Public Spending versus Public Investing: There’s a Big Difference

It’s time for politicians (especially those who pretend they’re fiscally responsible) to stop speaking of public spending and public investing as though they’re the same thing. Let’s recognize that there is relatively little return on government dollars allocated for routine expenditures, compared to public dollars wisely invested in high-return endeavors such as scientific and medical research, infrastructure, widespread connectivity, quality education, and programs to curtail hunger, poverty, and homelessness.

All government spending is not the same. Some spending can be unproductive, if not wasteful, while some can reap huge benefits to the nation, and it is time for discerning, intelligent people to recognize that. Some government investment produces strong and continuing growth, while some government spending produces little to no ongoing economic benefit. For example, fireworks and community pyrotechnic displays on the 4^th of July are fun and great for morale, and, of course, people are employed making them (mainly in China) and selling them here in America, and, yes, some jobs are created to cater to the crowds who come to ooh and aah over the pyrotechnics. That’s all fine, but purchasing Zeus Flourescent Artillery Shells does not constitute an investment in the future.

To further illustrate the point, we spend an estimated $1.3 billion a year on fireworks, mainly produced elsewhere. They are fired off once, and all we have to show for it is some smoke lingering in the air, picnic trash, and, often, a traffic jam. Yes, of course, people are paid to sell the fireworks, and many wonderful resorts and communities host barbeques around the 4^th of July fireworks displays. Fireworks on the 4th are fun. But that $1.3 billion is, essentially, for consumption and not for investment. For those who like quirky statistics, that expenditure buys an estimated one pound of fireworks and pyrotechnics for every man, woman, and child in the United States. But, as they say, at the end of the day, it all goes up in smoke.

Now, let’s focus on public investment that returns real value. Two weeks ago, this column reviewed the nation’s investment in the Apollo project to send Buzz Aldrin and Neil Armstrong to the moon, which cost about $152 billion in today’s dollars. That expenditure was widely ridiculed at the time. Former President Dwight Eisenhower called it “nuts.” President John Kennedy, the political father of Apollo, actually didn’t think it had much value either other than accelerating our expertise in rocketry.

Given all that has grown out of Apollo, its cost could, today, be considered the most significant investment ever made by any government next to, perhaps, the Internet which, incidentally, is also the result of an investment by the United States. The Internet has connected nearly every man, woman, and child, every business, every government, every university, every healthcare facility, and, well, just about the entire planet. Tech-giant, Cisco, says the value of this US investment would be about $19 trillion today.

So, just how much did the United States invest in the creation of the Internet?

The first stirrings of internet potential could be attributed to the early mega computing and processing companies such as IBM, Xerox, Remington Rand (Univac),Intel, and others. These systems, however, were not designed to communicate with one another. On January 1, 1983, the United States, under President Ronald Reagan, invested $124 million ($330 million in today’s dollars) to create a new communications protocol that would enable certain academic and other research organizations with defense contracts to communicate with one another.

 Before that date, communication between computer networks was limited to a relatively small group of academic and research organizations that had contracts with our Defense Department. That relatively small and discreet network was known as the Advanced Research Projects Agency Network, or ARPANET for short. The Reagan Administration funded the creation of a new communications protocol called Transfer Control Protocol/International Protocol that all geeks will recognize simply as TCP/IP. From that time on, all networks could communicate with one another with a new universal language. The Internet was, thus, born at the cost of $330 million in today’s dollars.

So, when we contemplate new public investments that common sense should tell us America needs, let’s focus on what those investments will do for America. Let’s stop the semantical gymnastics over the definition of infrastructure. Yes, the time has long since passed when we should have addressed the state of America’s roads, bridges, and public transit. But other facets of life in America, call it human infrastructure, such as outstanding educational opportunities for all of our children, programs to encourage much needed private-sector construction of decent housing, rethinking our nation’s electricity grid so that Americans in this 21^st century are never again left shivering without power in the middle of winter, and so that broadband is not an urban luxury, and so that first-class medical support is readily available to everyone who calls America home. We can and should accelerate investment in clean energy, telecommunications, and artificial intelligence.

Today, because of what that 1983 federal $330 million investment has morphed into, we all communicate routinely with handheld computers that we can carry in our shirt pockets compared to the first UNIVAC (Universal Automatic Computer) that the Census Bureau purchased in 1951 that weighed 16,000 pounds and required 5,000 vacuum tubes.

 Let that marinate for a few moments while we consider public investment versus plain old public sector spending.

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