Few people would say they like the idea of debt. Being in debt means you owe something more than you can pay, which puts a crimp on future spending plans and can last for years after the initial purchase has been forgotten.
At the same time, debt is a part of life. Whether it’s a mortgage or credit card or student loans, few adults can claim to be debt-free. When managed properly, debt can be highly useful in creating growth and fulfilling short- and long-term needs.
Gov. Ned Lamont has spoken frequently early in his term about what he’s calling a “debt diet.” The state has been borrowing too much, he said, and needs to cut back to essentials. On Tuesday, in his first meeting as chairman of the State Bond Commission, he started to put that idea into practice.
What sounds good in a press release doesn’t necessarily translate to better results.
The governor knows as well as anyone about Connecticut’s long-running debt obligation and the strain it is putting on the state budget, but it’s important to note that those numbers are driven to a large degree by pensions. The state for years underfunded its pension system, only paying up under former Gov. Dannel P. Malloy. But that wasn’t enough to make up for so many years of lax attention to the problem that preceded him.
So the state is laden with obligations that it has to pay for in coming years, but not all debt is the same. Bonded debt, as is covered by the Bond Commission, is used to finance projects that can create jobs, fill needs and give a boost to the local economy. Yes, they cost money, but the savings realized by cutting the projects can be outweighed by gains that were never realized.
Hearst Connecticut Media columnist Dan Haar rightly pointed out this week that projects that add to our long-term debt are often those that employ workers right now — people who need jobs and contribute to the state economy. The savings from such a move often wouldn’t be realized for years or decades.
None of that means more debt is always good or even that the recent rise in state bonding was sustainable. It makes sense to take a close look at every project and assure it is fulfilling state goals.
But at the same time, the state’s nonprofit sector is deeply worried about the temporary loss of a capital grant program that helps keep essential programs going. These are agencies that provide services that might once have been state-run but have been moved to the supposedly cheaper private sector. They still need money to operate.
Housing agencies, as well, are worried about the long-term effects of bonding cuts. Surely it can’t benefit the state economy to have more people at risk of homelessness because of a shortage of funds.
A debt diet is happening. A debt fast cannot.