Why Countries Never Thrive Without Activist Government Investment
Why Countries Never Thrive Without Activist Government Investment
By William Berkson at Evonomics
http://evonomics.com/countries-never-thrive-without-activist-government/
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Progressive candidates can consistently win elections with platforms advocating a policy of leadership through public investment. First, they can credibly promise opportunity for all, because, as we have seen, this is historically the only path to success. And they can credibly hammer conservative proponents of laissez-fairepolicies for advocating something that has never worked, even once, as a miracle cure.
Laissez-faire advocates harbor the false belief that money in the hands of the rich is always better for the economy than the same money taxed and spent on public goods and services. In reality, wise spending on public goods and services doesn’t “crowd out” private investment; rather it “crowds in” private investment, lifting it to a higher and more effective level—as was the case for the smart phone. The bottom line is that some of the money that a rich individual would spend on a bigger house would be better taxed and spent by government on public education, in order to promote opportunity for all. And some of the money that a car manufacturer would spend on a still higher salary for its CEO would be better taxed and spent on repairing roads and bridges—better for both the car company and for society at large.
Leadership through public investment is a vision that goes beyond overall growth. It is also a powerful argument to support social insurance and other “safety net” programs to promote opportunity for all. For governments can stimulate overall economic growth but still fail to grow opportunity for all. In fact, this is what has happened since Reagan. The actual Republican policies have been what Rep. Barney Frank called “weaponized Keynesianism”: huge deficit spending on the military, and starvation of other domestic spending. The result has overwhelmingly benefited the rich. To achieve broad-based growth in jobs and income, and opportunity for all, government needs to invest directly in education, research, health care and infrastructure, and also to fund social insurance and other ‘safety net’ programs.
Investment costs money, but as a country we have it. The U.S. is the richest country in the history of the world. In the 1960s, when top rates were 70%, we were both growing more, and more equally. With the current top rates at about half that, the historical evidence is that we have plenty of room to tax the rich more and publicly invest the funds to benefit all—including the rich, who in fact got richer faster in those high tax years.
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