Newswise — “President Obama’s vision of a rebirth in manufacturing and renewed support for education, job training and research requires us to make a distinction: Government spending directed toward investment is different from government spending directed toward consumption. Investment increases productivity and future output while more government consumption doesn’t.
“History supports this as a viable (indeed the only) route to lower deficits in the future. When the USA emerged from World War II with the highest debt/GDP ratio in history, we didn’t respond by cutting spending. Instead, we invested in people through the GI Bill and in infrastructure through building the interstate highway system, among other projects. Instead of paying the debt down we stimulated enough growth to make the same debt relatively smaller compared to our output.
“The President’s proposed emphasis on investment will require money – we should all hope those in Congress who oppose any government spending whatsoever can see the wisdom of investing in our future productivity.”
--Steven C. Kyle, professor economics at Cornell University’s Dyson School of Applied Economics and Management
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