Investment

The word "investment" has become so debased as a politician's euphemism for "spending" that most have stopped looking at the difference. Don Luskin spots one:

The fundamental mistake is that the $700 billion would be used to invest in income-producing assets, not to fund consumption. A dollar spent in Head Start, say, or in socialized health care, is gone forever, even though its expenditure may produce a benefit for whomever receives the service it funds. But a dollar spent on a mortgage earns interest, and can eventually be sold -- perhaps even at a profit. And in the meantime, if the government's temporarily holding these assets helps unlock the US real estate and securities markets, then so much the better. To be clear, I'm not endorsing the federal government investing $700 billion in private assets. But love it or hate it, it is investment -- not consumption.

Luskin never says that it is a good investment, and he provides for difference and discussion. But it is worth looking at the bailout in these terms and remembering that the gub'mint actually did turn a profit on the RTC.

Economics and Markets Posted by jk at September 22, 2008 1:33 PM