COMMON CURRENCY: Government spending can build a prosperous society
As the mid-term elections loom closer and closer this fall you are going to hear a lot of wailing and consternation among the chattering classes about the size and magnitude of government spending, the danger it poses to our continued prosperity, and a bleak future of an unsustainable burden of public debt that is being laid upon the backs of our children.
There is a very real risk that this could happen, and I write extensively about it in my new book "Generation Busted: How America Went Broke in the Age of Prosperity."
However, even though there is legitimate cause for concern, the hysteria surrounding the current level of government spending is more heat than light, and an unrelenting cry to drastically cut the levels of government spending to save the future is ultimately not a persuasive argument.
Why? Because borrowed money built the modern world.
The truth is it takes debt and borrowed money to build a prosperous society. In 1932, during the worst days of the Great Depression, a $35 million dollar bond issue backed only by the tax payers' promise to pay, made construction of the Golden Gate Bridge in San Francisco possible. Construction of the bridge began in 1933 when the unemployment rate was 25 percent.
The 83,000 tons of steel needed for the bridge was manufactured in New Jersey, Pennsylvania, and Maryland and shipped through the Panama Canal to the construction site. Just one of the bridge piers built to support the weight of the suspension towers consumed more concrete than the Empire State Building.
Result? The bridge project created thousands of jobs and made the entire area more productive and more prosperous as the regional transportation system became more efficient and the cost of moving people and goods fell.
What about the taxpayers? The bridge was completed in 1937 and came in $1.7 million dollars under budget. Every penny of the taxpayer guaranteed bond issue was paid off by 1971 from revenue generated by tolls to cross the bridge.
Every convenience of the modern world - clean running water, electric lighting, schools, hospitals, highways, bridges, airports, seaports, modern telecommunications and even our national defense - has been purchased with borrowed money.
And the more we spent the more prosperous we became.
So, ultimately, the argument should not be about the amount of government spending, but whether or not we are spending efficiently to improve the productive capacity of the economy. And where debt and borrowed money are concerned, productivity is the gift that keeps on giving. So let's at least ask the right question.
Here is the problem: Public debt and government spending that just maintains our standard of living does not create a prosperous society. And it is unsustainable in the long run.
But government spending that improves the efficiency of the economy does, in fact, contribute to a higher standard of living by increasing the productive capacity of the economy.
The bottom line is, debt is a tool, and like any tool, it can be used masterfully, or it can be used clumsily. As a nation, our capacity to borrow money and sustain economic growth has propelled American prosperity for more than two hundred years. Let's hope we learn the lessons of history and continue to use our nation's debt capacity wisely.
Alan J. Zemek is author of "Generation Busted: How America Went Broke in the Age of Prosperity". You can follow his blog, or comment on this article on his website: www.generationbusted. com.