In focus: investments

President Barack Obama began his Twitter Town Hall last Wednesday by tweeting, “In order to reduce the deficit, what costs would you cut and what investments would you keep ?”

To hear him tell it, everything the US government spends money on is an investment, and in that case, we should all be expecting some mighty fine returns on our tax money these days—but don’t count on it.

When people in private business use the term “investment,” it has a very specific meaning. Operationally, it is the setting aside of money that could be used for consumption in order to purchase assets that increase its productive capacity and allow for a greater amount of consumption later.

Before it is undertaken, cost estimates are laid out, future cash inflows are forecasted, and the possibility of costly side-effects from a myriad of risks are carefully brought into consideration. Knowing that a company’s stakeholders are also its financiers, managers reasonably and respectfully provide their investors with estimates of the net present value of the project, along with its rate of return and payback period.

Never missing an opportunity to subtly propagandize through the manipulation of everyday language, politicians, particularly Democrats, have slowly began using the word investment in order to pitch the gratuitous spending and subsidizing they have long dreamed of. No longer does an investment have to be targeted spending on a project that will yield a predetermined level of return over a set period of time. It magically became anything that money could be spent on in the present that might yield some benefit to someone somewhere down the road.

Over the course of his one-hour Twitter Town Hall, the President used the word “invest” or “investment” an astounding 24 times, only one of which was a reference to private companies making real investments. The rest were targeted attempts to take the broken, ill-conceived concept of central economic planning and make it sound sunny and essential to America’s material well-being. What better way to frame the debate between spending cuts and tax increases than to claim that nearly all of government spending is an “investment” and therefore cutting it would be a foolish idea?

Unless the President and his political party are prepared to offer us the payback period, rate of return, and net present value of their so-called “investments,” they should stop using the term as a ploy to borrow $40,000 every second of the day, leaving us indebted for senseless spending that will never yield anything that could rationally be considered a return on our tax money.

Steven Christopher is a first-year graduate student in C.T. Bauer College of Business and may be reached at [email protected].

Leave a Comment