Thursday, November 27, 2014

Return on Investment

In rational debate the parties will, at some point, discuss the return on investment as at least one of the factors in determining a course of action.  For example, let’s say you have bought a new aircraft and it has two engines.  You’ve planned that each engine should last at least 700 hours before it has to be taken off and refurbished.  When you start flying that aircraft you find it is only getting 50 hours between engine removal because the vendor didn’t know how bad the dirt was and what it would do to the engine.  So you look at a program to fix that problem and determine it will cost $100 million to design a new dust filter, but it will improve the engine reliability to about an average of 1,000 hours.  As you do the math the $100 million dollar investment will pay for itself by reducing the engine maintenance costs in only 5 years.  Since you expect to keep the aircraft for another thirty years this is a good return on investment since you will save over $600 million over the life of the aircraft. (BTW the exact math can be debated, but for illustration this is good enough).
So as we look at the government programs what kind of return on investment are we really seeing?  Has Head Start really prepared more disadvantaged pre-school children to perform to expectation in school, or has it only paid a lot of organizations to babysit?  Does the student loan program really produce a more educated group of young people capable of excelling in today’s world, or does it only create a group of people who’ve spent four years accumulating debt, only to find work at Sears as a salesperson?  Does raising the minimum wage create a better life for those who are affected, or does it just inflate the overall cost of goods and lead to replacement by automation?  What is the positive return on investment for these programs and can it be proven?
There are clearly programs that have had a wonderful return on investment, I am just not sure if they continue in a society were entitlement becomes the expectation.  For example, up until WW II veterans were returned to society with little thought of their injuries or needs.  This led to protest and riots after both the civil war and WW I.  After WW II the Congress and the President established the Veterans Administration to administer the hospitals, the home loan program, and the college loan programs.   As a result, a generation of individuals who would not have otherwise had the opportunity for college…went.  A generation who would not have otherwise been able to afford a house became homeowners.  As a result colleges grew, and whole towns sprang up.  The suburbs were invented.  Off-hand I’d say this was a measurable return on investment as the economy prospered and society found its way to new frontiers like space.

Does sending the majority of our tax dollars to the federal government really create better security and defense, better infrastructure, and better economy, or would those dollars be better spent close to home?  As we watch society devolve into one of special interest groups and racial divide, what is the next good return on investment?

No comments:

Related Posts Plugin for WordPress, Blogger...