Report

Beyond Recovery: America's Public Investment Deficit

Isaiah J. Poole — Tue, 10 Feb 2009 07:40:28 -0800

Conference

Click the logo for video and other resources from the 2009 "Thinking Big, Thinking Forward" conference.

EXECUTIVE SUMMARY

It’s time to look ahead. The need for a bold recovery plan to address the accelerating downturn understandably consumes Washington’s attention. Nonetheless, the challenge of getting the economy growing again, though vital, is not sufficient. Our response to the crisis must plant the seeds for the new economy of the future.

We must not, once we pull the economy out of recession, return to business as usual – a high-consumption, low-wage economy based on asset bubbles and foreign borrowing. That strategy was never sustainable and is no longer available.

A sustained recovery will require a dramatic change of course – and a dramatic change of priorities. We must make the investments vital to a dynamic economy able to sustain a broad middle class in a global economy. This requires investing in the public goods that are the foundation of a healthy society and a dynamic economy – from a 21st century infrastructure to world-class public schools. We need to curb short-term private speculation and bolster long-term public investment.

The crisis forces us in that direction. And the Obama administration has wisely offered up a plan – The American Recovery and Reinvestment Act Of 2009 – that would make an $800 billion down payment on vital investments, from clean energy to public schools, which can and should be sustained for the future.

We should begin with infrastructure, the backbone of the economy. Much of our infrastructure dates from the World War Two era; many of our water pipes were laid in the 19th century. We need to rebuild our transportation infrastructure for rail lines and mass transit. We need to rethink our energy sources to move away from polluting technologies and destabilizing dependence on foreign oil. Finally, we need to return attention to our people, the ultimate resource. We need quality daycare for the young – with professional salaries and standards – and guaranteed, affordable health care for everyone.

Deficits in Perspective

One concern that constrains our thinking is, of course, the federal budget deficit. The word has “deficit” become a stand-in for words like waste and irresponsibility – so running a deficit is nearly synonymous with irresponsibility, rather than an economic variable to be taken into consideration among many others.

The U.S. annual budget deficit is likely to exceed $1 trillion next year, a stunningly large number. Measured as a percentage of GDP – that is, in proportion to the size of the economy – a $1 trillion deficit appears more manageable. The question really is one of scale. Are we going so far in debt that we can’t dig out?

In fact, our debt is not extraordinary by historical or international norms. Scott Lilly of the Center for American Progress and former director of the Joint Economic Committee, points out that a $1 trillion federal budget deficit in 2009 “would push the public debt – even after the profligacy of the Bush years – to about 47 percent of GDP, and a $2 trillion-dollar deficit will push it to only about 53-percent levels — only a few percentage points above where it was in the early 1990s.” This is lower than most advanced industrial countries – all of whom are raising their deficits now also. France’s public debt is 67 percent of its GDP; Canada’s is 64 percent. Japan sets the scale at 182 percent.

Large deficit spending to make sensible investments to put people to work in this crisis, therefore, is both necessary and affordable. In the long term, of course, sustained expansion of public investments vital to our future will have to be paid for. That will require new priorities – squandering fewer resources on policing the world and subsidizing agribusiness, for example. Progressive tax reforms would also be a good start – closing loopholes, collecting unpaid taxes, taxing income on wealth at the same rates as income on work. We can afford to make these investments. Indeed, it will cost us much more – in economic inefficiency, a poorly educated citizenry, lost markets – if we do not make them.

Main Street Recovery Program

OurFuture.org Staff — Tue, 23 Dec 2008 12:07:47 -0800

Our economy now faces the most serious crisis since the Great Depression. The financial crisis that was triggered by the bursting of the housing bubble has now spread to the real economy, and we face a sharp downturn that is spreading across the globe. A serious recession now seems unavoidable in the United States, as well as Europe and Japan. The developing world is already struggling with financial turmoil and economic decline. For the first time since the 1930s, we face a real risk of deep worldwide economic contraction.

Restoring economic growth will require a bold, multifaceted plan. This must begin with a recovery program for Main Street — substantial fiscal expansion to revive the real economy.

Main Street Recovery Program

Publish at Scribd or explore others: United States Politics financial economy

The Investment Deficit in America

Isaiah J. Poole — Wed, 19 Nov 2008 07:18:42 -0800

RELATED RESOURCES

Research Director Eric Lotke discusses the "Investment Deficit" report and the "Real Investment in America" conference.

Conference: "Real Investment in America" | Conference liveblog
Robert Borosage: "Free Fall"
"Invest in America" website

Read full report >>

America is falling apart. Falling apart, and falling behind.

Previous generations of Americans built interstate highways and transcontinental railroads. Now we sit in traffic.

Americans from an earlier era pioneered universal primary education and chartered great universities on public land. They enacted the G.I. bill to give the greatest generation the access to college that helped build our modern middle class. Nowadays American students toil in overcrowded classrooms with leaky roofs, while the cost of college soars out of reach.

America grew up investing in its land and its people. Historically, we directed roughly 8 percent of our gross domestic product to long-range investments, and the investment paid off. Now we are down below 4 percent. Our post World War II infrastructure is starting to decay, and we aren’t replacing it. We are lamenting the loss of jobs rather than hiring people to renew and rebuild.

Other countries are racing past. China spends 9 percent of its GDP on infrastructure investment and opens a new subway system every year.

From physical infrastructure like roads and bridges to human capital from kindergarten to college, this report comprehensively examines our investment deficit. It documents yesterday’s achievements, today’s problems and tomorrow’s solutions.

As this report is released, America’s economy is in a deep downturn, which is now spreading across the
globe. A major recovery program is essential to lift this economy from what is likely to be the worst
recession since the Great Depression. Direct public investment—in new energy and conservation, in modernizing our infrastructure, in education and training, and research and development—should be the centerpiece of any recovery plan. That is not only necessary to lift the economy in the short run; it is a vital down payment on the sustained public investment that we need to sustain a competitive and decent society in a global
economy.

The needs listed in this report provide a guidepost for both recovery and for long-term, sustainable growth.

Financing America’s Infrastructure

OurFuture.org Staff — Thu, 13 Nov 2008 19:26:49 -0800

Infrastructure: Boring Word, Hot Topic

OurFuture.org Staff — Thu, 13 Nov 2008 19:23:34 -0800

Back to Basics

OurFuture.org Staff — Thu, 13 Nov 2008 19:19:01 -0800

Public Investment Works

OurFuture.org Staff — Thu, 13 Nov 2008 19:15:29 -0800

The Macroeconomic Considerations of a Public Investment Strategy

OurFuture.org Staff — Thu, 13 Nov 2008 19:10:50 -0800

Investing in U.S. Infrastructure

OurFuture.org Staff — Thu, 13 Nov 2008 19:05:35 -0800

Infrastructure Principles

Terrance Heath — Thu, 13 Nov 2008 12:17:28 -0800