Oregon Senate President Peter Courtney has put forth an idea that will put the taxpayers on the hook for one billion dollars of bonded debt in an effort to stop Oregon's recession and stimulate the economy. This is a bad idea for a number of reasons and will ultimately fail because it doesn’t deal with the root cause of the state's ability to deal with less revenue during a recession. Namely, too much spending and not enough in savings.

First of all, bonding debt for everyday operating expenses (something I voted for once) or to stimulate the economy because the state has less money to spend is like paying for your groceries with a credit card that takes you 20 years to pay off. It is not sound financial principle to engage in such activity in your personal life so why should the state do the same thing?

Secondly, the actual cost to the taxpayers is really 2 billion because the interest charges over 20 years equals the same amount as the original bond. The argument that the stimulus will create enough tax revenue to pay for the 2 billion falls on its face because other factors will determine whether Oregon's economy recovers or not. The banking crisis, federal and state climate change legislation, the inability of the legislature to restrict spending and put adequate money into a savings account and historically cyclical recessions will all influence the state's economy. One billion dollars for economic stimulus can’t overcome these factors, so the revenue will just not materialize.

Thirdly, Oregon is already heading into a recession with fewer revenues to spend, so why would anyone want to increase the amount the taxpayers must pay for another billion in bonded debt in the face of declining revenues? It just doesn’t make sense.

This idea will ultimately lead to higher taxes and less productivity in Oregon because it does nothing to deal with two systemic problems in thinking of Oregon legislators.  

1. Slowing in the increase in spending and putting enough into reserves to survive a recession.

2. Changing tax /regulatory policy to encourage private investment in Oregon, rather than adding new taxes that will drive businesses out of Oregon to more business friendly states.

Unless these issues are dealt with, bonding billions in debt will have little positive impact and keep Oregon's economy growing and it will only cost Oregon taxpayers more in the long run.