(Reprinted from the February, 2007 edition of Dan Klein’s “South Jersey Insider Magazine” and updated.)
During the past six years, Chris Christie Republicans and Steve Sweeney Democrats put New Jersey even deeper in debt. New Jersey state government is not legally obligated to pay most of its long term debts (Approximately $240 Billion as of December, 2019). That is because NJ State Constitution only requires repayment of debts that are approved by voters in statewide referendums. During the past 40 years, both Republicans and Democrats borrowed roughly $200 billion without voter approval, knowing that the State Legislature can “repudiate” or legally refuse to pay those debts at any time.)
SOUTH JERSEY INSIDER MAGAZINE, February, 2007
Last month, Democrat Governor Jon Corzine said in his budget message that New Jersey?s government was $33 billion in debt.? That is $4,125 for every man, woman, and child in the state. That comes to more than $10,000 for each average household. It is the third highest state government debt in the nation.
But that is just the beginning. State government also owes free lifetime medical benefits to thousands of retired public school teachers. It promised to pay those costs, but never set aside any money to do it. That will cost $68 billion more. Our pension funds for retired public employees are also short billions of dollars of what is needed to pay what was promised. Dozens of state commissions and authorities, like the Economic Development Authority (EDA), borrowed and squandered billions of dollars, and have no way to pay that money back.
Governor Corzine, former CEO of the Wall Street powerhouse of Goldman Sachs now says we have a “moral” obligation to pay these debts. That is why he proposed “monetizing” state owned property like they did in Greece and Argentina. In 2007, Corzine specifically tried to “monetize” the Garden State Parkway, New Jersey Turnpike, and Atlantic City Expressway by selling them, and than having us pay extra tolls as “rent” to use them. When that money was gone, selling our State Lottery, parks and beaches would be next.
I did not think that was a “moral” thing to do at all. Fortunately, most New Jersey voters felt the same way, and Corzine withdrew his plan before running for a second term.
As New Jersey becomes more and more like a banana republic, the only moral thing to do is to strictly apply our NJ State Constitution, and apply the “Odious Debt” doctrine of International Law. That doctrine is as follows:
“When a despotic regime contracts a debt, not for the needs or in the interest of the state, but to strengthen itself, to suppress a people’s rebellion, etc., this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime”.
In 2004, the people of Iraq used this doctrine to wipe out the government debt of Saddam Hussein. In 2003, the people of Argentina used it to repudiate $141 billion previously borrowed by a series of corrupt and dictatorial governments in the 1990’s
The Odious Debt doctrine definitely applies to New Jersey. Twelve years ago, Republican Governor Christie Whitman and a Republican legislature borrowed billions and failed to fund the pension system. This did not benefit the people of New Jersey in any way. It simply helped Republicans reward friends and raise campaign cash, without raising taxes before elections. Democrats under Jim McGreevey did the same thing after 2001, but on a much bigger scale. Since this spending did nothing to benefit the people, we should not be stuck with the debt, after the “despotic regimes” who borrowed the money are gone.
The “Odious Debt” doctrine of International Law also recognizes that investors who despotic regimes by giving them loans and collecting high interest are as guilty as the politicians who use them to stay in power. There is no “moral obligation” to repay them.
This also applies to New Jersey. The Wall Street firms who earned big fees by packaging the billion dollar loan packages paid for with toll and gas tax hikes made big campaign contributions to the politicians who hired them. If the junk bonds they sold are repudiated, these Wall Street banks should be held responsible for misleading investors on the risks they were taking. Leaders of the big public employee unions should also be held accountable for misleading their members. They used their political muscle to demand and get big pension hikes, knowing the state could never pay them.
During the President Bill Clinton years of the 1990’s, when the governments of both New Jersey and Argentina going heavily into debt, New Jersey?s Governor Jon Corzine (2005-2010) made a fortune as CEO of Goldman Sachs. During this time, his Wall Street firm made big profits by issuing and reselling junk bonds for corrupt governments in Greece and Argentina. Their analysts issued upbeat reports on financial conditions in Argentina to encourage gullible investors around the world to buy their junk. During this time, Democrat President Clinton appointed Robert Rubin, Chairman of Goldman Sachs Investment Bank as U.S. Secretary of the Treasury.
Now, with its former CEO as governor of New Jersey, Goldman Sachs is ready to make big profits repackaging the massive debts of New Jersey?s government. I hope the people of New Jersey will wake up quicker than the people of Argentina.
(This article was first published in 2007. In 2008, Democratic Governor Corzine withdrew his proposal to “monetize” New Jersey’s toll roads. However, during the next eight years, Republican Governor Chris Christie together with Democratic Senate President Steve Sweeney continue the reckless borrowing and spending of previous Republican and Democratic Governors Tom Kean, Jim Florio, Christie Todd Whitman, and Jim McGreevey. Their debts were secured by future tolls and gas tax collected by the New Jersey Transportation Trust Fund Authority. Today’s 9 cent per gallon gas tax hike is being used to pay back those junk bonds–not to build or repair roads or bridges.)
Seth Grossman, Executive Director, LibertyandProsperity.com
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Seth Grossman, Executive Director