Today, I'll start with his post Wake-up call to Concord: It’s not about the money. The Concord Group is for limiting spending and government deficits. As I've written before, my belief is that the current federal government deficit of a bit over 2% of GDP is both sustainable and desirable and Steve Conover seems to agree with that. The first statement of his that gives me pause is:
My career in corporate finance taught me that if a given investment meets or beats the risk/reward criteria (“what we get for the money”), it should be funded—period.
I think that the concept of equating corporate and government finance is flawed for a variety of reasons. A critical portion of the above sentence is "risk/reward criteria." I'm one of the management/founders in a small business and I have a variety of pending investments that meet or beat my risk/reward criteria. Yet they're not funded. Why? Because those with funds are not willing to lend me money to fund those projects. Why? Because lending me that money doesn't meet their risk/reward criteria.
The first point is that there are important checks and balances in the corporate world that help ensure that money is efficiently allocated while balancing risk and reward for all of the stakeholders. For the most part, that's either missing or much more indirect at the level of the federal government. Whose risk/reward criteria are we using at the federal level? A bunch of older congressmen who are interested in being re-elected at any cost and who will die before the impact of their poor investment decisions affects us all?
The second point is that the results are much more measurable in the corporate world. You know, the old "bottom line". After being funded, did the investment increase profitability? Again, this is often much harder to measure at the federal level. It's hard to know the effect of large, national projects because there's nothing to compare it to - there's generally no control group. Did those education dollars really provide a good return on investment? Did the extra money spent on defense really help? Who knows?
The third point is that Conover is a little too confident in (not Skeptical enough of?) his own analysis. I think the combination of folks like the Concord Group and Conover and everybody else ends up arriving at a reasonable balance. Part of that balance includes the dialog between Conover and the Concord Group so I have no interest at all in stifling that debate. I just want to point out some problems in his argument.
The other excerpt from Conover's post is this:
I am a Peacenik—correction, a PeaceThruStrengthNik—and I am willing to continue purchasing Treasury bonds to help fund the necessary national security investments.
I would claim this concept doesn't quite work either. To actually have a strong military, you need to fight wars. I think an illuminating metaphor is the concept of buying weights in order to be strong. Buying the weights isn't enough. You actually have to use them to get strong. Buying military equipment isn't enough. You actually have to fight wars to have a strong military. I'm completely convinced that our military is hugely stronger because of its experiences in Afghanistan and Iraq. But once you support the fighting wars, you're not any sort of Peacknik. You're a hawk, though there's not necessarily anything wrong with that in my opinion.