To Senators Obama and Reid and Representative Pelosi:
In the sixties, President Kennedy put hundreds of thousands to work on the space program, putting a man on the moon, aptly symbolizing American leadership, and foretelling United States military superiority and civilian commercial dominance in aerospace and communications for thirty years. The technological advantage American industry gained on the investment could not have been achieved absent the governmental commitment or resources.
In the eighties, President Reagan funded Star Wars, which achieved little in missile defense, but nonetheless, changed the world, leading to U.S. civilian computer, satellite and Internet superiority and prosperity for another thirty-year period. The time is again right for government investment in creating the future.
First, the beginning of a recession is a good time to act, because stimulus is helpful, jobs are at stake, and a government-funded program will immediately instill confidence in long-term labor conditions. This is far more productive stimulus than refund checks, which do ease family budget concerns, but only marginally improve commerce. They do little to support employment prospects and nothing to support long-term wealth creation.
Second, there are many areas, such as pharmaceutical research, Green technologies or military hardware, that require massive investment to achieve their full potential. No one can claim that research and development in alternative energy or pharmaceutical testing is near capacity. Both are so financially risky that only a fraction of what could be done is being done, even though the lives of millions and the future economic health of many nations hang in the balance. As with past science and technology programs, the initial public investment in energy, medical or environmental technology would surely be followed by decades of highly profitable private business applications.
Finally, the arguments against publicly funded investment misunderstand the real problems of government spending and deficit spending in particular. We can agree that private investment and direction of resources is superior to public, and yet still acknowledge the need for a military, Civil Corps of Engineers, or law enforcement to meet national needs. In the 1940s, the Government put the nation to work to produce armaments on a vast scale enabling our defeat of Fascism. Some tasks are just too large to be left to the private marketplace.
The real question is what should public money be used for, and crucially, what should it be used for when we are over budget?
The answers are not the same. Most commentators today oversimplify the issues surrounding deficit spending. They assert that a balanced budget or small deficits are always good and large deficits are bad, with the caveat that deficit spending during a recession is good as it stimulates the economy while spending during high growth periods is bad as it adds to inflation.
Without more, neither view is adequate.
Deficit spending is essentially borrowing from the future for the present. Thus, deficit spending can be thought of as irresponsible, and in some ways unethical, because it uses future resources to satisfy today’s needs. However, deficit spending only depletes future resources and weaken financial integrity when it does not lead to long-term financial health. When such spending is for infrastructure and facilitates wealth and revenue in the future, it is neither irresponsible nor unethical.
Such spending should be judged on the benefit versus risk of success at achieving its goals. Kennedy’s Sending of a Man to the Moon was a huge risk, but it paid off handsomely in its political, scientific and commercial legacy. Reagan’s Star Wars research was less of a reach and it paid off, even though the goal of the original research has still not been achieved.
In this light deficit funding for Green technologies would stimulate the economy during a recession and, if successful, would lower energy and environmental costs in the long run. This is how prosperous periods have occurred. Improvements in productivity mitigate inflationary pressures while increasing wealth during economic expansion.
Politically and commercially the benefits are obvious as leadership and wealth will be the rewards to nations that meet the challenges of the future most efficiently and profitably. Medical research presents similar cost/benefit prospects and military investment, though to a lesser extent, may also be useful given the difficulties we have had achieving military goals in the past decade.
The alternatives pale in comparison. Giving stimulus to individuals and businesses in the form of refunds or tax cuts at a time of economic slowdown has short-term social and economic value at a cost that is roughly equal to what has to be paid back later with interest. Investing in roads and bridges provides some job support and infrastructure upkeep, but no dynamic future benefits. Doing nothing has such great lost-opportunity costs. On the other hand, investing in the technology of the future will have a modest short-term economic benefit in confidence and jobs, and in the long term, if past is prologue, it will present unimagined opportunity.