Posted By RichC on June 4, 2017
From a small business perspective, excessive debt is near the top for reasons entrepreneurs fail in business. In my experience there are bankers and leasers with terms in the lenders favor, but not in the borrower’s favor.
Bankruptcies are harmful not only to the person and family going through the ordeal, but on the creditors who have extended credit or "terms" to the bankrupt business (extended liberal terms to long time customers in my case).
On the other hand, most of us need to borrow. On the personal side, it is nearly impossible to buy a house without a mortgage. Some would say it is even necessary to borrow in order to go to school, buy a car or take a vacation — we in debatable waters at this point. As a business persona, capital is almost always necessary to start or expand, especially in equipment oriented businesses, and few owners or managers can carry enough inventory or have capital for receivables in today’s competitive business environment.
Same for rebuilding our country … although it is often too easy for politicians who love to spend and hate to pay anything back. Jim Glassman, Head Economist for JPMorganChase Commercial Banking wrote about this in is recent Markets and Economy article titled, "Does the US Have a Debt Problem?" I was particularly enlightened by the Debt as an Investment section:
Borrowing should be viewed as an investment—all debts must be paid, but if the money can be used to build greater wealth, taking on debt can be worthwhile. For example, if infrastructure spending were viewed as an investment, there would likely be fewer objections to debt financing for high-return projects. If roads are built where they’re most needed, the investment in infrastructure eventually pays for itself by promoting future growth.
It makes sense as we approach the budget negotiation in Washington DC over the next few months, particularly since many elected to serve do not run capitally intensive businesses or are educated as economists (nor are their constituents putting pressure on them to either "balance the budget" (conservative right) or "spend liberally on everything" (far left). Hopefully there will be sound judgement from a reasonably fiscally sound leader in the House of Representative (Rep Paul Ryan) and business minded President Trump using the bully pulpit to convince voters … that we’ll get a spending plan that promotes growth.