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August 7, 1992
Employment statisticsŠ..
Other data confirm an economy in faltering growth, but still growing. The July Purchasing Managers' Index moved up to 54.2 from 52.8, June Leading Indicators fell .2% after six straight modest gains, Construction Spending turned in its weakest performance in a year, down 1.5% in June.
As Mr. Clinton makes his move to corner the political center, his campaign presents two crucial words: "change" and "investment." The first is vague beyond meaning, but the second is particulalrly interesting to the credit markets.
Is this fellow a moderate in fiscal territory, a Truman/Kennedy type? Or another big spending liberal camouflaged by rhetoric?
An investment by government requires parting with cash. (Hard work can be investment capital also, but government has seldom been known for this kind of mobilization.) What is the difference between plain old ordinary spending, and glorious "investment?"
Return on invested dollars separates wise policy from pork.
For example, making the Arkansas river navigable from Baton Rouge to Tulsa was an investment. However, the real return from this project mostly showed up in the reelection of Congresspersons from nearby districts.
In endless deficit debates, some analysts say the country should have a capital budget, separating bridges, buildings, and aircraft carriers from mere spending. A capital good is one that's supposed to assist in production. Aircraft carriers fail as a capital good because they don't produce anything except more spending.
But when you get to bridges, there is an argument. Good bridges make it easy for labor to get to work. Ditto good roads the whole "infrastructure" argument.
There is much suspicion in the capital markets about the validity of infrastructure investments. Do we really need more/better roads when fewer people move, and more information does? It was underpaying trucks on the heavily subsidized highway system that put the betterfortheenvironment railroads out of business.
Education spending is easier to justify, but in constant dollars we already spend double the amount per pupil as twenty years ago. Results, anyone?
As the campaign slops on, try to figure out if the lead ham is going whole hog, or for real investment.
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