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Author: Vetiver Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1961750  
Subject: IF the US Government were a Business Date: 3/5/2013 1:22 PM
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There are several different financial reports that companies use to monitor themselves and report to the stockholders. The government maintains a cash flow statement but not really a balance sheet. Liabilities are reported but not assets. Of course assets are only assets if they represent positive cash flow down the road. For many capital intensive industries their profits depend as much or more on the changes in the value of their assets than on their current cash flow. That is why cutting back on things like maintenance and R&D during a tough times is such a bad idea. However, it is usually what companies do instead of cutting things like executive payment and perks or cash payments to stockholders, cash outflows where you will never see that money again, consumption.

The government invests in things like roads and bridges, science, etc. It also invests in its people through education and healthcare, particularly for younger people that have their productive years ahead of them. It has much more in the form of consumption spending; particularly military and healthcare for older people. Some amount of spending here is necessary. Some is from previously made financial obligations. Some is a moral obligation. However, if you look across the board, most of the republican objections to what is in the budget are objections to anything that sounds like an investment.

Healthcare for young people tends to be relatively cheap. If it prevents minor health issues from growing into long term health problems it a fantastically profitable investment for the government to make... like changing the oil in your car. Investment in their education is also a wildly profitable thing for the government to do.

During the Bush years, Medicare Part D, an unfunded $800 billion expenditure sailed through without a peep. More money principally going to older Americans past their productive years. If you are going to spend $10K a month to keep a senior alive for the financial result of being able to spend another $10K next month, why can't we spend 1/1000th that amount to give an 8 year old an annual checkup with a doctor? the answer is 8 year olds don't vote and Its not something for me!

Indeed, consumption spending in general goes to the already established, the things of the past. Investment goes to the things of the future and these things of the future might not vote or have a lobbying organization. the best way to have no future and no future cash flow is to stop investing in it and spend everything on current consumption.

V.
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