Letter to the editor

About 50 years ago a new scheme was launched in the U.S. to ensure that bankers and mega-investors had an annual, tax-exempt, legal way to get taxpayer money transferred to them–debt service. Fifty years ago California paid most bills out of general revenue cash. Then they started selling bonds to investment banks and stock brokerages. Each year interest was due on these tax-exempt bonds. And every year new bonds were sold and the interest due (debt service) grew and grew.

The banks got worried as the percentage of the state budget due for debt service kept growing. So they had their friends in the California state legislature amend the state constitution to require it to pay debt service before paying for anything else.

What a great windfall for the banks. They soon came up with additional ways to steal. The state set up “authorities” of all kinds—out of the control of the public, which also sold bonds—with the California budget being responsible for the debt service. It’s almost a state secret to find the exact amount of the debt and debt service paid annually. But here are some examples:

In the current budget debt service direct payment is about $7 billion. If you add in the Department of Water Resources ($1.3 billion), the California university systems (total unknown, estimated at $2.7 billion), and an agency that sells bonds just to cover the shortfall in the budget ($1.4 billion), that comes to $12.4 billion without all the other authorities included. The banks buy California bonds with federal taxpayer money Troubled Asset Relief Program, and then we have to pay them again with interest, and they pay no taxes on the profit.

The state could declare an emergency and defer or default on the debt service and stop borrowing. All the bourgeois economists (who work for the rich) will cry, “What a horror! California’s credit rating will be in the toilet.” Well, it already is, forcing the state to pay higher interest rates. Tax the rich, the corporations, agribusiness and especially the banks and increase benefits to the workers who produced all that wealth in the first place.