Labels Matter

Michael Mandel

pgl of Angry Bear objects to my previous post on deficits. He says:

The simple point is that public investment has NOT increased even as private investment has declined. Mandel’s usual reply is that national income accounts fail to count investments in R&D and education, which is fine. But we have not dramatically increased the share of national income in either R&D or education

Oh, oh, I agree with him--up to a point. The share of national income going to going to R&D and education has not change much over time---which is exactly why I am so insistent calling R&D and education investments!

pgl wants the U.S. to invest and save more--so do I, but I just have a broader definition than he does. I want to encourage more resources devoted to R&D. I want to encourage more resources devoted to science and engineering education, and funding college for low-income and middle-income kids. I want to do the investment in the Knowledge Economy.

From this perspective, I don't like the latest Bush budget. The proposed 2007 budget takes a hacksaw to education outlays, cutting it by 18%, or 21% in real terms. Spending on R&D goes up slightly, but slower than the growth of the economy.

All told, Bush is proposing to reduce "Knowledge Economy" investments from 1.8% of GDP in fiscal year 2005 to 1.6% of GDP in fiscal year 2006. Outlays on Knowledge Economy investments are reduced by $15 billion.

This may be fiscal restraint, but I don't like it, and I don't think it should be counted as deficit reduction. Do you?

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE