Gwyn Morgan’s column in the November 14 Globe and Mail Report on Business was titled “Why big governments are such slow learners”. Towards the end of his column, he stated: “The Greek tragedy is a symptom of the lethal delusion shared by Europe and the United States – the belief that governments are able to counter the forces of economic reality by pouring borrowed cash.”

While not stated explicitly, Morgan implied, like many other critics of government spending, deficits and debt, that deficits, increasing debt levels and most types of spending are unproductive and inhibit the future prospects of a country. Austerity has become the rallying cry for critics of government; and the so-called debt vigilantes – the speculators out to make a quick and easy buck or two – increasingly are backing more and more governments into a corner where is escape is possible, in the absence of central bank intervention, only after draconian spending cuts are made. Increasing taxes as a solution are a no-no simply because such measures will not achieve the ultimate goal of dramatically scaling back government.

I suggest that if governments reported their finances similarly to corporations, the fiscal picture would look much better and the hypocrisy of the critics would be more apparent. For example, many government expenditures are investments – capital expenditures. Expenditures on infrastructure clearly are in this category. Some of the expenditures on training, healthcare, education, R&D (e.g. NASA and the Departments of Defense and Energy in the US), and the judiciary also should be classified as investments, for all of them contribute to enhancing the productive capacity of the economy.

Such expenditures should be excluded in the calculation of the budget balance – the equivalent of a company’s income statement – and instead be included in the government’s cash flow statement, as is the case with investment expenditures by companies. If these expenditures were treated in this manner, most government deficits would disappear immediately, replaced with budget surpluses. Of course, governments would report negative cash flows from operating and investing activities, and they would have to borrow to cover their net cash requirements.

But this is exactly what most companies do, especially the ones that are growing rapidly and investing to enhance their competitive positions.

Gwyn Morgan used to be the CEO of Encana. In 2010 Encana recorded negative cash flow of $2.4 billion from its operating and investing activities. The company also had net debt of $7.6 billion on it balance sheet. Mr. Morgan is currently a director of SNC Lavalin. In 2010 SNC Lavalin had negative cash flow of $537 million from its operating and investing activities.

The debate over government finances would be much more useful and intelligent if the government accountants treated investment spending similarly to corporations. The debate would then entail issues such as how much should government invest; where should the government invest; and how should the government invest? The debate also would focus on whether governments need to balance their operating accounts at all times, as well as the appropriate role for government in establishing the rules necessary for markets to function well, and the best ways to enforce the rules.

However, until the accounting for government expenditures is changed to separate operating from capital expenditures, we will continue to be subject to the shrill cries that government spending is bad and government intervention is bad.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.