Investment Versus Spending

I disagree with liberals on a lot of things, but no topic do I disagree more vehemently than on investment and spending. As a former business owner and author on the subject, it is a fact liberals think backwards when confronted with fiscal problems. Liberals use the words investment and spending interchangeably as if they mean the same things. Spending is defined as to pay out money. Investment is defined as a property or possession acquired for future financial return or benefit. Sometimes liberals refer to spending as a stimulus which they conclude is an investment in the economy. Some liberals such as Nancy Pelosi insist unemployment compensation and other anti-poverty spending is an investment in the economy. In fact, New York Senator Kirsten Gillibrand went on to say that 1 dollar spent on anti-poverty programs such as food stamps returns $1.71 to the economy! Really, a 71% return on anti-poverty investments! Maybe we too will get rich if we too invest in ant-poverty programs. This is in insane for several reasons.

First, and most importantly, federal government spending simply distributes wealth from one person to another. The government collects taxes on wealthier citizens and redistributes these funds to poorer citizens. If anything, this act should be deficit neutral. But we know this is not true because the federal government is actually 16 trillion dollars in debt. Hence, if anti-poverty spending is an investment, where is the benefit or financial return? In previous posts I have pointed out that fewer than 30 cents on the dollar make it to people who are registered to collect anti-poverty funding. This is not an investment.

Secondly, a big problem many liberals have with the wealthy is that they invest and save their money. Hence, liberals draw the misguided conclusion that this does nothing to help the economy because they are not purchasing good and services. When, in fact, this type of investment is best for the economy. Money saved in banks allows them to hand out loans. Investments in companies help them to expand and grow. And income earned through investments is taxed and provides the government with tax revenue. Quantitative easing programs initiated by the Federal Reserve (which is chartered to monitor the fiscal wellbeing of the economy), for example, buy investments to stimulate the economy. The Fed does not spend more money on anti-poverty programs to stimulate the economy.

Thirdly, for some reason most liberals I talk with favor government spending over charity spending. In fact, some do not think charity spending is an investment, but on the other hand are convinced government spending is an investment. Actually, the only difference between the two is that charity spending is more efficient than government spending by at least 20%; charities let people choose which anti-poverty programs they want to spend their money on; and charities do not operate at a loss.

Fourthly, if Gillibrand’s logic is correct than that would mean that 1 trillion dollars in state and federal spending on anti-poverty programs this past year should have generate an additional 710 billion dollars for the economy (nearly 5% of GDP). That is enough money for 45 million Americans (90% of those living in poverty) to live at the U.S. median income level and enough money to generate, at a minimum, 77 billion dollars for the government in tax revenue. Well, since the government is in debt and 50 million people live in poverty we can conclude anti-poverty spending is no investment.

So why then do many Americans believe what the Democrats preach about spending as being true? First, essentially anyone benefiting from these programs will side with the Democratic definition of spending. Secondly, and most importantly, Americans are routinely manipulated to think this way not only by the government, but by corporations. For instance, when we shop at a grocery store our receipt and checkout clerk will remind us that we saved a particular sum of money by shopping at their store. I routinely hear people talk about how much they saved when they purchased a new product. No matter how you look at it, when you buy something you are spending money even if you got it on sale. This is especially true if you are buying necessities or nonessential items such as food, clothing, energy, or electronics. You spend money on these items, but they are not an investment (although you can make money off real estate).

Liberals may have convinced many if we put 1 dollar in our right pocket, it will magically generate $1.71 in our left pocket. However, the reality and facts show stimulus spending is no investment since there is no future benefit. It may create or save some jobs, but at what cost – 1 million dollars per job? This is no benefit or financial return.