Living Outside of our Means
Common sense says it is smart to live within your means. This lifestyle might occasionally create the need for sacrifices in purchasing goods by having to budget your short-term consumption habits by choosing when to spend, invest, or save, but the long-term economic results are worth it. We all know and apply this to ourselves, so how exactly does our state government hold up?
For starters, Arkansas is ranked 48th for lowest debt per capita in the country. That’s good news, right? Sure, but we also have the 11th highest spending per capita. On the surface it seems like this low debt rate could perhaps justify the large amount of capital being spent; for instance, because of the low debt, Arkansas receives an AA+ bond rating from the federal government to borrow money (meaning the state gets lower costs associated with bond purchases).
Arkansas also has the 22nd best cost rating system for borrowing, which provides an incentive for the administration to spend more money because it costs less to borrow it.
In other words, here is the circle of life for borrowing and spending:
1. Arkansas receives more bond (loan) money to spend because we have low debt and a good rating.
2. Arkansas spends this money to pay off existing debt.
3. Arkansas receives even better “credit history” (and, thus, cheaper loans) as debt is paid off.
4. Arkansas accrues more debt by taking out more loans after paying off past loans. Rinse, lather, repeat.
If this system sounds good, a career in government might be perfect for you… But, the fact is that this circle doesn’t actually create opportunities or eliminate debt; it effectively just prints money for the purpose of going directly into the circle – or it “recycles” money originally taken from you to begin with! Debt is never eliminated because we never “pull the roots out of the ground;” the wasteful spending that incentivizes the state to take out loans is never curbed.
Furthermore, the spending does not create more the potential for prosperity for Arkansans; it merely recirculates wealth back into the hands of federal government, instead of encouraging real economic growth which occurs when money stays in your own hands.
So, while it’s certainly a good thing that we have nearly the least amount of debt per capita, we must also consider spending. Instead of using the borrowed money to invest (or, you know, just not borrowing it in the first place), we are spending that money – and not just a little here and there; we are spending much more per person than 78% of the country.
If we want to foster true economic prosperity for Arkansas, we must reduce the debt and reduce the spending.