Let's take a moment and pretend that the common political idea of running government like a business makes any damned sense at all. And let's not wonder which business we should model our government after; Enron, Lehman Brothers, Bear Stearns, BP, etc. Let's just take it at face value and assume this is the best idea anyone ever had. Now, ask yourself this question; is debt a bad business plan?
If it is, then American business is screwed. One of the first problems we had in the Great Economic Unraveling of 2008 was that banks weren't lending money -- to businesses. And this was bad, you'll remember. Businesses relied on credit to keep things rolling. If they couldn't get loans, they wouldn't be able to make payroll or meet other obligations. It became clear that American business, like businesses all over the world, relied on credit. This shouldn't be all that surprising. If your profits are x and the interest rate is y, then it makes good business sense to borrow money if it means the value of x will exceed the value of y. In other words, if credit allows you to make investments in your business that result in profits that exceed the what you have to pay back -- interest included -- you'd have to be a fool not to borrow money to make that investment. We know that debt is good for business, because we witnessed a period when credit wasn't available and we know that it was really, really bad. If our government is running like a business, there will be times that running a debt will be not only necessary, but the wisest course of action. The "government as a business" types like to pretend that businesses don't carry debt, but they're just plain lying. In capitalism, debt is not only good, but crucial -- one of the factors in the creation of wealth are interest payments.
So, in our "government as a business," we can't automatically argue that debt is bad. Before we can do that we have to show that the borrowing won't pay off in the long run. For example, leading causes of our current debt are the wars in Iraq and Afghanistan and Bush's top-heavy tax cuts. In terms of investment, our "government as a business" was shoveling money into a hole with the wars -- we still are -- and the tax cuts were a gamble that didn't pay off. Despite Bush promises that we'd "grow our way out of debt," we never actually did. In this government business, war and tax cuts have turned out to be pretty lousy investments...[CLICK TO READ FULL POST]
If it is, then American business is screwed. One of the first problems we had in the Great Economic Unraveling of 2008 was that banks weren't lending money -- to businesses. And this was bad, you'll remember. Businesses relied on credit to keep things rolling. If they couldn't get loans, they wouldn't be able to make payroll or meet other obligations. It became clear that American business, like businesses all over the world, relied on credit. This shouldn't be all that surprising. If your profits are x and the interest rate is y, then it makes good business sense to borrow money if it means the value of x will exceed the value of y. In other words, if credit allows you to make investments in your business that result in profits that exceed the what you have to pay back -- interest included -- you'd have to be a fool not to borrow money to make that investment. We know that debt is good for business, because we witnessed a period when credit wasn't available and we know that it was really, really bad. If our government is running like a business, there will be times that running a debt will be not only necessary, but the wisest course of action. The "government as a business" types like to pretend that businesses don't carry debt, but they're just plain lying. In capitalism, debt is not only good, but crucial -- one of the factors in the creation of wealth are interest payments.
So, in our "government as a business," we can't automatically argue that debt is bad. Before we can do that we have to show that the borrowing won't pay off in the long run. For example, leading causes of our current debt are the wars in Iraq and Afghanistan and Bush's top-heavy tax cuts. In terms of investment, our "government as a business" was shoveling money into a hole with the wars -- we still are -- and the tax cuts were a gamble that didn't pay off. Despite Bush promises that we'd "grow our way out of debt," we never actually did. In this government business, war and tax cuts have turned out to be pretty lousy investments...[CLICK TO READ FULL POST]
