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SPENDING AND INVESTMENT (A THUMBNAIL SKETCH)

May 30, 2017

SPENDING AND INVESTMENT (A THUMBNAIL SKETCH)

Are we “spending” too much or “investing” too little, neither or both? Do we even know the difference between spending and investing given the cloud of propaganda that hovers over both? What is public spending and what is public investment that leads to socially desirable goals or, as with tax cuts and other additions to their bottom lines via tepid regulation for banks and other corporate entities, to socially undesirable outcomes? What are socially desirable outcomes?

Let’s start with a definition of terms. Spending from the public treasury presupposes that government will get something for its money and that such a transaction is in the public interest. If government gets nothing from such spending, then it amounts to a giveaway of public funds and is not in the public interest. Giving tax cuts to the rich and corporate class amounts to spending without compensating effect under the trickledown theory since historically such monies go into overseas accounts in Switzerland and elsewhere and not into new plant and increases in employment, a clearly undesirable social outcome. We give something and get nothing, a bad bargain.

Investment in the public interest (streets, highways, bridges, healthcare, SNAP, education, etc.) is by definition not a giveaway because such funding increases efficiency and safety in our transportation system so that both business and citizen use of such system is enhanced, healthcare which makes for a healthier and happier employee who is more efficient and productive on the job and whose worker productivity is increased to the benefit of his corporate employer’s bottom line, and adequate food for all which promotes a healthier populace which transfers into more effective learning for students and a more efficient worker on the job which further translates into increased worker productivity of those who are directly engaged in the production of goods and services for their corporate employers. You give something and get something, a good bargain for both corporations and the public interest.

So what is a socially desirable outcome? The answer can be expressed either positively or negatively. For instance, we have decided that alcohol and tobacco are serious dangers to public health and safety, so we (under what has come to be known as “sin taxes) tax the sale of these two items heavily in order to restrain their use. On the other hand, we lightly tax or fail to tax via tax credits, deductions and other such exemptions the sale of electric cars and solar panels in order to encourage their use, which is felt to be justified by reducing the toxic atmospheric hazards to human health and environmental safety. Socially desirable outcomes as results of policy decisions made can thus be very beneficial to the health and welfare of our people while a failure to enact such policy decisions can be very detrimental to the health and welfare of our people.

Some of such decisions are not made by politicians but rather by innovation. Thus when electricity can be manufactured by solar panels rather than by transmission of electricity from coal-fired plants at a competitive price per kilowatt hour, many environmentalist-minded people will invest in tax-supported solar panels as an alternative energy choice, which is not to say that coal mining and the fossil fuel industry have not also been heavily subsidized by government in many ways, including tax allowances for wasting assets, i.e., a tax reduction based on having less coal or oil or gas to mine or pump year to year. It seems to me that the government is operating at cross-purposes in where policy decisions are made that simultaneously favor competing industries and that, unfair as it may seem, it comes down to the brutal decision of picking winners and losers based on the state of the art and environmental reality.

Many coal-burning operations have been switched to cheaper natural gas en route to a shift to yet even more innovative and less environmentally destructive means of producing energy, a continuing move stoutly resisted by the coal and petroleum industries who are losing their markets to innovative new means of producing energy. The truth is that coal as a fuel to make energy is on the way out, and I write this with some nostalgia in mind since my father was a coal miner and I was born and raised in a coal mining community.

However, just as the motorcar put the horse and buggy out of business, so it is that new and more environmentally appropriate means of producing energy will in the not too distant future put coal mining out of business, contrary to the promises of politicians such as Trump who, figuratively speaking, talk of a resurrection of the coal mining business, which is not going to happen. Due to lack of demand, there will be no such resurrection just as there has been no resurrection back to horse and buggy days. New rules and regulations that allow coal-mining corporations to blow the tops off mountains and dump pollutants into creeks and rivers will only delay the process; coal mining is beyond rescue, a victim of innovation and change.

The choices seem obvious to me. Spending taxpayer money by way of tax cuts to the already rich to send to Swiss banks who will not reinvest in American plant and jobs is a pure giveaway for which we get nothing in return (except a larger deficit to someday pay), a process sometimes called corporate welfare and plainly not in the public interest; whereas investment in our public roadways, bridges and the education and health and sustenance of our people pay handsome dividends in terms of greater and safer efficiencies in both public safety and  the workplace marked by greater worker productivity and enhanced corporate bottom lines, a result which by some studies demonstrates that the return on investment is in excess of the investments made, a really fantastic return on investment to both corporate interests and the corporate workforce as well as in the public interest.

Conclusion: Invest in our people and public infrastructure and businesses but not in Swiss bank accounts via tax handouts. Such a forward-looking policy makes good economic sense for both our people and even the rich and corporate class as such efficiencies in worker productivity wend their way into the bottom lines of corporate balance sheets. Let’s spend taxpayer money where it does best for all of us.        GER

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