Deficit Spending at Home

In buying a home we are running not only a deficit, but also creating a debt. When government does this, theyʼre "mortgaging our future"; when we do it, weʼre fulfilling the American Dream.
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These days, when talk turns to funding anything, debate hinges on whether we can afford it. The deficit looms large in these discussions. Be afraid, very afraid. I will leave whether and when the deficit should concern us to the economists. But all of us have the right and duty to ask what it is weʼre buying and, conversely, what we forgo when we elect not to spend.

Cheap plastic crap, whether for a single child or a nation with childish desires for cheap plastic crap, is not a great use of money. But sometimes we spend money that actually gives us more in return. This can be quite clear, like buying tools to expand a business that employs people. Or it's less obvious, like decreasing obesity among children so that we can have less fat children.

How do we address what we need when the conversation hinges on the murky question of what we have? Politicians frequently liken the national budget to that of the household, invariably concluding that if families have to live within their means, the government should too.

Looking more deeply into this problematic simplification we find the very rhetorical device that aids our case for spending -- deficit be damned. If you're tempted to tell me that household budgets and government budgets are entirely different, feel free but expect these replies: (1) I don't actually say they're alike (2) this is about crafting compelling communication that's accurate, not extensive economic explanations that are complete and (3) too late. People already do think of government budgets as similar to their own.

The fact that they readily default to this simplifying model offers us a strong potential narrative -- one born of lived experience most Americans share. Many of us practice "deficit spending" responsibly and for our own good: we purchase homes.

Most homes cost much more than their owners will make in one year -- some more than they'll make in a decade. We buy these homes anyway and, until recent events threw all rules, logic and caution out the window, it makes sense to do so.

In buying a home we are running not only a deficit, but also creating a debt. Paying off this debt costs more than the home we are purchasing. When government does this, theyʼre "mortgaging our future"; when we do it weʼre fulfilling the American Dream.

A home is usually understood as an asset, not a liability. This assumption has been based on two things: (1) people need to live somewhere and (2) the value of a house will always rise.

The first, our large and growing homeless population aside, is hard to contest. The second is where things are less obvious, both for our own home purchases and in considering incurring additional debt as a nation.

Will a single house be worth more in the future than it is today? And, more importantly, will our house, the nation, be worth more as well? This, it turns out, is no idle comparison. The very same things that raise property values plot by plot raise them country by country. Good schools, safe streets, attractive landscapes, good urban planning. The things that make a neighborhood desirable make a nation desirable too.

Will we have these things in the future? Will we borrow against the value of America and remodel our crumbling foundation, retrofit for energy efficiency, fight blight in our neighborhoods and make it easier to commute to decent jobs?

We donʼt know for sure that the value of our home will rise again, that weʼll be able to ride out this investment and pay it back with cash to spare. But, we know for certain that when you leave a property to rot the value plunges.

When we elect to buy universal preschool, preventive care, living wages and so on, we either pay for it up front by contributing more in taxes or we finance some or all by increasing our debt. We pay this debt to ensure this is a great place to live.

Let's counter the conservative and presidential insistence on spending freezes and budget balancing by reminding Americans that most of us donʼt actually live within our means. We accrue, over our lifetimes, a vast array of debts from student loans to small business expenses to mortgages. Not all debts are created equal. But buying a home, starting a business, going to college -- are we ready to declare these donʼt make sense?

If we increase the deficit so that all of us can have these things along with health to enjoy them, we can reasonably call this is a sound investment. Until now, Iʼve heard of no other that offers similar opportunity for equitable and sustained growth.

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