Let me start by saying I think I really should have said 50 years instead of 100. That seems to a big sticking point for people.
I haven’t made myself clear. What I’m saying is create a contract to enforce the institution of a law. The government is the signatory, not any particular person. Governments can and do hold by agreements that past governments made, even if they disagree with their predecessors.
Now, sometimes they break those promises, and that’s why I’m talking about creating a binding contract. As in, if you break the contract, a penalty occurs.
For example, let’s say the government issues $1T of a particular financial asset. Those assets are basically inflation-adjusted perpetuities, except upon the institution of the delayed law, they cease to pay out. (Unless the law is instituted before the 50-year period, in which case they only cease to pay out after 50 years so that the perpetuity buyers aren’t swindled.) If the law is not instituted, then they continue to be perpetuities.
Upon selling those “enforcement perpetuities”, the government splits the ownership of land and buildings. So if you own a house, now you own the house itself, as well as a financial asset for the land underneath it. The land asset pays off a cashflow equal to the land value (if you’re taxed $1000 on Jan 1st, the government pays you $1000 on Jan 1st). Now, the money raised from the enforcement perpetuities can be used to buy those land assets from all current landowners.
Maybe you’d call this an incentive mechanism, rather than a contract. Whatever, I’m not a legal expert. Whether that’s the best solution or not, I don’t know. Even if there’s something wrong with the contract I just laid out, I would be shocked if there were not a way to do this. I’m sure there are plenty of creative solutions.
Obviously, that particular solution doesn’t apply to all delayed laws. Different laws will require different solutions. For the voting system problem, make a constitutional amendment requiring a unanimous vote to overturn it.
So what happens when in 50 years the government just stops paying, without passing the law? Buyers of these instruments don’t care about that law, so they will not object much, and there will be no reputation loss.
I work at an investment fund. If we held these assets, I assure you we would be trying to get paid if the government reneged. It would be a default, and government defaults are a very big deal with serious consequences for the country. So your suggestion is not really an option. Either the future government can enact the policy and get their debt wiped for free, or they can continue to pay the debt.
It’s a very strong enforcement mechanism, since the benefit to enacting the policy is so high.
Let me start by saying I think I really should have said 50 years instead of 100. That seems to a big sticking point for people.
I haven’t made myself clear. What I’m saying is create a contract to enforce the institution of a law. The government is the signatory, not any particular person. Governments can and do hold by agreements that past governments made, even if they disagree with their predecessors.
Now, sometimes they break those promises, and that’s why I’m talking about creating a binding contract. As in, if you break the contract, a penalty occurs.
For example, let’s say the government issues $1T of a particular financial asset. Those assets are basically inflation-adjusted perpetuities, except upon the institution of the delayed law, they cease to pay out. (Unless the law is instituted before the 50-year period, in which case they only cease to pay out after 50 years so that the perpetuity buyers aren’t swindled.) If the law is not instituted, then they continue to be perpetuities.
Upon selling those “enforcement perpetuities”, the government splits the ownership of land and buildings. So if you own a house, now you own the house itself, as well as a financial asset for the land underneath it. The land asset pays off a cashflow equal to the land value (if you’re taxed $1000 on Jan 1st, the government pays you $1000 on Jan 1st). Now, the money raised from the enforcement perpetuities can be used to buy those land assets from all current landowners.
Maybe you’d call this an incentive mechanism, rather than a contract. Whatever, I’m not a legal expert. Whether that’s the best solution or not, I don’t know. Even if there’s something wrong with the contract I just laid out, I would be shocked if there were not a way to do this. I’m sure there are plenty of creative solutions.
Obviously, that particular solution doesn’t apply to all delayed laws. Different laws will require different solutions. For the voting system problem, make a constitutional amendment requiring a unanimous vote to overturn it.
So what happens when in 50 years the government just stops paying, without passing the law? Buyers of these instruments don’t care about that law, so they will not object much, and there will be no reputation loss.
I work at an investment fund. If we held these assets, I assure you we would be trying to get paid if the government reneged. It would be a default, and government defaults are a very big deal with serious consequences for the country. So your suggestion is not really an option. Either the future government can enact the policy and get their debt wiped for free, or they can continue to pay the debt.
It’s a very strong enforcement mechanism, since the benefit to enacting the policy is so high.
Defaults only matter due to reputation. But stopping a weird practice which no one else does doesn’t really damage reputation.
What’s stopping Congress in the 49th year from passing an exemption into law that lets the government then ignore it with minimal consequences?