Saturday, April 13, 2013

Living within our means along with running government like a business

I just finished the Khan Academy course on finance which covered the basics of how companies are run. I highly recommend it for anyone who invests, which should be everyone. While it is called "stocks and bonds" which everyone should understand and isn't that difficult it includes the background of how businesses work and how they start which is very important.

Today I was reading a news article about Washington State's new budget where the Republican Senator who drafted the budget announced that we were "living within our means" which made me immediately think of their claim to want to "run government like a business" which immediately made me think after watching those educational videos "what a bunch of liars".

When people start a business they usually won't have the capital required start a business, so they will take a loan to get their business running to the point where they are self-sustaining. While taking this course and writing notes I looked at companies' balance sheets to get practice and basically every company I looked at had some sort of liability in the form of debt. Beyond that, the reason companies initially go public is to get cash in return for selling part of the company to continue to grow with the promise to pay back the stock if someone sells it back.

The root of the message is, the government can choose to do one of two things, run like a business by making an initial investment that will then pay off, (as we did in the 1930s) or live within their means and only investing what they already have in hand with a religious fervor against taxes which usually means cutting social spending. (which Greece is doing right now) One cannot do both. One would think that Mitt Romney would have understood this given how he was in Bain Capital all these years, but he apparently decided to campaign to the lowest common denominator who doesn't understand how to run a business because they think it is "boring" or "too complicated". But the root of it is, all the Republicans who preach both policies are liars or fools (by talking about something they clearly don't understand) and should be removed from office.

Given a choice, I would much rather see a government with a willingness to invest in its people than a government with a religious belief that they need to cut taxes, which is usually followed by cutting funds to schools and health care which is usually followed by a recession.

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