Thu Nov 15, 2012, 03:06 PM
thomhartmann (3,506 posts)
Thom Hartmann: Spending vs. Investing...what makes America work?
There’s something that every single American family understands, that Conservative budget hawks don’t want us to talk about, and that’s the difference between spending and investing. Let’s assume that the typical American family collects its paycheck at the end of the month and decides to go out to eat for a fancy dinner. A couple glasses of wine, an appetizer, four entrees, and a few desserts later, the waiter brings the check and – at least here in DC – that family is now out about $150. Do that once a month as a special treat, and you’re pushing $2000 a year. That money is not coming back. It was spent and is now gone.
Now let’s assume that same family decided to skip the fancy dinners all year. Instead they take $2,000 and put it into home repairs like a new air conditioner, improved insulation, or a new rooftop deck. Unlike spending it on a fancy dinner, that money doesn’t just disappear. It will actually create more wealth in the long run through lower energy bills and an increase in the value of their home. That’s an investment. Or let’s assume that same family uses a chunk of their paycheck to start a pre-paid college fund for their kids. Again, that money doesn’t disappear. Instead, it was invested in the future for their kids to earn a college degree. Or heck, maybe they just buy $150 worth of stocks every month like everyone else. Again, the money doesn’t disappear. In fact, in a year it might be worth $2500. That’s another investment.
American families know the difference between spending and investing. And they know when times are tough, they cut back on the spending but not on the investments. That means fewer fancy dinners out, but no cuts to their kids’ college fund or mortgage payments on their home. But why isn’t this same logic applied to our government? Like a family, our government is capable of spending and investing. Money put into our wars is the perfect example of spending. As a nation, we can spend a trillion dollars deploying troops in Iraq and Afghanistan, manufacturing and detonating bunker busting bombs, and re-fueling aircraft carriers in the Gulf. Guess what happens to all of that money? It’s obliterated.
War spending is just that – spending. It doesn’t create more wealth in the future. The shards of a Predator Drone’s Tomahawk missile in Northern Pakistan will not create one dime of lasing wealth for our nation. Our military might as well have gone out for a few million big fancy steak dinners. No question about it, our government spends a lot of money. And when it comes to reducing our deficits, there’s certainly a lot of waste, fraud, and abuse within that spending that can be cut – particularly in the Defense Department, which seems to have lost $2 trillion dollars they can’t account for.
But let’s not confuse spending with investing, which our government also does a lot of.
For example, money put into Pell Grants so more kids can go to college is an investment that will create lasting wealth for our entire nation when those kids graduate and become a productive part of the economy. Our experience with the GI Bill indicates every dollar spent will return at least seven dollars – and maybe as much as fifty dollars – back to government coffers in the form of income taxes from more productive and higher-paid workers.
Money put toward green energy projects like wind farms, solar plants, and electric cars are investments that will create a boat-load of jobs, reduce our demand for foreign oil, and make our environment cleaner. Money put toward infrastructure like new roads, bridges, and high-speed rail systems are investments that will make it cheaper and easier for businesses to ship goods across the country or for Americans to travel and go on vacation. Money put into health care research is an investment that will cut down on the costs diseases inflict on our economy, and, as a bonus, give us a healthier, more productive workforce.
Even money put toward social welfare programs like food stamps and unemployment benefits are investments. Moody’s did research into this and found that for every dollar invested in expanding the food stamp program, the economy generates an additional $1.73. And for every dollar invested in unemployment benefits, the economy generates an additional $1.64. That’s a pretty good return on investment.
President Obama often says the word “investment” when referring to money put into education programs, infrastructure, and health care research. But you will never hear Republicans use the word “investment.” For them, it’s always spending, spending, spending.
Ever since Reagan said, “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help,’” Conservatives have been hell-bent on convincing all of us that government can’t do anything right. That all it can do is spend – or waste – money. But this ridiculous talking point ignores an entire national history of worthwhile investments - from Jefferson’s Louisiana Purchase to Lincoln’s Land Grant Colleges to FDR’s New Deal to Eisenhower’s Interstate Highway system. All were investments made by our government that created enormous wealth in the long-term for the nation in the form of new jobs, better education, and more efficient transportation. And they all more than paid for themselves by the increase in tax revenues that comes with increased economic activity.
But Conservatives know that if they drag the name of government through the mud enough, then they can convince the American people that our American experiment in democratic governance is a failure. So they appoint lugheads like “Brownie” to head up FEMA, and then point out FEMA’s subsequent failures to justify privatizing it. Whether they call it “austerity” or call it “Starve the Beast,” the goal is the same: slash government investments and let the private sector handle the work of building our national infrastructure, caring for our sick and elderly, and transitioning to a new energy source. But rather than all of this work being done for the public good as the government would ensure, it will be done for the private profit-good of a handful of fat cats on Wall Street.
Today, with the so-called “fiscal cliff” looming, Conservative budget hawks are still ignoring – or lying about – our government’s role as an investor. Paul Ryan’s budget, which is the Republican starting-point in negotiations, proposes massive cuts to crucial investments like Medicare, Pell Grant programs, and green energy. In the short-term Ryan’s cuts will lower the deficit. But in the long-term, those fewer investments will inflict serious harm on our nation. What will the American workforce look like in 20 years with a million fewer college graduates? How much money will be wasted over the next fifty years on cancer-causing, climate-warming fossil fuels while we procrastinate on clean energy? What sort of damage will be inflicted on our health care system when millions of seniors lose preventative care and instead rely on Ryan’s vouchers and the Emergency Room as their health provider?
Just as a family chooses to invest in the areas that are most important to them – like their home, their kids’ college education, their healthcare – our government’s investments reflect national priorities like education, healthcare, and infrastructure. Without those investments, we have no future. And without a future, then budget deficits and fiscal cliffs really don’t matter at all. Let’s put America back to work – let’s invest in her once again.
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Thom Hartmann: Spending vs. Investing...what makes America work? (Original post)
Response to thomhartmann (Original post)
Thu Nov 15, 2012, 08:05 PM
ricardA (42 posts)
1. Theory vs reality
agree that investments should pay off, but the problem is just that, the investments have ended up being worst than spending because not only the money earned is gone but people have ended with debt. And is compunding. That is what now people are aware off. It is not a political issue any longer since the problem is that the bookeeping and the bookeepers seemed to have misundrestood basic balance or basic math. Where did it all go?
I think there's something very wrong here for an active economy to crash like that, or even assuming no corruption to actually function in a very high risk scenario. Because if that family managed to saved after all and then invest, or by a sneaky law is made to invest, it could loose it all. That would be a permanent bad deal THAT HAS TO GO.
Please try to explain in lay people's term how the capitalism pie works so that one can have a chance to not only save but invest wisely AND to protect the economy from the economic vampires. They neither can restrain their apetite for taking they come up with all kind of 'hocus pocus' to decive to drain the economic pie.
The cure I see for this is undrestanding the system and make it participatory. For REAL.
How come the economists don't have solutions?