you end up poorer, not richer. First, you burden yourself with considerable debt. Second, you do not actually get to keep the matching funds for yourself; you are forced to spend it. But not only are you forced to spend it–you are forced to spend the money on questionable, perhaps wasteful, pork-like items.
This is essentially how I see the federal matching funds arrangement for capital improvement projects. The federal government is essentially luring the CNMI into imprudent (and massive) debt, leaving us extremely vulnerable, particularly in this still very weak and fragile economy.
The federal government is compelling us to spend on infrastructure projects, which are illiquid, depreciating assets that constantly have to be maintained. Could the CNMI government get a loan by listing a local infrastructure project (a Congressman’s paved driveway, for instance) as collateral? And will the infrastructure project (CUC generator, PSS classroom) be paying dividends, profits, capital gains, interest income, rental income, or any other kind of return? (Of course not)
If anyone offered me $50,000 in matching funds, and I had to bury myself in debt to get it for questionable consumption, I would turn the offer down. “Borrow $50,000 and I’ll give you another $50,000-—but you have to spend it on global travel.”
Thanks, but no thanks. I would rather keep my money earning more money–and remain debt free in the process. Our local government should, too.
Our local government should live well within its means. It must never allow the federal government to lure us into questionable debt. The local government should operate like a thrifty, fiscally responsible individual.
“It took us about 60 days to prepare everything to secure the $30 million loan and it’s ready to be closed except for a statute that will authorize changes on present taxation system,” said a government official handling the CNMI loans for the federal matching funds.
Will taxes have to be raised to accommodate this multi-million dollar loan? If so, we will all be poorer CNMI citizens—-as a direct result of this “sweet deal.” Too bad we can’t include an infrastructure project or two on our personal balance sheets or investment portfolios.
