Home > Business, Economics, Politics > Didn’t some of these guys go to Wharton and HBS?

Didn’t some of these guys go to Wharton and HBS?

Something they teach you in business school: When a project’s returns are in excess of its financing costs, invest in that project.

The republicans think they are the party with business sense… how the heck does it make sense to turn down 2% financing? That’s exactly what the country has access to right now, and we could be doing what any business would do if it had access to funds at 2%: investing in anything with returns over the hurdle rate. 2% is a low hurdle. Off the top of my head, additional spending in physical infrastructure and education both would easily return more than 2%, and that return is not currently constrained by low consumer demand: regardless of how sour the economy becomes, people still need to get educated and use our roads, bridges, and ports, and these are the types of public investments that are the most likely to facilitate additional private investment.

Instead we are having a silly debate about the national debt in the context of the century’s worst economic conditions. Primarily, the problem right now is a lack of investment that stems from low confidence and a high perception of risk. There is strong evidence that investment is being hampered by market uncertainty, and a strong case to be made for government directed investment to bolster consumer confidence and kick start the economy.

Our physical infrastructure is aged and our education system and immigration policies (our human capital infrastructure) are not world leading or cutting edge (stagnant is perhaps the best description). We don’t necessarily need to be leading the world, but soon both types of our infrastructure will no longer even be considered “world class”.

Categories: Business, Economics, Politics
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