How the Democrats are Blowing It

Michael Mandel

Democrats are confused. They propose this great platform of innovation-improving ideas: Provide scholarships for science and engineering students, double funding for NSF, increased funding for broadband, more money for energy R&D. Great ideas, all of them.

AND THEN THEY MUCK IT UP! Here's what the Democrats say about their innovation agenda:

House Democrats will submit these priorities to the rigors of “pay-as-you-go” budgeting to ensure that new spending or tax cuts do not add to the deficit.

Yowza. The Democrats don't seem to understand that "pay-as you-go" budgeting for innovation investments makes no economic or political sense.

Economics: Their innovation proposals are investments in physical, human, and intellectual capital. Elementary economic theory tells us that it's worth borrowing to make an investment if the rate of return is higher than the long-term rate of interest (call it 6% or so). With the possible exception of broadband, it's clear that all of these proposals pass this test. Translating: If these proposals are worth doing, they are worth borrowing for.

Politics: Okay, so the Democrats don't want to add to the deficit. Does anyone think they will cut social programs to fund their innovation agenda? No, they will raise taxes (or eliminate some of Bush's tax cuts). So anyone of any intelligence will realize that a vote for innovation, under the Democrats, is a vote for higher taxes.
Way to build support for the future, folks!

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