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The Math on Government Spending
In 2009, the next President--whoever he or she is--will face red ink as far as the green eyeshades can see.
This deficit dynamic will strain our ability to invest intelligently in high-payoff, long-term programs such as strengthening US competitiveness. The federal coffers will be strained by the Iraq war, Social Security, Medicare and other fiscal surprises, and editorialists and elites will likely demand "pay as you go" proposals to justify any new idea or program, no matter how good it may be.
What emerges is not a pretty picture. Billions of dollars in "locked-in" federal spending programs, whose chief virtue is the presence of powerful political constituencies to defend them, are already in place. These programmatic incumbents often crowd out new investments and get far less scrutiny. Think prison spending and the drug war, weapons systems that don't work and Alaskan bridges to nowhere.
So how can we overcome Congressional and Beltway inertia so that smart, no-brainer, big-payoff ideas for new spending aren't immediately crowded out or diminished in scope by locked-in programs and at the same time address the deficit intelligently and responsibly?
Here's an idea--let's require economic and social impact assessments on all government spending and assess the total return/payback on all programs and tax expenditures.
Just like the old environmental impact assessments changed state, local and federal decision-making by requiring new analysis and evaluation, a new EIA would force the debate to be about the net costs and benefits of all government investments. Here's what we'd see:
• Progressive programs like preventative health, investing in kids, jobs, education, safe bridges, workforce and clean energy would more than pay for themselves.
• Insider tax giveaways and ridiculous earmarks would look like the economic losers they are.
• Conservatives would be forced to take a public stance against doing the math on what government buys, and abandon their argument that government spending is useless.
Think about it.
Thirty years ago, government decision-making had a quiet transformation when "environmental impact statements" required decision-makers to consider the full scope of costs and benefits. Suddenly certain dams, even to Ronald Reagan's OMB, didn't look so smart, given their destructive natural effects.
Three years ago, major insurance and banking firms asked businesses to simply consider "climate risk" in their annual economic reports. This simple requirement has changed the fundamental economics of power plant investments and raised new doubts about the real net costs of new coal-fired facilities.
In 2009, progressives should demand a serious look at the costs and benefits of public investment, add important new criteria like "climate impact" and make the case for payback economics. There are serious policy arguments and precedents to build from in the months ahead, starting with dusting off the Report on President Clinton's 1999 Commission to Study Capital Account Budgeting and examining new ideas like Alan Jenkins's calls for opportunity assessments.
Can we out-trump the conservatives on economics and demand a policy payback analysis to all federal or state investments? How would pet Republican programs do if their corporate welfare programs had to be benchmarked against, say, proven pre-kindergarten education investments for kids? Let's get the substantive cost-benefit analysis done to make that case on everything we are in favor of achieving in the next thirty years.
Whether it's the interstate highway system, the electronics industry or the Internet, there are endless examples of public investment acting as a catalyst for economic success.
This is no-brainer stuff. The pubic at large can get this. So let's find a formal way to make sure we do the math.
--Dan Carol
Copyright © 2008 The Nation
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11 Comments so far
Show AllI love it. Truly, no-brainer stuff. Now all we need to come up with are some brains in our leadership! Oh, drats ...I knew there was a catch.
Ten thousand dollar bills, stretched end to end, reach almost a statute mile. What we are spending every month just on Bush's criminal war on Iraq will stretch from the Earth to the Moon - four times.
oversight!!
what a concept
"...In 2009, progressives should demand a serious look at the costs and benefits of public investment, add important new criteria like "climate impact" and make the case for payback economics..."
The bottom line is human survival in reasonable numbers. If we were truly interested in this, no piece of legislation would be signed without its having been vetted by an independent scientific agency for it environmental soundness ie it would move us toward environmental sustainability.
Course it ain't gonna happen!
Accounting is not an exact science.
Accountability through Accounting can still be jerried enough to make the thieves look good.
I get suspicious anytime someone says that a program will pay for itself, e.g., the war in Iraq-Nam. I had a similar talk with someone trying to get me to buy a new refrigerator. He told me it would pay for itself, so I told him once it had done so, he could deliver it because I wasn't going to pay for it. His crestfallen look still warms my heart.
Thomas Edison once said "A nation that can issue 30 billion in bonds can also issue 30 billion in currency". Why we have to borrow our money is beyond me as well.
For those non profitable investments in infrastructure and health, they do not need to pay for themselves in an accounting sense, which only measures profit and losses in a manner to minimize profit and maximize losses to reduce taxes. The criteria should be does the spending improve the nations welfare or not. If it does, you create the money and spend it, but wisely, and in a manner to minimize inflation (under the Fed a dollar in 1913 is worth 8 cents today, while in the previous 100 years before the Fed we had no inflation). You don't borrow it, or take away wealth from your citizens via taxes to pay for it.
To minimize inflation with government created money you must contain costs, yet still allow for your contractors to make a "fair" profit. No bid contracts are not the way to contain costs. Allowing Big Pharma and the health care industries to fix prices without government using it's market power (300 million people) is also not going to contain costs. Just look at Part D of the Medicare pharamceutical plan for an example of what does not work.
There is a way, but peoples ignorance of money due to MSM propaganda and the Tax Free Foundations influence on our Educational system, both of whom have a vested interest in maintain the same system which maximizes profits in our Financial System and allows for price manipulation by Industries that are so concentrated that the top 4 companies in each Industry make up over 40% or more of the business.
Neo-liberal economics may work when there is healthy competion and the economy is running at full employment. It is a recipe for fascism when these conditions do not exist, and they do not.
The other issue is corporate influence over government. Until we are able to prevent companies from being treated as citizens and allowed to influence our congressmen financially, we will never be able to reverse course.
One issue is the corporate tax regulations. Somewhere I read that in 1960 corporations paid about 30% of the income taxes. A couple years ago it was either 9% or 14%; 14 % of the budget, but after considering tax subsidies and other forms of corporate welfare it amounted to only 9%. And 1960 was considered a boom economy. Times were good. Ike had just warned of the threat of the military industrial complex, we hadn't started the war in Viet Nam, and rock 'n roll had everyone dancing.
LOL! And who will make the assesments? Who will do the assessing? It will just be a coda to the bill, added by the bill's sponsor, lauding it.
How do you measure cost / benefit? I agree it should be measured, but easier said than done, even when effort is sincere.
One glaring example is the difficulty of determining which particular expenditures will improve public education. There are so many variables, so many agendas, so much history, so many assumptions (not all of them benign).
On the other hand, some things like the environmental and economic impact of corn based fuels vs. solar energy are a lot easier to measure. The cost / benefit of funding flu shots to all children is also a more straightforward epidemiological problem. Such things should be evaluated before govt makes any commitments.
Step 1 is to take assessment out of the hands of industry and re-formulate the National Science Foundation as an independent and well-funded body of experts.
Similarly health planning should go to an independent NIH rather than big pharms.
Ask your candidates to support independent science.