Investment, Spending, and Debt

From this article in The Conversation - Menzies, a failure by today’s rules, ran a budget to build the nation:

“What corporations do, and what governments used to do, is to distinguish between capital spending (spending that delivers future benefits) and recurrent spending (spending that delivers transient benefits). Only the portion of capital spending that is “used up” in the current year is included as an expense, and this portion is called “depreciation”.”

“The reason that companies and households rack up huge debt is because they think the things they are investing in will deliver long-run benefits that far exceed the combination of the upfront costs and interest paid on the debt. Investment markets rarely complain about the “interest burden” carried by such companies. Rather, they often accuse them of having a “lazy balance sheet”, which means they haven’t borrowed enough to invest in growth.”