The biggest lie in the federal budget is that all spending is the same

by Ezra Klein

Here's the problem: the federal budget makes no distinction between money the government spends and money it invests.
But there is a difference. A dollar spent on Social Security is a dollar that the federal government no longer has. That's different from a dollar spent building, say, a federal courthouse, where the government trades a dollar worth of currency for a dollar worth of courthouse. These kinds of spending are not the same, and the government shouldn't treat them as if they are.

TREATING INVESTMENT AND SPENDING AS IDENTICAL CAN LEAD TO SOME REALLY DUMB DECISIONS

Treating investment and spending as identical can lead to some really dumb decisions. If the government cuts spending on Social Security by $10 billion then it really has saved $10 billion.
But if the government cuts spending on infrastructure repairs by $10 billion then it looks like it's saved $10 billion, but really it's just pushed $10 billion worth of infrastructure repairs into the future — and because the bridges may crumble and the water pipes might break, deferring that $10 billion in spending might mean the government has to spend $20 billion instead.
Enter a capital budget: the idea that the federal budget should treat capital investments differently than other kinds of spending.
This isn't some crazed concept dreamed up by FDR nostalgics. It's how most businesses run their budgets, too. They keep an eye on annual cash flow, which is basically what the federal budget tracks now, but they're interested in more than that: they're interested in future profits and losses, and so they try, as best they can, to break out the investments that are meant to generate those future profits and stem those future losses.
The hard part there is they also estimate how much value their capital assets are losing each year, and they treat that, correctly, like a hit to the company's value. You don't lose money when you initially buy a machine for your company — after all, that was simply an exchange of money for machine, and the machine was presumably worth the money you paid for it. You lose money when the machine stops working, because then you don't have the money or the machine.
So, to use the government as an example, capital budgeting would make clear that if our roads are degrading to the tune of $20 billion a year, then we need to be spending $20 billion a year on repairs just to stay even. Spending nothing means losing $20 billion in value, not holding even.

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