Wednesday, December 9, 2009

Bond Drive

Sen. Ben Nelson (D-NE) is proposing that we pay for the war in Afghanistan by selling war bonds.

The bonds, Nelson said, would be purposed with helping to pay for the military efforts, in particular the surge of 30,000 troops in Afghanistan, without having to resort to the “war surtax” that has been discussed by some liberals in the House and Senate.

As others have noted, Mr. Nelson’s understanding of the concept of bonds is lacking. Selling bonds means you are borrowing money from the buyers who, at some point, expect to be paid back with interest. So it’s not like the money generated by the bond sales is free, and at some point they end up costing more, and that means even more debt. It may be politically unpalatable, but the smart way to pay for the war is to raise taxes.