"tighten the belt" ... reverse the coin and see what it says

Alright, back to taxes and the conservative statement that in these times of need, government shouldn't borrow and should act like every family does and tighten its belt.  I mentioned in my November 22nd post how ridiculous this statement is based on just the statement's premise and the role of government, but I'd like to investigate the opposite side of the statement.

If in times of need, government should tighten its belt just like families do, what happens in good times?  I actually happen to agree with this side of the coin.  Conservatives suggest that we should lower tax rates when times are good... should workers therefore tell their employers "hey, I can pay all my bills and still have some left over, you should pay me less?"  That's a horrible idea, right?  I completely agree.

In point of fact, in good times, families should invest in their future.  For one thing, you want to invest for college, retirement, a new house, but in addition to those things, families should build up some savings so they are at least a little prepared for emergencies.  The same is true for governments.  Admittedly, they don't have children to put through college or have to retire, but they sometimes have to buy new buildings and vehicles and build infrastructure.  These are investments governments have to make from time to time.  In addition, governments should prepare for economic downturns by building a rainy day fund.

Massachusetts has a rainy day fund that has cushioned the blow of the recent recession, but the problem for Massachusetts is that the residents decided to lower taxes in good economic times instead of recognizing that those good times would not last forever and that we should plan for the future.  In my last post, I commented that we did this and that we should restore our tax rates to pre-2000 levels (in 2012 MA tax rates are 5.3%, in 1999 they were 5.95%).

When times are average, we should make small investments in our future, just as families do.  When times are good, we should make larger investments in our future.  And when times are bad, we should use some of those investments in order to maintain services government provides to people, and even increase some.  We should not cut taxes just because we are bringing in more money than we're spending, just as we shouldn't raise taxes in bad times just because we can't fund everything out of the current tax income.  There must be a balance where we invest when we can and use those investments when we can't pay for everything with current tax income.