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Posted by: Michael Mandel on February 14
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?
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.