Sunday, December 9, 2012

What Would a Smart Family Do?

By Greg

Anyone who has been paying attention knows that our nation’s infrastructure is falling apart, without the funding to rebuild and upgrade. An editorial in the New York Times today explained: “Civil engineers in every state are monitoring ominous cracks in roads and bridges that carry freight and school buses. … Around the country, there are 70,000 structurally deficient bridges…” In conclusion: “The need for investment in public works, never more urgent, has become a casualty of Washington’s ideological wars.” This war has revealed itself most recently by house Republicans standing in the way of President Obama’s proposal to invest $50 billion for “transportation improvements.”

The counter argument, of course, is that in a recession, with a huge national debt, we simply can’t afford any new spending. Opponents of new infrastructure investment often compare our nation’s fiscal situation to that of an American family sitting around at home, making tough belt-tightening decisions in order to pay the bills (remember John McCain’s “kitchen table” speech?).

This comparison of our nation’s spending to the average American family has become ubiquitous in discussions about our nation’s financial future. Of course there are differences between a family and our government (most families I know can’t print money and set interest rates). But other parts of the argument are apt, so I want to focus on what this average American family would actually do (if it were smart) to get back on its feet.

Cutting costs is a necessary short-term strategy for unexpected situations that adversely affect our finances. But a family that simply accepts a “new normal” and, month after month, finds new ways to cut spending is not going to rebuild wealth in the long-term. If this family is smart, it doesn't just work on cutting expenses, but also focuses on strategies for increasing revenue, such as seeking an advanced degree or additional job training/professional development, finding a higher-paying job, changing jobs/careers, re-aligning investments, etc.

Often revenue-building strategies involve some degree of risk and up-front costs; you have to spend money to make money. And those costs have short-term repercussions, such as incurring additional debt, (yet more) belt tightening, getting a second job, refinancing, selling assets, withdrawing money from savings, etc. But in the long-term this approach may be necessary to regain financial stability and growth. Focusing on both reducing expenses and also increasing revenue is what families do, it's what businesses do... it's what our federal government should do too.

The federal government should be spending money now, when times are tough, to invest in our workforce and global competitiveness. Our lawmakers talk about not wanting to “kick the can down the road,” but why not? Once we have recovered and times are flush, then we can work to reduce our national debt. For now, the discussion should be about how we keep funding for essential programs stable, while “spending money to make money” by rebuilding our infrastructure and investing in the competitiveness of our businesses and workforce.

So much of our nation lacks high-speed internet, has crumbling roads, rails, and bridges, lacks the basic systems needed by industry to compete with companies overseas. If we want our businesses and workforce to be competitive, but are unwilling to invest in infrastructure now, then we are truly kicking the can down the road. Making critical investments in the future when times are tough is exactly what the smart American family, sitting around its kitchen table would do. So why won’t our lawmakers?

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