Although lawmakers and the public are rightly concerned about the shaky economy, saying state borrowing can’t be part of a package aimed at boosting the economy is shortsighted. Just as companies routinely borrow money to upgrade equipment and build new facilities, the state must borrow in order to invest in its infrastructure, research and development and energy efficiency to maintain and create jobs.
Further, borrowing and spending money — especially on infrastructure — makes more sense during a recession than during boom times. Interest rates and material costs are low, and the spending creates jobs here in Maine. And the physical improvements made by the bond funding serve as the nuts and bolts of a growing economy.
Democratic leaders earlier this week unveiled their $99 million bond package, which has emphases on transportation and energy. Gov. John Baldacci is expected soon to present his borrowing plan, which will have the same focus but a smaller price tag.
The amount of the package is less important than what projects are targeted for funding and whether they complement the $69 million in bonds that are already on the June ballot. Projects that bring in federal matching dollars, such as water system upgrades, and that spur private investment, as do research and development, should be a top priority. Investments in these areas and transportation also boost employment.
The mantra from Republican leaders in Augusta is “you can’t borrow your way to prosperity.”
This defies economic logic. Corporations don’t squirrel away money to buy new equipment or build new facilities. They borrow.
As do families. The largest measure of family prosperity is home ownership. Without a mortgage, only a tiny fraction of Americans would be able to buy a home. The majority also would not be able to buy a car, a staple of American life.
Borrowing also has made higher education accessible to many students, who go on to more lucrative careers because of it.
In each instance, families and corporations have decided that some debt is necessary to allow them to grow and prosper. Of course, there are limits to how much should be borrowed, and using a home equity loan to pay for a vacation doesn’t make a lot of sense.
The same is true of the state. It can hunker down and hope the recession ends or it can borrow to make strategic investments to create jobs, speed the recovery and position the state to prosper.
Coupled with spending reductions, borrowing to invest is an important piece of the state’s economic plan.