By far, the most negative feedback I’ve received on last week’s LA Times Op-Ed concerns the notion that LA could borrow money from the European Investment Bank. The emails aren’t plentiful, but the ones I’ve gotten are plenty angry. The upshod:
America is the greatest country in the world, and thus, it’s wrong to seek money from foreign banks.
Well, ok. I’m not quite sure what to do with that argument. So I’ll try to break up different ways of thinking about it. Assumed is the idea that greatness is complete financial autonomy–that is, Americans finance their own government. This itself isn’t a terrible position to take, and given the loss of sovereignty experienced in Greece, Spain, and Italy, makes intuitive sense.
But Measure R is a bit different than sovereign debt. Well,it’s a lot different. Banks can know approximately how much to expect over the next decades from Measure R, even if there are some ups and downs, and they can limit what loans they are willing to make based on that information. It’s not as though LA’s mayor would head off to the world just looking for a loan based on general obligation bonds on taxes he has no authority or political hope of raising. Assuming that all debt is terrible and going to lead to a Greek-style meltdown is tantamount to assuming no bank should ever issue a mortgage again, even to people with steady jobs and sound credit, because a subset of homeowners got caught in the recent bubble. It’s tempting intuitively, but the analogy is off due to extraordinary conditions.
As to whether a city’s actions really reflect much on American strength, I can’t tell. All the mechanism I suggested–the California Infrastructure and Economic Development Bank, the European Investment Bank, and private funds, like Meridiam–all are simply different doorways into the global bond market, anyway. So I’m not sure functionally that what door you walk through makes much difference.
Argue with me, somebody. Help me see the basis for the reaction.