The concept of ‘spending money to make money’ seems to elude many people. When the stimulus came up in the United States (and to a lesser extent here in Canada), people were outraged. “Isn’t that just like a liberal to try and spend their way out of a problem? Spending is what got us in this problem to begin with!” Ignoring for a moment that the question of ‘spending on what‘ is rarely addressed (except by libertarians, to their credit), this complaint still suffers from a central flaw.
If you’re on a motorcycle 3/4 of the way down a ramp that faces a yawning chasm, you might be tempted to throw on the brakes. The problem with that strategy is that your momentum is likely to carry you over the edge of the precipice, where your lack of speed will kill you. Sometimes, paradoxically, you have to pick up speed to clear the gap. That’s when you can think about braking. It’s not a complicated concept, but it seems to elude many people.
What very rarely gets discussed, however, is the cost of not doing anything. To put a point on it – anyone reading my post this morning might have found the admonition to spend money on improving education and infrastructure to be nothing but bleeding heart liberal nonsense. “Where are you going to find the money?” say our ‘fiscal conservative’ friends. It’s a question that’s actually easier to answer than you think: [Read more...]