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This man has an earned doctorate, but that doesn't mean he's smart. This may be the most preposterous thing we've ever read regarding government spending.
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America has a deficit problem. But the country’s biggest deficit isn’t the federal budget deficit. It’s the deficit in public investment. (Two preposterous claims in the first sentence. Dr. Reich will not bother to justify these assertions.)
The public investment deficit is the gap between what we should be investing in our future — on infrastructure, education, and basic research — and the relatively little we are investing. (Dr. Reich simply makes this up. There is no "we," there is no government mandate to invest in our future, and "we" have already invested trillions of dollars on these things with nothing to show for it.)
Increasing public investment needs to be a major goal of the Biden administration.
Public investment is similar to private investment in that we invest today because of the payoff in the future. (No, it's not. The private sector spends its own money as it chooses. Government spends other peoples' money without regard for their interests or preferences. The private sector chooses investments in order to meet the needs of their customers. The government chooses its "investments" according to political clout and pandering.)
The public investment deficit is the gap between what we should be investing in our future — on infrastructure, education, and basic research — and the relatively little we are investing. (Dr. Reich simply makes this up. There is no "we," there is no government mandate to invest in our future, and "we" have already invested trillions of dollars on these things with nothing to show for it.)
Increasing public investment needs to be a major goal of the Biden administration.
Public investment is similar to private investment in that we invest today because of the payoff in the future. (No, it's not. The private sector spends its own money as it chooses. Government spends other peoples' money without regard for their interests or preferences. The private sector chooses investments in order to meet the needs of their customers. The government chooses its "investments" according to political clout and pandering.)
The difference is public investment pays off for all of us, for America. (This has never happened.)
In the 1960s, we used to make a lot of public investments. But they’ve been steadily declining ever since. (Considering the National Debt is now $28 trillion [$87,000 for every person in the US] and the federal budget is $4.79 trillion [$15,000 per person], may we ask Dr. Reich where all this money has gone? Why do we need to spend more? And where is this money going to come from?)
That decline has been largely driven by so-called “deficit hawks” who argue against more federal spending. But as I’ve been saying for years, reducing the federal deficit just for the sake of reducing it makes no sense. (If he's been saying for years he's been wrong for years.)
Any business person knows that you borrow money for the sake of investing in the future of your business. (Government is not a business.)
In the 1960s, we used to make a lot of public investments. But they’ve been steadily declining ever since. (Considering the National Debt is now $28 trillion [$87,000 for every person in the US] and the federal budget is $4.79 trillion [$15,000 per person], may we ask Dr. Reich where all this money has gone? Why do we need to spend more? And where is this money going to come from?)
That decline has been largely driven by so-called “deficit hawks” who argue against more federal spending. But as I’ve been saying for years, reducing the federal deficit just for the sake of reducing it makes no sense. (If he's been saying for years he's been wrong for years.)
Any business person knows that you borrow money for the sake of investing in the future of your business. (Government is not a business.)
Those are wise borrowings. (Government is not wise, and has never spent wisely.)
Because then you can pay those debts off when they get bigger. (Government has never paid off its debt. It has not reduced the national debt since the 1950s.)
A national economy works exactly the same way. (No it doesn't.)
A national economy works exactly the same way. (No it doesn't.)
It doesn’t matter that we’re borrowing money, if we’re investing those monies that we borrowed from abroad — in education, training, infrastructure, factories — but we’re not. (It does matter that we're borrowing money. All those wasted trillions are prima facie evidence.)
The public return on infrastructure investment, based on 2020 report taking into account the pandemic, averages $2.70 for every single public dollar invested — yet we haven’t made those investments. (No, it's exactly zero. Every dollar spent by government is taken from someone else who now cannot spend that money. It's a zero sum game where the only change is who is spending the money.)
The public return on infrastructure investment, based on 2020 report taking into account the pandemic, averages $2.70 for every single public dollar invested — yet we haven’t made those investments. (No, it's exactly zero. Every dollar spent by government is taken from someone else who now cannot spend that money. It's a zero sum game where the only change is who is spending the money.)
Our infrastructure today is crumbling. (What happened to the "shovel ready jobs" promised by the Stimulus? What has happened to the money from the trillion dollar deficits of the Obama presidency? What has happened to the bailout money?)
The return on early childhood education is between 10 and 16 percent — but only a handful of our children have access to early childhood education.
Public investment on clean energy has an annual return of over 27 percent. But federal tax breaks favor fossil fuels over renewables by about 7 to 1. As is typical for leftists, Dr. Reich thinks the best possible use of money is by government, not by those who earned it [the taxpayer].
The return on early childhood education is between 10 and 16 percent — but only a handful of our children have access to early childhood education.
Public investment on clean energy has an annual return of over 27 percent. But federal tax breaks favor fossil fuels over renewables by about 7 to 1. As is typical for leftists, Dr. Reich thinks the best possible use of money is by government, not by those who earned it [the taxpayer].
Also typical is the leftist penchant for thinking that a government action has no ripple effects. That is, they view the economy as a closed system, where an action can be taken in a vacuum. A tax gets levied with an estimated yield to the government which never gets realized. The reason is people change their behavior to avoid the tax. This means the economy is dynamic, and this is why the left's estimates, promises, and projections always fail.)
The public return on investments in basic research and development are huge. America’s competitiveness depends on them, because no individual company has an incentive to make them. The lithium-ion battery that powers iPhones and electric cars was developed by federally sponsored materials science research, while the Internet itself was borne out of the Advanced Research Projects Administration. (Total nonsense. Private companies always seek to fill a need. They want to sell products. Government doesn't do this, it simply throws money around and then takes credit when someone comes up with an idea.)
And yet in recent years, public investment in basic research has declined as well.
Are you seeing a pattern yet? Federal investments in all these areas have shrunk — even though the payoffs from these investments are gigantic, and the costs of not making them are astronomical. American productivity is already suffering.
Now, some say we don’t need to worry about this public investment deficit because private investments fill the gap. Baloney.
(Now comes a litany of leftist talking points, well worn and no truer now than they were 80 years ago...)
The public return on investments in basic research and development are huge. America’s competitiveness depends on them, because no individual company has an incentive to make them. The lithium-ion battery that powers iPhones and electric cars was developed by federally sponsored materials science research, while the Internet itself was borne out of the Advanced Research Projects Administration. (Total nonsense. Private companies always seek to fill a need. They want to sell products. Government doesn't do this, it simply throws money around and then takes credit when someone comes up with an idea.)
And yet in recent years, public investment in basic research has declined as well.
Are you seeing a pattern yet? Federal investments in all these areas have shrunk — even though the payoffs from these investments are gigantic, and the costs of not making them are astronomical. American productivity is already suffering.
Now, some say we don’t need to worry about this public investment deficit because private investments fill the gap. Baloney.
(Now comes a litany of leftist talking points, well worn and no truer now than they were 80 years ago...)
Corporations are focused on getting the best return for themselves, not for America. For most of the last four decades, they’ve made money by lowering their costs, at the expense of working people: capping wages, reducing taxes, and deregulating.
A common assumption is that when American corporations are profitable, Americans are better off. But that’s false. Trickle-down economics is a sham. Tax cuts and subsidies to big corporations and the wealthy don’t build the economy. Economies don’t grow from the top down — they grow from the bottom up, through public investment. (Nothing in the previous two paragraphs is true.)
So if private investment won’t fill the gap, how do we fill it? Two ways: tax the wealthy and large corporations, and borrow. (Of course. Raise taxes and spend like drunken sailors on shore leave. By George, Dr. Reich is so innovative. None of this has been attempted before. Oh, wait...)
Tax rates on the wealthy and on corporations have continued to drop over the past 40 years, (Now Dr. Reich obfuscates. Tax rates are not the same as taxes paid. The share of tax paid by the top 20%, 10%, and 1% has been increasing for decades. Tax rates are irrelevant.)
just as the deficit in public investment has grown. In the 1950s, the highest tax rate on individuals was over 90 percent. Even after tax deductions and credits, it was still over 40 percent. But since then, tax rates have dropped dramatically. For the first time on record, the 400 richest Americans now pay a lower effective tax rate than people in the bottom half.
Revenue from corporate taxes has also plummeted.
If wealthy individuals and corporations want all the advantages that come with being American, they have to pay taxes so America can afford the public investments necessary for a high-wage, high-productivity society. (An implicit threat. "Nice looking portfolio you have there, buddy. Be a shame if something happened to it.")
The other way to pay for public investment is through public borrowing. This kind of borrowing doesn’t burden future generations, because it’s used to build a better future for those future generations. (This has never been true. See the quoted debt numbers above.)
Remember: There’s a difference between borrowing for the future and borrowing for today. You might not want to borrow to pay for a vacation, but it’s perfectly rational to borrow to purchase a house, because a vacation doesn’t have any future return, while a home does. Right now, the federal budget irrationally treats all government borrowing the same. (Indeed it is irrational. Government never has to pay it back. Businesses do. Dr. Reich doesn't want government to pay it back, he wants government spend more and run up the debt more, which of course is what it has been doing for decades with nothing to show for it.)
The government needs a public investment budget separate from the current spending budget to clarify what we’re investing in and allow us to keep borrowing for investments as long as the returns justify it.
Public investment is the biggest and most important deficit you’ve never heard of.
Don’t listen to people who claim we can’t afford to invest in the American people. We can afford it. We can’t afford not to. Joe Biden needs to recognize this, and make public investment a central part of his economic strategy.
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