Liberals Make a Bad Investment of Time

by John Hood

For many years now, the Left has been obsessed with the idea that conservative candidates and causes succeed only when conservatives successfully shape the terms of debate to frame issues to the Left’s detriment. While the effective use of political rhetoric is clearly important, the Left’s fascination with “framing” has led them into ridiculous attempts to rework basic English and contort our political vocabulary. Tax increases become “revenue enhancements.” Government programs become “public assets.” Government-run health insurance becomes the “public option.” Government giveaway programs become “public support structures.” And so on.

At its root, the strategy is to make governments sound like private businesses. Instead of taxing, borrowing, and spending, governments are said to attract revenue, raise capital, and make public investments.

Some conservatives think this strategy is brand new. It’s not. When I worked at The New Republic in the late 1980s, there was a lot of talk about the idea of reclassifying federal spending as federal “investment.” I remember a piece by Robert Reich arguing for a division of the federal budget into an operations budget (including most income-transfer programs) and an investment budget (including spending on education and infrastructure). The idea was that the latter expenditures could properly be funded with federal borrowing, since they represented the formation of human and physical capital that would deliver an economic return.

Some government spending does, indeed, meet the definition of investment. To invest means to defer immediate gratification in anticipation of a larger benefit later. Instead of spending a dollar on a consumption good today, you spend it on a capital good that will help you earn additional income in the future. You will either consume that future income yourself or give it to others to consume or invest.

Capital comes in many forms, such as physical (plants, equipment, or infrastructure), human (education, training, or social skills), and financial (cash balances or securities that can be converted to other goods in the future). Obviously, governments can engage in all these forms of capital formation.

So far, so good. Unfortunately, liberal politicians and activists tend to stop there. Once they’ve classified their favorite government spending as “investment,” they think they’ve made the case for rescuing it through tax hikes. Not at all. For one thing, all these new investment gurus exhibit a remarkably elastic definition of capital formation. Rather than saying that government spending can sometimes be classified as investment, they end up saying that virtually all government spending is an investment. As certain federal judges have argued in the case of Obamacare and the Commerce Clause, if you define a category so broadly that there is virtually nothing remaining outside it, your definition is probably faulty.

Secondly, and more importantly, not all investments are worth making. Some are likely to pay off. Others aren’t. When buggy manufacturers spent the modern equivalent of tens of millions of dollars upgrading their plants and equipment in the early 20th century, they were investing — but poorly. When governments today spend billions of dollars on ineffective education monopolies and transportation technologies (such as high-speed rail) that don’t fit the needs of the vast majority of Americans, they are also investing — poorly.

So, my lefty friends, if you are going to use the lingo of investment, you need to apply the concept properly. Otherwise, you really are just engaging in rhetorical games. The nation’s lawmakers and governors face daunting fiscal and economic challenges. They don’t have time to play with you at the moment.

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