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Spending to Save

Businesses should not follow Washington, D.C., by adopting a shortsighted approach to fiscal matters.
By Mark Roberti
Tags: Defense
Aug 08, 2011Like many people, I don't have a very high opinion of politicians, but my contempt for the elected class in the United States hit an all-time low over the past couple of weeks, with the battle over the debt ceiling. I'm all for decreasing spending and reducing the national debt, but the deal struck by Democrats and Republicans over increasing the debt ceiling was bad for the U.S. economy, and is a model that businesses should never follow.

Politicians in both parties took the easy route: They slashed nonmilitary discretionary spending. Why is that easy? Because there are no big constituencies that will vote you out of office if you lower spending for roads, medical research and other projects. It's more difficult to cut military spending or Medicare—or to raise taxes on the wealthy—because there are groups that will punish those who make such choices.


Discretionary spending, however, isn't the problem. The problem is the growing cost of caring for an aging population, and cutting nonmilitary discretionary spending might make it harder to pay for entitlements in the long term, since you need to invest in new technologies in order to save money.

The Veterans Health Administration (VHA), part of the U.S. Department of Veterans Affairs (VA), is looking to deploy active RFID technologies to track hospital equipment and critical assets. This will increase efficiencies, improve the quality of care and boost asset-utilization rates, resulting in lower long-term spending on equipment (see VHA Moves Toward RTLS Rollout).

The VA is spending now to save later—but cutting discretionary spending means there won't be money for investing in RFID and other technologies that will improve the efficiencies of ports, airports and road infrastructures. As a result, the government will likely spend more money in the long term, thereby exacerbating the long-term debt problem—and it's likely to take in less revenue, because the economy will grow more slowly if the infrastructure is not upgraded to support growth.

Businesses also need to invest in order to save. Too many companies, focused on their short-term profitability, put off investing in RFID and other new technologies. They know that these technologies can help them become more efficient in the long term, but they don't want to invest now, because that lowers profits in the near term. And that's too bad, because investors will likely pay the price in the future, once competitors that have been investing enjoy lower costs and gain market share.

Some companies that focus too much on the short term might go out of business. That's OK—it's part of capitalism. But if the government fails to upgrade the infrastructure on which all businesses depend, then all businesses suffer, even those that have invested in their own infrastructure. Believe me, I'm all for cutting spending and reducing the debt, but can't politicians do it smartly, the way successful businesses do?

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.
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