A Country-Defining Investment is Not Spending

A Country-Defining Investment is Not Spending

By Sheldon Kimber

The debate over President Biden’s proposal for historic government investment to combat climate change is a colossal waste of time when the overwhelming facts of history are starkly laid out before us. 

We are so distracted by the shallow rhetoric of “tax and spend” vs. “small government,” and  elaborate economic models that try to estimate how much of a tax cut or spending increase will flow to each corner of our society, that this has become a perceived choice. Meanwhile, the choice before us now is not whether an extra percent on any given tax bracket will be spent unwisely or slow economic growth. We need to recognize that  our choice is not about taxes and spending at all, but rather, it’s about investment. 

Do we still have the unity and fortitude to make the multi-generational investments that have enabled our global economic leadership? Or are we so divided that we have no common future in which to invest? 

Like many in my field, I am a student of economics. I have been taught to appreciate the econometric analysis of multivariable models that instruct us on causation and caution us against the anecdotal arguments offered in support of many political agendas. As I’ve grown older, however, I’ve realized that in addition to economics, we should all be students of history. While economic models are more accurate in the analysis of clearly defined dependencies over specific timeframes, one can easily miss the forest of history for the trees of narrowly defined econometric analysis.  

History has Rewarded Bold Investments in the Face of Crisis.

History is defined by societies whose fortunes were pinned to their ability to collectively meet the crises of their day. The most enduring and impactful oness proved capable of rising to meet them, while  the end of most “great” societies is almost universally defined by their failure to do so. And you don’t need an econometric model to see this pattern throughout our country’s history. 

Between 1863 and 1869 the young United States government, in the midst of one of the greatest challenges to its own existence, undertook an effort to build a 2,000 mile railroad connecting the Eastern railroad network to the port of Oakland, California. The resulting railroad would connect the US West, with its natural resources and  trade routes, with the Pacific and the rapidly expanding industrial economy of the Northern States. 

The government’s investment would also bring together former soldiers of the Union and the Confederacy, and help the nation emerge from the polarization of the Civil War.    

Despite the massive cost (an enormous 5% of GDP), cost miscalculations, and rampant fraud, the transcontinental railroad stands as one of the greatest infrastructure investments in the history of our country whose price tag was returned many times over.

Perhaps the most well defined example of bold investment transforming crisis into long term prosperity, is the US industrial mobilization during World War II. In a 2001 article, Pulitzer Prize winning biographer Doris Goodwin writes “America’s response to World War II was the most extraordinary mobilization of an idle economy in the history of the world…industrial productivity increased by 96 percent, and corporate profits after taxes doubled. The government expenditures helped bring about the business recovery that had eluded the New Deal. War needs directly consumed over one-third of the output of industry…By 1944, as a result of wage increases and overtime pay, real weekly wages before taxes in manufacturing were 50 percent higher than in 1939.”

The US Government invested over $4 trillion in the effort to win World War II, surpassing 40% of total GDP in 1945 alone. For context, President Biden’s original American Jobs Plan, with a  $2.7 trillion investment over 10 years (*footnote Cato Institute / Fox News overestimate here), would have us investing only about 1.2% of GDP annually, largely in the fight against global climate change. 

It’s Time to Boldly Fund a War Against Climate Change.

We look back at an investment that peaked at 40% of US GDP as being one of the greatest accomplishments in US history, morally, militarily, and economically. This investment changed the course of American history, set us on a path to decades of economic dominance, and secured our moral and social leadership globally. Today we have the opportunity to undertake a similar investment, once again transforming our country and securing our place economically, geopolitically, and morally with an investment about 35x smaller than the peak of our spending in World War II.

As we debate the President’s Build Back Better infrastructure proposal, we can spend the next few months comparing studies from conservative and liberal think tanks, or lie to ourselves and say we’re having a debate between “tax and spend” liberals and “slash and burn” republicans. But we are not choosing between these two things. We are assessing whether we as Americans can and will once again undertake a multi-generational, defining investment in a “War Against Climate Change.” 

Next week, I’ll continue building on this and the idea that some of the most successful corporate leaders support higher taxes on corporations, tax reform to close loopholes on the wealthy, and massive government investment in solutions to the Climate Crisis. Stay tuned!

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