Good debt vs. bad debt
Published 12:00 am Wednesday, June 8, 2005
There are two types of debt: Good debt and bad debt. If, for example, you take out a mortgage to buy a house, you’re piling up debt, but it’s good debt. You have a place to live while you pay back what you’ve borrowed, and your house likely will be worth more when you sell it.
On the other hand, if you eat every night at a five-star restaurant and put the meals on your credit card, that’s bad debt. You have nothing to show but a pile of bills.
Today, the United States is racking up far too much bad debt.
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The latest example is the bloated transportation bill, recently passed in different forms by the House and the Senate.
President Bush has promised to veto the bill if it calls for spending more than $284 billion in the next six years. That’s still more than the government collects in gas taxes, which are supposed to finance highway construction. The House at least managed to limit itself to that number. But even that immense figure wasn’t enough for the Senate. Its highway bill would cost $295 billion.
Consider some of the things we may be putting on our national credit card if this bill becomes law. The House measure includes funding for an anti-obesity program known as &uot;Safe Routes to Schools.&uot; It also would set aside money for something called the &uot;Bicycle Clearinghouse,&uot; which may be important to cyclists but shouldn’t be a concern of the federal highway program. And it will attempt to keep the memory of a failed automobile alive by providing some $3 million for the National Packard Museum in Ohio.
The bill also funds projects that local officials don’t want. For example, the House bill would spend $25 million to build a bridge connecting two rural communities in South Carolina. The state’s governor, Republican Mark Sanford, opposes this project. He told a local newspaper that this money could be better spent elsewhere.
All told, there are more than 4,000 such &uot;high priority&uot; earmarks in the House bill, adding up to more than $12 billion.
On the Senate side, there’s already a provision to provide $1.5 million for a bus stop in Anchorage, Alaska. If that money is approved, this particular bus stop may end up featuring lighted signs and heated sidewalks to melt snow. A real showpiece of your federal tax dollars at work.
And our senators are just getting started. Traditionally they add their earmarks during conference – the phase where lawmakers from both houses work together to iron out differences in their bills.
The transportation bill is just one example of how the government is wasting our money. At the end of the year, a massive Medicare prescription drug entitlement program will begin, adding hundreds of billions of dollars to the federal debt. And lawmakers have made the problem worse in recent years by doubling the Department of Education’s already bloated budget and by vastly expanding wasteful farm subsidies.
President Bush has vowed to halve this year’s $350 billion federal deficit by the time he leaves office. That’s a worthy goal, but one that will remain unreachable until our elected officials agree to truly cut spending.
The transportation bill is a good place to start. It would spend up to 40 percent of federal fuel taxes on projects that do not benefit the average motorist or trucker. The president should veto any bill that exceeds his spending limits and insist that lawmakers stop using the highway bill to fund pet projects.
If that happens, we’ll have better roads – and a smaller pile of that bad debt that Congress finds so tempting.
Ed Feulner is president of the Heritage Foundation.