Mark Sanford would have loved my parents. They taught me to avoid debt at all costs. I bought my first car with cash. I did take out a college loan, but I paid it all off before interest charges started accruing. I didn't get my first credit card until I had been out of college two years, and I always paid off the entire bill.
We put down 20 percent on our house, and at the height of the refinancing craze a decade ago, we refinanced not to pull money out but to shorten the term of the mortgage.
It was around that time that I sat down for the first time with a stock broker. I was taken aback initially by his answer to my question about paying off the rest of the mortgage: Don't do it, because your rate of return in the market is higher than the interest rate on the mortgage. Granted, he has a bias toward stock purchases, but he was making an important point about debt.
Which brings me to Gov. Sanford's campaign to use federal stimulus funds to pay down state debt. The latest iteration of his proposal – to repay money the state has borrowed from Washington to pay unemployment benefits – fails my stock broker's test, since the feds aren't even charging us interest yet. (They don't want states to start paying back money as long as they need it to meet this obligation.)
But that plan arose as the governor and his allies grasped for new ideas after questions were raised about his claims that our state has the nation's fourth-highest rate of debt payments as a share of tax revenue, spends nearly 11 percent of our annual tax revenue on debt payments and "has another $20 billion in unfunded, long-term political promises for pensions and other liabilities."
Lawmakers have looked askance at these claims for some time, and over the weekend, journalists from the Upstate and the Lowcountry took a look at them. Their conclusions were similar to the one I often reach when I dig into the governor’s statistics: Be careful about taking them at face value.
The first two claims come from the American Legislative Exchange Council, which incidentally on the same page rated South Carolina as having the nation’s 18th best economic performance and 20th best economic outlook for 2009. The numbers make for interesting apples, but they have little to do with the oranges that go into how well state taxpayers can afford the debt, which is what we owe on the outstanding bonds the state issues in order to get around a constitutional prohibition on borrowing.
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