No legal or moral obligation to repay “Odious Debt”

(Reprinted from the February, 2007 edition of the “South Jersey Insider Magazine”.?? During the past five 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, because NJ State Constitution only requires repayment of long term 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 such debts?it 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?s ?$4,125 for every man, woman, and child in the state?more than $10,000 for the average household.? It?s 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 teachers.???? That will cost $68 billion more, and no money is put aside for it.?? Our pension funds for retired public employees are also short billions of dollars of what is needed.? And dozens of ?state commissions and authorities, like the Economic Development Authority, borrowed and squandered billions of dollars, and have no way to pay that money back.

Governor Corzine, formerly CEO of? the Wall Street powerhouse of Goldman Sachs says we now ?have a ?moral obligation? to repay these debts.?? Because of this, they propose that we ?monetize? our state assets.?? That means we raise cash today by selling the Garden State Parkway, the New Jersey Turnpike, and our state lottery.??? When that money is gone tomorrow, we sell our parks and our beaches.

But that doesn?t sound very moral to me?especially to our kids.??? As New Jersey becomes more and more like a banana republic, the only moral thing to do is apply the following ?Odious Debt? doctrine of International Law:

?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.? It simply helped Republicans reward friends and raise campaign cash, without raising taxes before the election.??? The 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, but simply helped corrupt politicians stay in office, the people should not be stuck with the debt, now that the crooked despots are gone.

Another element of the ?Odious Debt Doctrine? of International Law ?is that the people who prop up ?despotic regimes? by giving them loans 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 put the billion dollar government loan packages together were hired for their political connections and big campaign contributions, and they were paid very well.?? If the debts they put together are repudiated, they deserve the consequences.? Ditto for the big public employee unions.?? They used their political muscle to demand and get big pension hikes, knowing the state had no money to 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 was making a fortune as CEO of? Goldman Sachs.?? During this time, his Wall Street firm made big profits by issuing and reselling junk bonds for the ?corrupt governments of 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.

Seth Grossman, Executive Director, LibertyandProsperity.org.

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