Building America to last: a smarter investment strategy can end the recession and balance the budget.

• Author: Miller, Matthew
• Position: Includes related article on deficit financing

A smatter investment strategy can end the recession and balance the budget

And so, my fellow Americans, to summarize my budget recommendations, I propose that we stick to the economic program that has gotten this great nation where it is today-borrowing and spending about $300 billion a year more than we take in.

We won't use that money for investments in transportation, schools, and research that might spur long-term economic growth and thus create enough wealth to repay our creditors. Instead, we'll go deeper into debt to meet current expenses, like subsidies for those who can buy the political influence to get them.

Oh, I can hear the naysayers now-whining that piling more debt onto our kids to pay these short-term bills is unfair. Or immoral. Or that it k anyone guess how they'll be able to dig themselves out without living less well than we do.

Well, my fellow Americans, I refuse to yield to those who doubt the pluck and ingenuity of America's children. God bless those children -and God bless these United States.

Okay, maybe these won't be the exact words we'll hear when the president unveils his fiscal 1993 budget this winter. And maybe George Mitchell and Tom Foley's Democratic response won't sound like this either. But strip away the window dressing and the partisan rhetoric and the facts are plain: This borrow-and-spend philosophy is indeed the bipartisan fiscal policy of the United States, and it has been for 10 years.

The fact that it's "borrow and spend" and not "borrow and invest" helps explain why our children and grandchildren will curse our stewardship. The record, after all, is grim. We've quadrupled the national debt from $900 billion in 1980 to $3.6 trillion today-with $5 trillion in sight by 1995 if we keep hustling. That means that, while real incomes have stagnated, every household's share of the debt tab has spiralled in the last decade from $1 1,000 to $39,000. This year, interest on the debt edged out defense as the federal government's biggest expense.

Debt is not always a bad thing, of course; it's what it's used for that determines whether it's been smart or stupid to borrow. Yet the federal budget process ignores, by design, the one distinction that businesses, states, and families all use to make sure they're thinking soundly about debt: the distinction between investment and consumption.

Investment is what builds wealth, either for individuals, businesses, or nations. Companies invest when they build a new plant to hike production; so do cities when they upgrade their airports to attract new business to town. This type of investment creates both short-term jobs and long-term economic benefits-a combination that can help jumpstart a sluggish economy. Investing in transportation, for example, pays off not only in smoother, safer roads somewhere down the line, but also in the short run to the tune of some 41,000 new jobs for every $1 billion spent.

Consumption expenditures, by contrast, are just what they sound like. Dollars spent now on, say, plane fares or pension payments or paper clips are gone forever. Lumping investment and consumption expenses together, as the federal budget does, is more than just an accounting no-no. It's as if Uncle Sam saw no difference between borrowing to go out to dinner and borrowing to buy a house.

Say you're a Department of Health and Human Services official, and your Medicaid watchdogs need new office space. You scout the market and come down to two options. You can rent the space you need on a 20-year lease at 1 million a year. Or you can buy a good building outright for $5 million. You don't need an MBA to know that buying the building is a better deal. But because it involves a bigger cash outlay this year, your boss tells you it's a no-go. He'd rather do the lease -which looks on his budget like a smaller expense-and use the $4 million "extra" for other agency needs.

Welcome to the world of "cash budgeting," where taxpayers fund such cockeyed choices because, in the government's "unified" budget, all outlays are created equal. That basic bookkeeping disincentive plays out in thousands of different, expensive ways, even in places where a small investment has a clear economic payoff. Consider: The energy efficiency of government buildings has remained flat over the decades (the Environmental Protection Agency and Department of Energy are among the least efficient), while the efficiency of private sector buildings has grown two- or threefold thanks to new technology. Getting the government up to par could start paying off this winter. Similarly, a relatively minor investment in an IRS computer system that could systematically pick out tax cheats would begin saving federal money immediately. So would a beefed-up investment in the government's Women, Infants, and Children Program for improving the nutrition of expectant mothers and young children, as money spent now on properly feeding these babies saves millions in health care costs later. But these days there's no budgetary compulsion to make those investments. All incentives point in the opposite...