When I was still wet behind the ears, my father advised me never to buy groceries or gasoline on credit. If you must use credit, he said, then do so when buying things that last a long time, like appliances, cars, and houses. Although that conversation took place in the last century, long before most people were transacting constantly with debit cards, it contained some bedrock logic that can even be applied to President Trump's newly-released budget proposal.
Dad's idea was to match the duration of benefits with expenditures while gaining a bit more happiness along the way. At the extreme, no one with good sense would take out a 10-year loan to pay for an expensive night on the town, and, of course, no bank would make such a loan. But that was long before home equity line loans made it possible to do just that.
Mom and Dad were born in 1908. They married just before the Great Depression fractured the economic landscape. Dad always had a job during the Hoover years, but his paychecks didn't always pass muster at the bank. Maybe because of this, Mom and Dad were thrifty; they saved before spending. Even in their last years, when living on two Social Security checks and interest earnings on CDs, they were still poking away money into a savings account each month and selling home-grown tomatoes to a local grocery store to get some extra spending money.
Along with not buying gasoline and groceries on credit, Dad understood how borrowing to improve production could make a lot of sense. He was a newspaper production manager and had, more than a few times, replaced and rearranged machinery for the purpose of reducing costs and improving the printed page. He knew that to survive in that competitive world, successful newspaper operators had to earn enough from their investments to pay off the loans and have something left for the good of the cause.
The lesson was clear, at least to my father. It made sense to borrow and spend when the result was greater long-term happiness or improved productivity. But additional debt didn't make a lot of sense otherwise.
I thought about Dad's admonition when I read the headlines announcing Trump's 2018 budget proposal. There is plenty in it to arouse passionate partisan parrying. With an eye toward reducing the annual deficit to zero in 10 years, and by pulling back in areas that could be made up for by state action, the budget calls for dramatic future spending cuts in some categories that support consumption. These include food stamps, healthcare and public radio, for example. There are also some budget increases that include defense spending and infrastructure investment.
Most people will find some things they like and some things they don't. In all cases, we need to hear some cool heads question just what we forfeit with cuts and what we may gain from spending increases.
Sometimes, however, what looks like consumption can be investment, and what appears to be investment is really consumption. Programs that provide healthcare and school lunches for lower-income children may look like consumption, but they are also long-term investments in stronger, more productive people.
Or consider infrastructure spending, which sounds like investment. "Bridges to nowhere" have a way of creeping into the mix. Such construction may generate employment but nothing in the way of continuing benefits.
Let's also recognize those voices that say we cannot keep borrowing to support spending increases, unless the increases yield a stronger and better nation and bring more than enough productivity to pay down the debt.
As Dad might ask, are we borrowing for the right reasons? Only objective economic analysis, not talking points, can determine this.
In fact, let's hope this budget debate gives us more than just words. We need basic facts and some hard numbers about how today's decisions affect future prosperity that we can take to the bank.