Monday, February 18, 2013

Another View of Debt and Spending

An opinion on the debt and spending from the Left, Andrew Tobias, who wrote a great book on investing, "The Only Investment Book You Will Ever Need." This is from his blog:

"One way to look at it is to ask this question: Will we have an easier time managing our already giant debt if our infrastructure is crumbling . . . or managing an even slightly larger debt if we have a modern, efficient infrastructure? Which economy is likely to generate more tax revenue long-term? Which is likely to inspire more investor confidence?
Another way to look at is: Will austerity and non-investment in our future really lower the deficit? Or will it mean (at best) more of the same kind of economy we have now, with lots of safety-net expenditures but less tax revenue than we’d raise in a robust economy?
A third way to look at it: What will be the cost of repairing bridges after they’ve collapsed versus repairing them now? Ten times as much? A hundred times as much? What will be the cost of dealing for 70 years with kids whose intellect has been impaired because we failed to de-lead their homes, or because we failed to provide pre-school education and modern classrooms . . . versus the cost of doing that work now? Ten times as much? A hundred times as much? Isn’t it cheaper to put idle people to work doing that now so more of those kids become productive taxpayers rather than wards of the state?
And note, as always, that scary as half-trillion-dollar deficits sound, if we just ran them every year for the next 50, in an environment where our economy were growing just 2.5% in real terms but also 2.5% with inflation, our National Debt would gradually but dramatically shrink as a proportion of GDP. From roughly 100% of GDP now to roughly 25%. No need to “balance” the budget at all — especially because the way Uncle Sam budgets, we don’t capitalize investments. Bridges that cost $1 billion to build are not amortized over decades, as a business would amortize a power plant; they are “expensed” all in the year the cash goes out the door.
This is what we did after World War II..."

But if Wall Street sold a product that they knew would lose value over time, wouldn't you be outraged?

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