While all of New Jersey is trying to figure out how Corzine's toll road scheme will effect their daily lives and pocket books, I got to thinking about where all this money is going to come from.
75 years is a very long time for a loan, which is what a bond is. Prudent lenders won't lend for residential real estate for more than 30 years, 25 years for commercial real estate. Inflation has made these long term loans a good deal for the borrowers because the dollars used to pay back the loans are worth less than the dollars borrowed. Corzine seems to have found a way around that with his inflation adjustments for the toll road scheme. He probably has a new kind of security in mind whereby the "principle" amount of the loan will increase with inflation. Corzine has a history of inventing hybrid debt instruments, with terrible consequences (Enron).
While this wrinkle might make a 75 year loan more attractive in theory to a stupid lender, the increases in tolls will be astronomical, very likely leading to a massive decrease in the roads usage. 75 years is a long enough horizon for people and institutions to make wholesale changes in the way they live and operate.
How has the world changed in the last 75 years? Its mind boggling.
Seventy five years ago Franklin Roosevelt was inaugurated for his first term as President of the United States. We were in the midst of The Great Depression, $20.67 bought a troy once of gold. There was no social security or Tennessee Valley Authority.
Hitler became chancellor of Germany in 1933.
A. Harry Moore was the Governor of New Jersey. There was no Garden State Parkway, NJ Turnpike or Atlantic City Expressway.
The word "Pakistan" came to be in 1933. The nation was officially founded in 1947.
King Kong was a box office hit, and Mount Rushmore was dedicated.
Newsweek was published for the first time.
Prohibition was repealed and cannabis was made illegal. I wonder if A. Harry Moore inhaled?
On March 15 1933, Wall Street was so impressed with President Roosevelt's first Fireside Chat, that the Dow Jones Industrial Average had what is still its biggest ever single day gain, 15.34%. The Dow closed at 62.10, up 8.26.
The New York Giants beat the Washington Senators in the World Series, 4 games to 1 and Mrs. Unitas gave birth to Johnny.
Ruth Bader Ginsberg, Jayne Mansfield, Joan Rivers, and Flip Wilson were born in 1933. So were George Mitchell and Regis Philbin.
1933 was the Chinese Year of the Cock.
The average price of an new car was $629.00 and Detroit sold over 2 million cars.
So how will the world change in the next 75 years? Who knows? Maybe cars will become obsolete. Sure, that is as unthinkable now as cell phones and knee replacements were in 1933.
Corzine's plan is nuts. He wants to solve problems that have accumulated over the last twenty years by spreading them out over 75 years while still having the resources to expand government with universal health care, more mass transit and universal pre-school, etc.
The arrogant and deceitful Governor is telling the people there is no other alternative and challenges us to come up with another plan. This after he spent two years and $800,000 of our money to come up with his plan, and he won't let us read the $800,000 report.
Here's a plan Governor: Cut spending. Renegotiate labor contracts like the private sector does. Get rid of "prevailing wage." Not fair you say? That would be a great deal fairer to all concerned than your nutty plan.
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2 comments:
Your last paragraph is puzzling. To cover previous mandates (a mistake made decades ago while those "in the know" complained and no one listened), there will be no NEW expensive programs coming on board (universal health etc.), only OLD expensive programs. And indeed, a sytematic approach to health care at a national level would be a huge help the state with its fastest growing budget item: employee and retiree health.
The main part of your thesis - will investors be able to properly value a 75 year plan - is an excellent point.
Your last paragraph is puzzling.
I mean cut spending.
To cover previous mandates (a mistake made decades ago while those "in the know" complained and no one listened)
Cut those too. Labor give backs, just like in the airline industry and auto industry
there will be no NEW expensive programs coming on board (universal health etc.)
Corzine has been talking up his scheme as a way to build a mass transit system in South Jersey. I bet the toll road investors will love that one. Universal heatlh care in NJ is in the works. Corzine wants Horizon/Bluecross to become a private for profit company and collect $3 billion in back taxes. He wants the uninsured to be able to buy into Horizon at the same cost the state pays, which Horizon has said will be a money loser,but they would do it. That would increase everyone else's premiums.
only OLD expensive programs.
Cut Cut Cut
The main part of your thesis - will investors be able to properly value a 75 year plan - is an excellent point.
Thank you,
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