Big Recovery Act Spending is an Investment

There is a difference between a company spending hundreds of thousands to redecorate its CEO's office suite, and spending that money to buy new production equipment. The latter is calculated to produce profits that return the investment and then some. Still, either way, well chosen spending is essential for businesses.

Somehow, however, to some people—like extreme conservatives who are now common in the GOP—government looks different. All spending is bad unless it is for defense and then it is all good. (Incidentally, all taxation is also bad unless it is paid by the poor and the middle class.)

OK, some government spending is wasteful. But most is, like business spending, to pay for employees, facility space, equipment, heat and light, etc. It is good or bad depending whether it furthers the mission. Some government spending is, as when business does it, an investment that will provide a future benefit for the stakeholders, namely us.

When a business spends considerable money, an amount that is a big fraction of annual revenue, that can have a big impact on current stockholders' value, especially if it is borrowed. But stockholders often recognize the value to the company—in bricks and mortar or in new staff that can create new products to sell or in other forms. Any brief sell-off is followed by a rise in share price

When the government spends a large amount compared with annual revenue, as the US will the next few years, the immediate reaction to large numbers needs to be tempered by asking what if any value will be added to the country, and be available over the years to those who must repay the borrowing. Another question is what if anything might happen without the big borrowing.