The Math on Government Spending

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The Nation

The Math on Government Spending

by
Dan Carol

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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