Andy Caldwell/Commentary

Have you noticed the number of commercials these days advertising debt relief? The promise in these ads is that consumers hopelessly in debt can get all their debt consolidated and cut in half by using the professional services of the advertisers.

When I see these commercials, I realize two things. First, some people should not be allowed to have credit cards. Second, the losses to the creditors by writing off a major portion of money owed to them is eventually going to be recaptured from my pocket.

How so? Credit agencies raise interest rates to cover the cost of these deadbeats and merchants raise prices for the same reason.

I think America took a turn for the worse when it allowed people to borrow indiscriminately regardless of their ability to pay or the necessity of the purchase.

When I was young, there was no such thing as credit for most purchases. If you wanted something bad enough, you either had to save up the money, increase your earning power or give up something else as you reordered your spending priorities. The closest thing to credit was layaway for those items that otherwise wouldn/t be around by the time you saved up enough money to make the purchase.

As things evolved, Americans at one time had to qualify for credit. All such fiduciary caution has since been thrown to the wind. These days, there is no sacrifice or discipline needed to be a consumer, There is simply never-ending offers of lines of credit from institutions who have no regard for your ability to pay off the debt.

For the first time in history, the average consumer now owes more than they make in a year. Besides credit card debt, many have borrowed big bucks against the equity in their homes. We all end up paying more for the things we need as a result of the lack of self-control most consumers have with respect to their use of credit.

The same holds true of taxpayers with respect to the out-of-control spending habits of state government.

The state of California spends in the neighborhood of ,125 billion a year. Most of this money is generated from personal and corporate income tax, property tax and sales taxes. Unfortunately, the state has become increasingly dependent upon it/s own form of a credit card 7 state bonds. This year voters are going to be asked to give the Legislature permission to borrow even more money yet again. They are also being asked to raise taxes again.

Currently, according to the Legislative Analyst, the state has about ,45 billion of infrastructure related General Fund bond debt outstanding, on which it is making principle and interest payments. In addition, the state has not yet sold about ,30 billion of authorized general- obligation and lease-revenue infrastructure bonds.

The state also has another ,15 billion in bonds that were approved by voters in 2004 to pay off accumulated budget deficit and other obligations. The cost of these bonds to taxpayers depends on a variety of factors, but it is safe to say the cost of paying them off is close to ,2 for every dollar borrowed. Borrowing this ,90 billion means that taxpayers are in debt ,180 billion!

This November, voters are going to be asked to approve five additional general obligation bond measures on the ballot, totaling ,42 billion in new authorizations. The debt service over the life of the bonds will be twice this amount, or ,84 billion. If they all get approved, Californians will have accumulated a total state government debt of ,264 billion!

What this means can be understood in terms of what is called a debt-service ratio. This ratio indicates the portion of the states annual revenues that must be set aside for debt-service payments and is therefore not available for other state programs. If all the bond measures pass this November, 6 percent of the states revenues would need to be spent on our total accumulated debt.

The end result of the Legislature/s penchant for deficit spending is no different than that of our neighbors who can/t handle their credit cards 7 the rest of us, who try to be responsible in our spending habits, end up paying extra through no fault of our own.

Unfortunately, a good number of Californians are only too happy to see taxes raised or to allow even more borrowing, because they personally are hoping to get something out of the deal.

Someone once observed this about democracies: A democracy is always temporary in nature. It simply cannot exist as a permanent form of government. A democracy will continue to exist until the time voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates 7 and in this case, ballot measures, and tax hikes on others! 7 who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy.

Andy Caldwell is executive director of COLAB and a 38-year resident of the Central Coast. His column appears every Thursday. You may reach him at 929-3148, or by e-mail at

colab@utech.net

Sept. 28, 2006