Credit Card Trap

Posted on November 09, 2006 | Author: Noah Clarke
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From all her talk about investing, one might think Governor Janet Napolitano is trying to channel Warren Buffet. She's always talking about investing in something education, bio-tech, downtown.

But she's not really investing, she's spending. In her first term, General Fund spending surged 70 percent, a bigger increase than any other governor in the past two decades. Not only is general spending up, debt spending is increasing $2 billion a year. Is all this "investing" really good for Arizona?

The Federal Reserve Bank of Dallas offers this point of view, "growth in government stunts general economic growth. Regardless of how it is financed, an increase in government spending leads to slower economic growth" (emphasis added).

In a radio interview, Governor Napolitano was asked if debt financing of capital projects was like using a credit card. She replied flatly, "No, it's a bond," as if that explained everything. But bonds are like credit cards--they allow government to spend beyond its current means, saddling future taxpayers with higher costs and interest payments.

If the governor wants Arizona to sustain its economic momentum in her second term, she will need to cut spending. Period.

Noah Clarke is an economist with the Goldwater Institute Center for Economic Prosperity.

Key Links:

-Federal Reserve Bank of Dallas: "Fiscal Policy and Growth"
-Janet Napolitano: "Governor's Priorities"

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