November 18, 2009 07:15 AM UTC

It's called spending principal

• 2 Comments
• by: DavidThi808

Rule number one for increasing your wealth is not do not spend principal. In fact, you need to re-invest interest/profit as well as keep all principal invested to grow.

This holds not just for trust-fund babies, but for corporations, families, everyone. A company that stops investing in R&D, a family that does not provide it’s children with a good education and health-care – all face the same thing.

And this a short increase as you gain the advantages of previous investment without the cost of ongoing investment. But then comes the inevitable decline.

from the Denver Post we have:

Colorado is falling behind surrounding states when it comes to winning new jobs and increasing incomes, a report from the Metro Denver Economic Development Corp. released on Tuesday warns.

…

But in several areas, the state lags. It ranks 47th for state and local funding per student for higher education and 47th for its student-to-teacher ratio in primary education. The state ranks 29th for its high school graduation rate.

Signs point to the state slipping. Per capita income has fallen from 8th to 13th in recent years and per capita export dollars dropped from 33rd to 45th.

What Colorado has been doing is spend down the principal invested in this state for the last 150 years.

For the first 10 – 15 years the Republicans could make this look like free money. Invest less, keep more, everything continues ok. Everyone wins.

But now we’re into the period of decline. And changing the direction of the slope is now a lot more expensive, because we have to undo the damage of burning through our principal for the last 15 years.

Any good businessperson understands the situation we are in. Unfortunately most Republicans are not business people. They love the free enterprise system, but they don’t understand it in practice. (To be fair, the same is true of most Democrats & Independents.)

And to make it even worse, the bill for our “have out cake & eat it too” ways has come due in the middle of a depression – the one time it does make sense for the state to spend a bit of it’s principal.

The question is, can anyone get this across to the voters? Because they sure as heck like being told they will get everything they need without having to pay for it.