Now I want to go to municipal finance. That is- now incidentally, we have to distinguish in the United States between state governments and local governments like cities. Because state governments are sovereign, they are like separate countries. Remember, the United States began like the European Union. There were 13 colonies, they were separate countries, and they came together and formed a union, but they're still separate countries in the law. So the federal government is not gonna make laws about bankruptcy of state governments, but they do make laws about bankruptcies of municipal governments, cities. So the basic motivation- now, cities borrow money. Why do they do that? It's the most elementary thought that I want to get clear. I would say, you could say city government shouldn't borrow money, they can raise taxes and they should pay- they shouldn't go into debt. Why does a city go into debt? You might say, people do say that, why don't you just finance everything by taxes? But there's a really important reason why they don't finance purely by taxes, and that is, there's a problem of population inflow and outflow. Suppose you are a young city, newly established, and you have a reasonable prospect of expecting to grow, so there would be a huge population in the future. It would be reasonable, wouldn't it, for the government of this new town to set out roads and sewers and other basic infrastructure, do it all at once, do it right. Bring in a consulting firm- expensive consulting firm, lay out a grid of streets, and then put the whole sewer system in now. I mean, rather than do it piecemeal, you know, it's more efficient to do it. But how are you gonna pay for it now? Because the people who are there and- there aren't many people who've come yet. You'd have to put enormous taxes on them. That, obviously, is unrealistic. So the city government will borrow money to put into these infrastructure investments and then they have the right to tax future people who come in to pay off the debt. So, they're making a gamble that people will come in- it may be a very reasonable gamble- but they have to convince the lenders, the borrowers, the buyers of the municipal bonds that it's a reasonable prospect that you will get repaid. So, you have to agree, isn't it obvious? Our schools, right? You have to, you know that people are coming into your city, let's get a lead on it. Let's not have them come in and then there won't be any classrooms. Let's have an extra amount of classrooms now. You want to finance that by debt. But now, have you heard this, that in the United States, almost all state governments have prohibitions against deficit spending, against the state governments for borrowing money and spending it instead of raising taxes. Let me give you an example. I'll just pick our own state as an example. The state of Connecticut initiated an income tax. It now stands at I think it's 6.7 or is it 6.8, somewhere in that, I should know, I pay it. It's only a tenth of a percent I might be off. So, I'm talking about the top bracket. So, our governor, Lowell Weicker, was an independent. He campaigned, he put his personal reputation on the line saying Connecticut, which is then short of money, needs an income tax because the income tax is is a fair way to raise money. It taxes people with more income more, rather than sales taxes which tax everyone the same, so it's progressive. It's hard to sell that, though, because your influential people tend to have higher incomes. So how did Lowell Weicker do that? Well, he's very proud of it, that he did that. It was the right thing to do. They had to have a constitutional amendment to get it by. And he was not reelected, he's out. This is an example of a profile in courage where he did the right thing and it got him into personal trouble. But in order to get it passed, the Connecticut voters wanted something in exchange, so they put it in a balanced budget amendment for the state of Connecticut that it cannot do deficit spending. And so- but then if you look- no wait a minute, you say there's Connecticut government bonds. How can it be if we're not allowed to do deficit spending, why do we have debt? Then you have to understand the way it works. The prohibition against deficit spending is on the current account. The state and local governments have both a current account and a capital account. On the current account, it's their expenditure inflows and outflows for current things like salaries, taxes come in, salaries go out, that's the current account. But if we borrow money to build a school, that doesn't even go under our current account because that's capital. We're not waste- there's nothing irresponsible. Building a school, is that irresponsible? So, we are allowed to do that, so states can borrow if they can justify it as for making a capital expenditure. There's also state and local governments issue bonds that look a lot like GDP-linked debt, in a sense. It's not GDP, but they're linked. They're more like equity. They're called revenue bonds. So, if a city issues debt for a particular project like building a toll road or a toll bridge which has money coming into the state from something other than taxes, then they can issue bonds which promise to repay the debt out of the toll revenue in this case. So it's like a business that the government is engaging in. It could be a private business. We could have a private company building a bridge. This used to happen, I don't know. It's not very common anymore, but a private company could build a bridge and plan to make money by charging tolls on people who cross the bridge. But typically that's done by- that kind of thing is done by state and local government. And it does it with revenue bonds, so revenue bonds are like equity in a government project. So it's good to know about revenue bonds if you are a public-spirited person and you want to see something happening that looks like it's a business prospect but it isn't happening for maybe some subtle reasons in the private sector. You give up your idea of starting a new company. You might think, I want to form a bridge company. We need another bridge over the Quinnipiac River here. You could start a company and build a bridge, but you might have problems, maybe legal problems in enforcing toll, I'm not sure. But anyway, you decide it's not gonna work for me. But it's still a good idea, so what do you do? You go to the mayor or the governor of the state and you say, "I have an idea that can be financed by revenue bonds." Now governors like this better when you come and say, "It's an idea for something you can do and you don't have to raise taxes. You can issue revenue bonds." It sounds more saleable. So remember, revenue bonds, that's an alternative to your budding dreams of becoming an entrepreneur. You can participate in local government in an entrepreneurial-like activity. There's nothing new here about this. There's a special bankruptcy law I mention in chapter 7 and chapter 11. Chapter 9 is a special bankruptcy law for municipals in the United States Code. Also, the slide, the title might be inappropriate. There's a lot of talk about balanced budget amendments, and it continues today not just in the U.S. but in other countries. But I think it's maybe- I support a balanced budget amendment because I think we need deficit spending as an economic stimulus. But it's not as bad as it might seem if you reflect that these schuldenbremse, for example, I think doesn't prohibit local governments from doing deficit spending for capital account.