Reviews | Spend as if the future matters


For centuries America has invested taxpayer dollars in its future. Public funds built the physical infrastructure from the Erie Canal to the interstate highway system. We have also invested in human capital: Universal education arrived early in the United States, and America essentially invented the modern public secondary education. This public spending laid the foundation for prosperity and helped make us an economic superpower.

With the rise of the modern right, however, America has turned its back on this story. Tax breaks – essentially giving money to the rich and hoping it would trickle down – have become the solution to all problems. “Infrastructure week” became a punchline under Donald Trump in part because the Trump team’s proposals were more about crony capitalism than investment, in part because Trump never showed the willingness to override preservatives who opposed any new major expenditure.

Now, Joe Biden is trying to reconnect with the tradition of future-oriented public spending.

Rebuild it better legislation which was passed by the House last week is not a pure investment plan; in particular, it includes substantial health care spending geared more to helping Americans in the short term than in the future. But about two-thirds of the proposed expenses are indeed investments in the sense that they should have big profits in the future. And if you combine Build Back Better with the infrastructure bill already passed, you see a agenda this represents about three quarters of capital expenditure.

This is how I read the Biden program as it currently stands. Total new spending is estimated to be around $ 2.3 trillion over a decade. This total would include between $ 500 billion and $ 600 billion in spending on each of the following three elements: traditional infrastructure, restructuring the economy to tackle climate change and children, the last element being mainly pre-kindergarten and childcare, but also involving tax credits that would greatly reduce child poverty.

There is every reason to believe that all three types of expenditure would have a high social rate of return.

Harassed supply chains have reminded everyone that old-fashioned physical infrastructure remains extremely important; we still live in a material world, and getting things to where they need to go requires public and private investment.

When it comes to climate investments, the damage caused by global warming is becoming increasingly evident – and droughts, fires and extreme weather are just the tip of the disasters to come. Build Back Better investments wouldn’t come close to ending the danger, but they would mitigate climate change, partially protect us from some of its consequences, and make it easier for the United States to lead the world toward a more comprehensive solution. The money would therefore be well spent.

Finally, there is overwhelming proof that helping families with children is a high-return investment in the nation’s future, as children whose families have adequate resources grow into healthier and more productive adults.

So what’s not to like about this diary? No, that wouldn’t be inflationary: don’t take it from me, listen credit rating agencies, who say the same thing. The approved and proposed spending would be quite low as a percentage of gross domestic product – which the Congressional Budget Office predicts at $ 288 trillion over the next decade – and largely paid for with new taxes, so it would have very little inflationary impact.

Oh, and while some of the ‘pay-for’ are questionable – in this case, mostly on the traditional infrastructure bill; Rebuilding is better more or less paid – which means that spending would likely increase federal debt somewhat over the next few years, that the increase in debt would be small relative to GDP, and, given low interest rates, would hardly increase the costs of the government. debt service. In the longer term, the return on public investment may well be enough to reduce the deficit.

Yet Republicans denounce the Biden agenda as socialism, because, of course, they are. Hey, by their standards America has been ruled by socialists for most of its history – people like DeWitt Clinton, the governor of New York who built the Erie Canal, and Horace mann, who led the common school movement for universal basic education decades later. And don’t even get me started on Dwight Eisenhower, who presided huge government investment and a maximum tax rate of 91 percent.

Certainly, the Biden plan would reduce economic disparities, both because expanded benefits would be more important for less well-off families and because its tax changes would be strongly progressive. But public policy that reduces inequalities, like public investment, is squarely in our national tradition. America Wholesale invented progressive taxation, and as economist Claudia Goldin has Noted, the high school movement was “rooted in egalitarianism”.

So don’t believe the politicians who try to portray Biden’s investment agenda as somewhat irresponsible and radical. It’s highly responsible and it’s an attempt to restore the all-American idea that government should help create a better future.


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