Columns » John Brummett

Our pay-later culture

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This was about as substantive as it gets on “Arkansas Week,” the weekly news review program on state public television. You had Warwick Sabin, transplanted New Yorker and hot-shot writer for the weekly Arkansas Times who was student body president at the University of Arkansas at Fayetteville and a Marshall Scholar in Europe before doing press work for Marion Berry and raising money for the Clinton Library. Then you had Jeff Hankins, old boy out of ASU in Jonesboro who is publisher of the weekly Arkansas Business and provides occasional reports on radio and television, and who seems to have developed actual business insight. The subject was Gov. Mike Huckabee’s announcement that he will call a special election Dec. 13 to ask voters to approve new bonded debt for highways and higher education. We already have bonded debt for both. This idea is to generate more debt to pay off what’s left and spend anew. It’s just like refinancing your mortgage at the updated value of your home, paying off your old loan and putting the new loan’s overage back into the house. If this cycle could continue, you could stay a step ahead of financial reality. It’s not tax-and-spend. Here’s what it is: borrow, spend, borrow again, payoff, spend again, borrow again, payoff, spend again. The only problem occurs if interest rates get way up there. These highway bonds are to be paid back in annual increments from federal highway money yet to come. The college bonds are to be paid by taking $25 million off the top of general revenue each year. That brings us back to Warwick and Jeff. Warwick said we needed to be honest. It’s nice, he said on the Friday night show, that we’re going to do good things without raising taxes. But he warned that we’re moving toward becoming a debtor state and we’re already a debtor nation and a debt-crazed culture. We need to admit that Huckabee’s proposals provide big money now that the next generation actually will have to pay for, he said. Jeff said to wait a minute. He said debt can be problematic, yes. But he said good debt is vital to progressive financing; otherwise, few of us could afford homes and few businesses could expand to meet new markets and provide new jobs. Credit card debt is bad debt, but a home equity line of credit is good debt, he said. Rebuilding our pitiful interstate highways and enhancing our higher education infrastructure — that’s good debt, he said. Warwick said everyone is for better roads and better colleges. But he said we needed to be straight how we were paying for them. Someday, he said, we’ll have pumped dry the well that is this pay-later game. We’ll have to raise real-time money for real-time needs. It’s just like the car ad on TV. You can get one for nothing down and no payment for six months. After that the auto credit division will start making up for lost time. Warwick and Jeff are right. We should take Jeff’s advice and vote for this good debt. More of our interstate highways need work and our colleges must make capital improvements, especially in technology. But we should heed Warwick’s words and behave with as much fiscal responsibility otherwise as we can muster. If we indeed vote to give colleges $150 million in new bond proceeds for capital improvements, we should in turn demand that our legislators stop spending tens of millions more every other year out of the so-called surplus for yet more college capital improvements. We should preserve that money for public schools, Medicaid, pre-audited local projects protecting health and safety and even a rainy-day fund in case some catastrophe, natural or debt-induced, befalls us. And it’s beyond me why anyone would want to rebate actual money on hand while borrowing against the future. That’s like getting a loan and quitting your job.

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