Debt is one of those things people love to hate, and that goes double for public debt.
Just about all adults, if asked, would say their preference would be to be debt free, yet almost no one is. The realities of modern life all but preclude being debt free. Saving enough money to pay the full price all at once of a house is out of the question for all but a handful of homeowners. And why would anyone buy a car for a few thousand dollars outright when it is possible to pay a few hundred dollars a month for the same ownership rights?
Add in credit cards and bank loans for special projects or needs and the amount of debt carried by each household adds up fast.
Though this can be an irritating thought, the reality is carrying debt isn't a problem until a tipping point is reached when it becomes difficult to make debt payments and also buy life's daily necessities and niceties. Keep the level of debt below that tipping point and not only is it not a problem, it is a real benefit. Without the ability to incur debt, it could take three to four years – if not longer – to save enough money to buy a car that today costs $20,000. And odds are that car will cost a good deal more than $20,000 in three or four years. But take out a loan with monthly payments that are a bit of a pinch today and there's a good chance they'll seem like a bargain three or four years from now. It's an example that really makes debt look like a good thing when it is applied to the cost of buying a house with a mortgage, as compared to the cost of saving up to buy a house while also having to pay rent.
Debt is neither good nor bad. It is simply a tool. Use it properly, and the results are good. Misuse it and the results can be catastrophic.
The same is true when it comes to public debt. It turns out that the amount of debt being carried by Harford County is $3,486.55 per person, or $13,946.20 for a family of four. It's substantially more than the per person county debt of $1,439.45 owed a decade ago, but is it too much?
First of all, it's vital to take into consideration that public debt held by counties and states is generally money borrowed to pay for specific projects like new schools, major roadway upgrades, parks and other public facilities. Counties and states generally are precluded from borrowing money to pay for general government operations like the day-to-day operation of schools and police agencies. This stands in sharp contrast to the federal government which routinely borrows money to balance its operating budget.
Back to the family of four theoretically responsible for paying $13,946.20 to settle the Harford County government debt. That amount would be massive if it were expected to be paid all at once, but a good deal of the county's debt is financed over 20-year loans at rates in the 2 to 3 percent range. As the debt figure includes both principal and interest, the monthly payments can be roughly estimated by dividing the total by the number of months in 20 years, which comes to just shy of $60 per household. The estimate is a very rough one because not all the loans come due 20 years from now. A school financed 17 years ago over a 20-year term is very close to being paid off (and the monthly payments would look like a bargain compared to those associated with a loan for a school to be built today).
A debt requiring payments of $60 per month per household doesn't seem particularly excessive when compared to the taxes levied by the county. Given that property tax bills paid to the county are far north of $3,000 a year for most homes, $60 a month is hardly a huge sum given the schools, parks and other public facilities the county has to show for it.
Still, the rate of growth over 10 years from a level of $1,439.45 per person to $3,486.55 per person is something to keep an eye on. Just as it is easy to run up credit card debt when a series of individual purchases each seem inconsequential, it is quickly possible to run up a substantial public debt given that the public demand for new, or newly renovated, public facilities is always great.
So long as Harford County's per person debt is at a level that doesn't seem shocking when broken down to monthly payments, it is safe to say it is in the reasonable range.