Amer­ica’s other deficit “L

The Washington Post Sunday - - BUSINESS - EZRA KLEIN Eco­nomic and Do­mes­tic Pol­icy

ose weight and get fit” is a good New Year’s res­o­lu­tion. Not nec­es­sar­ily for you, dear read­ers, as half of you are ex­tremely hand­some and the other half, stun­ningly beau­ti­ful (and all of you have great taste in news­pa­pers). But for the govern­ment, it’s spot on.

Of course, the govern­ment is con­stantly talk­ing about los­ing a few inches around the deficit. What wor­ries me, though, is that the “get fit” part will get for­got­ten. The govern­ment can no more cut its way to a strong econ­omy than a per­son can starve him­self to health. Andy Stern, the for­mer pres­i­dent of the SEIU and a mem­ber of the pres­i­dent’s fis­cal com­mis­sion, nails the point in his dis­sent to the com­mis­sion’s fi­nal re­port. Amer­ica, he says, has two deficits: The bud­get deficit we’re all used to hear­ing about. And the in­vest­ment deficit that of­ten goes un­men­tioned.

The two deficits are more alike than peo­ple re­al­ize. Larry Sum­mers, the out­go­ing di­rec­tor of the Na­tional Eco­nom­ics Coun­cil, ex­plains it well: “ You run a deficit both when you bor­row money and when you de­fer main­te­nance that needs to be done. Ei­ther way, you’re im­pos­ing a cost on fu­ture gen­er­a­tions.” A dol­lar in de­layed road re­pairs and a dol­lar in

bor­rowed money are not, in other words, that dif­fer­ent: Both mean some­one is go­ing to have to spend a dol­lar later. In 2011, Amer­ica should stop pass­ing that buck.

In­fra­struc­ture is the eas­i­est place to start. The Amer­i­can So­ci­ety of Civil En­gi­neers es­ti­mates that the nation needs about $2.2 tril­lion in in­fra­struc­ture re­pairs and up­grades merely to bring the ex­ist­ing in­fra­struc­ture up to “good con­di­tion.” But has Amer­ica’s ral­ly­ing cry re­ally gone from “We’re No. 1” to “We’re only $2.2 tril­lion away from good con­di­tion”? How in­spir­ing.

Our run­ways are clogged, our rail sys­tem is de­crepit, and our lev­ees — well, the ASCE gave our lev­ees a D-mi­nus — and its re­port came out four years af­ter Hur­ri­cane Ka­t­rina. But in 2011, in­fra­struc­ture is more than roads, rails and run­ways. The United States lags the rest of the de­vel­oped world in broad­band speed, pen­e­tra­tion and cost. The coun­try has no smart grid to speak of. We don’t just need to bring our in­fra­struc­ture up to “good con­di­tion.” We need to make it bet­ter.

Here’s the good news: In­fra­struc­ture in­vest­ment is the best deal in the econ­omy right now. Govern­ment bor­row­ing costs are lower than they’ve been since the 1950s. Un­em­ploy­ment in the con­struc­tion sec­tor is above 15 per­cent, which means com­pa­nies are des­per­ate for work and bids to com­plete projects are com­ing in low. A weak global econ­omy means cheap raw ma­te­ri­als. Bot­tom line? These in­vest­ments are more af­ford­able now than they’re likely to be in a few years. We’d be fool­ish to miss this op­por­tu­nity.

But it’s not just our phys­i­cal cap­i­tal that needs in­vest­ment. Our hu­man cap­i­tal does, too. Our schools spend a lot of money but fail a lot of chil­dren. We don’t have a na­tional sys­tem of pre-kinder­garten, de­spite an al­most end­less amount of ev­i­dence that pre-K ed­u­ca­tion has huge re­turns for ev­ery dol­lar spent and is prob­a­bly the sin­gle most valu­able in­vest­ment we could make in the coun­try’s fu­ture. We know that the value of a col­lege ed­u­ca­tion has in­creased in re­cent decades but that the per­cent­age of Amer­i­cans who grad­u­ate from col­lege has stag­nated — a trend that econ­o­mists Clau­dia Goldin and Lawrence Katz es­ti­mate ac­counts for about two-thirds of the run-up in our sky­rock­et­ing in­come in­equal­ity.

Then there’s in­tel­lec­tual cap­i­tal. Re­search and devel­op­ment are good things in nor­mal times but are even more nec­es­sary when the 10 hottest years on record have all been within the past 13 years and ev­ery at­tempt to price car­bon has fiz­zled in the Se­nate. We ei­ther in­no­vate our way out of cli­mate change, or we’re not get­ting out of it. And though this will come as, ahem, cold com­fort to those of you who’ve spent the past week in a Sisyphean strug­gle with the snow on your walk, 2010 looks likely to be ei­ther the hottest or sec­ond-hottest year on record. We need to be spend­ing a lot more on a Man­hat­tan Project for re­new­able en­ergy, routed through a pro­fes­sional, in­de­pen­dent agency mod­eled on the Na­tional In­sti­tutes of Health.

Not all of this re­quires new money. In many cases, what’s needed is not money at all, but the re­solve to make dif­fi­cult de­ci­sions to close, sim­plify or, at the very least, rig­or­ously eval­u­ate ex­ist­ing pro­grams.

Take broad­band. The Fed­eral Com­mu­ni­ca­tions Com­mis­sion is re­spon­si­ble for the Uni­ver­sal Ser­vice Fund, which col­lects al­most $8 bil­lion an­nu­ally to sub­si­dize ru­ral tele­phone lines. You might won­der whether — in an age when voice-over-In­ter­net ser­vices are both com­mon and cheap, when cell­phone cov­er­age is al­most ev­ery­where and when on­line con­nec­tiv­ity is an eco­nomic ne­ces­sity — that money shouldn’t be go­ing to broad­band cov­er­age. As it hap­pens, pretty much ev­ery­one won­ders this. The prob­lem is that at­tempts to do any­thing about it have been fought by ru­ral tele­phone com­pa­nies and their al­lies in Congress.

Or ed­u­ca­tion. One com­mon re­frain of em­ploy­ers is that we don’t grad­u­ate enough sci­ence and en­gi­neer­ing ma­jors. When he served on the pres­i­dent’s fis­cal com­mis­sion, Dave Cote, chief ex­ec­u­tive of Honey­well, made this a big theme. Work­ing with Sen. Tom Coburn and Stern, he iden­ti­fied 110 pro­grams meant to in­crease the num­ber of sci­ence and en­gi­neer­ing grad­u­ates — but no data on whether they were work­ing.

Sen. Kent Con­rad, chair­man of the Bud­get Com­mit­tee and a fis­cal com­mis­sion mem­ber, made a sim­i­lar point about job train­ing: “ There were over 40 dif­fer­ent job train­ing pro­grams, with very lit­tle co­or­di­na­tion be­tween them, and dif­fer­ent def­i­ni­tions of who was el­i­gi­ble. And there were al­most no met­rics on any of them.”

The govern­ment’s prob­lem with self-eval­u­a­tion — and thus with self-im­prove­ment — has been no­ticed out­side the fis­cal com­mis­sion, too. Michael Green­stone, di­rec­tor of the Hamil­ton Project, re­mem­bers his time as chief econ­o­mist for the pres­i­dent’s Coun­cil of Eco­nomic Ad­vis­ers. “In the first year of the Obama ad­min­is­tra­tion,” he says, “I ap­pointed my­self to run around and ar­gue that the stim­u­lus was the great­est op­por­tu­nity for eval­u­a­tion of fed­eral pro­grams that’s ever hap­pened. But the fed­eral govern­ment is not equipped to do that. No one is against it, re­ally, but it’s not a pri­or­ity. It’s not part of the cul­ture. And so it doesn’t have the sense of ur­gency that run­ning a fit govern­ment would re­quire.”

The prob­lem, Green­stone con­tin­ues, is that the govern­ment sim­ply doesn’t have good data on what works and what doesn’t. But there’s a so­lu­tion. “We should take one­half of 1 per­cent of fund­ing for ev­ery pro­gram and use it for eval­u­a­tion,” he says.

For the fed­eral govern­ment, it’s the equiv­a­lent of step­ping on the scale ev­ery­day. And if you’d re­solved to lose weight and get fit, isn’t that how you’d start?


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