Argument Against Proposition 32

In this measure, state legislators are proposing that the State of California sell a half billion dollars in bonds to be used by the Cal-Vet Home Loan Program.

While it is true that the lucky home buyers repay the bonds—principal and interest—the program costs everyone else hundreds of millions of dollars in a way proponents never talk about.

You see, government bonds are purchased by investors even though they yield a low rate of interest only because the interest earned is tax-free under both federal and state law.

When investors buy tax-free bonds instead of making tax-producing investments in the private sector, the federal and state governments lose money that would have been collected on taxable investment returns.

The amount lost approximates the difference between the rate of interest on government bonds and the rate of interest on secure, taxable investments.

So, the Cal-Vet Home Loan Program is actually quite expensive. If it were "free" as proponents have claimed in the past, everyone could receive low interest loans from the government! We could have a "Cal-Resident Home Loan Program" for everyone. But, it does not work that way.

Now that you know how the Cal-Vet Home Loan Program costs YOU hundreds of millions of dollars, the question is whether the program is justified.

Here are the biggest problems we see:

(1) The program is not limited to veterans who served in combat.

Any California veteran may apply.

(2) Bureaucrats then decide which veterans get the homes and which do not.

Relatively few veterans end up benefiting from the program.

MELVIN L. EMERICH, Co-chair
Voter Information Alliance
GARY B. WESLEY, Co-chair
Voter Information Alliance