How many times have you heard a politician say, “Government needs to be run more like a business”?  Unfortunately, every time the public sector has a chance to do exactly that, those same politicians suddenly have a change of heart.

The latest example is the persistent failure of the Republican controlled Congress to support major investments in U.S. public works while interest rates are at historic lows. Compare that to the private sector.  Every car dealer, furniture store and realtor is encouraging consumers to buy their products at little or no interest.  Buyer Reports lists 21 manufacturers who are offering zero percent loans on many of their 2015 and 2016 models.  Corporations were encouraged to investment in new plants and equipment, taking advantage of Federal Reserve near-zero discount rates.

What does this mean in real dollars?  If you borrow $1,000 at three percent for twenty years (the average term of a public bond), it will cost you $331 in interest.  In contrast, if you borrowed the same amount at 0.5 percent (as was possible at the height of the recession), interest would total $51, a savings of $280.  Imagine if Congress had authorized a public works program of $10 billion in 2012, when interest rates were at their lowest.  The savings over 20 years would have been $2.8 billion dollars.

Seemed like the perfect time to make a smart investment in the country’s future.  Additionally, the injection of $10 billion into construction projects would have created a minimum of 200,000 employment opportunities, easing the impact of the recession on working families.  The private sector has responded.  Unfortunately, Washington did not get the message.

So the next time you hear your Congressman or Senator suggest government needs to behave more like a business, watch what they do, not what they say.

For What It’s Worth
Dr. ESP