States, counties, and cities went out and issued bonds, backed by anticipated revenue from tobacco companies under terms of a 1998 settlement. Just one little problem with that: due in large part to their continuing efforts to demonize smokers, tobacco sales have declined sharply - which means that the governments aren't getting anywhere near the money they'd projected would be flowing in when they sold the bonds. Although the tobacco settlement funds were ostensibly to offset health-care costs and to fund smoking-cessation programs, governments naturally saw a pot of cash and couldn't keep their hands out of it, so they issued bonds backed by the anticipated revenue to fund all sorts of pet projects. Now, some of the bonds are already headed toward default, and the situation's likely to get worse. What a surprise! Who could have seen that coming?
The prospect of eventual defaults among the hundreds of outstanding bonds underscores the risks inherent in forecasting tobacco payments decades down the road. In the rush to market, many overlooked a basic conflict: the states were banking on a certain level of payouts, even as they adopted antismoking measures that would reduce those amounts. As a result, the historically safe municipal bond market has been peppered with something unusual, a type of muni that actually defaults.
It's what government does. Look at their efforts to fight "man-made global warming": they implement CAFE standards mandating increased gas mileage at the very time when the main work-force, the "boomer" generation, is starting to retire - and therefore, driving less. I used to fill the tank twice a month; now, it's around every month and a half. Result: less revenue from gas taxes. Add to that their decisions to use gas-tax revenue to fund bike paths, trails, public transit, and public "art", and they're amazed to find that there's less money available for road maintenance. As a result, they start looking at mileage taxes (which also isn't going to work, because so many are driving so much less) and other forms of revenue "enhancement" when in fact, the problems are directly traceable to the policies adopted by these same politicians.
The cigar explodes in their faces; they want to outlaw cigars.


















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