Report

The Investment Deficit in America

Isaiah J. Poole — Wed, 19 Nov 2008 10:18:42 -0500

RELATED RESOURCES

Research Director Eric Lotke discusses the "Investment Deficit" report and the "Real Investment in America" conference.

Conference: "Real Investment in America" | Conference liveblog
Robert Borosage: "Free Fall"
"Invest in America" website

Read full report >>

America is falling apart. Falling apart, and falling behind.

Previous generations of Americans built interstate highways and transcontinental railroads. Now we sit in traffic.

Americans from an earlier era pioneered universal primary education and chartered great universities on public land. They enacted the G.I. bill to give the greatest generation the access to college that helped build our modern middle class. Nowadays American students toil in overcrowded classrooms with leaky roofs, while the cost of college soars out of reach.

America grew up investing in its land and its people. Historically, we directed roughly 8 percent of our gross domestic product to long-range investments, and the investment paid off. Now we are down below 4 percent. Our post World War II infrastructure is starting to decay, and we aren’t replacing it. We are lamenting the loss of jobs rather than hiring people to renew and rebuild.

Other countries are racing past. China spends 9 percent of its GDP on infrastructure investment and opens a new subway system every year.

From physical infrastructure like roads and bridges to human capital from kindergarten to college, this report comprehensively examines our investment deficit. It documents yesterday’s achievements, today’s problems and tomorrow’s solutions.

As this report is released, America’s economy is in a deep downturn, which is now spreading across the
globe. A major recovery program is essential to lift this economy from what is likely to be the worst
recession since the Great Depression. Direct public investment—in new energy and conservation, in modernizing our infrastructure, in education and training, and research and development—should be the centerpiece of any recovery plan. That is not only necessary to lift the economy in the short run; it is a vital down payment on the sustained public investment that we need to sustain a competitive and decent society in a global
economy.

The needs listed in this report provide a guidepost for both recovery and for long-term, sustainable growth.

Promoting Equality Through an Employment of Last Resort Policy

Terrance Heath — Tue, 04 Nov 2008 17:00:55 -0500

Economic Stimulus and Economically Distressed Workers.

Susan Ozawa — Tue, 04 Nov 2008 07:26:59 -0500

As the financial crisis on Wall Street unfolds with intense media coverage, we are losing sight of another crisis: more than a million families across the United States will face foreclosure in the next six months as the last of the sub-prime mortgages contracted in 2006 and early 2007 reset. Accelerating job losses and low wages aggravate the lives of tens of millions of families. In the rush to focus on Wall Street, these are the families whose lives must not be forgotten. These are the working people who need attention and help from a new stimulus package as well as structural economic reforms. This study focuses on the needs of these economically distressed workers and proposes economic policies that will improve their lives while strengthening the overall economy.

Fiscal Stimulus—Is More Needed?

Susan Ozawa — Tue, 04 Nov 2008 07:22:49 -0500

Because we agree that the current economic situation is quite dire, we explore in this Strategic Analysis the possibility of an additional fiscal stimulus of about $450 billion spread over three quarters. We start from a plausible baseline projection, which we obtain by updating and verifying our work for the November 2007 Strategic Analysis, but we do not initially include the effects of the recently passed stimulus plan. We then simulate the effects of that plan. Finally, we simulate the effects of a $600 billion stimulus spread over four quarters, starting in the third quarter of this year.

Fiscal Conditions in 2008

Susan Ozawa — Tue, 04 Nov 2008 07:15:19 -0500

Confronted with declining economic conditions driven by downturns in housing, consumer spending, and jobs and income, city finance officers report that the fiscal condition of the nation’s cities has weakened dramatically in 2008.

Among the findings of the National League of Cities’ latest annual survey of city finance officers are:

❋ Two in three city finance officers (64%) report that their cities are less able to meet fiscal needs in 2008 than in the previous year;

❋ Final tallies for 2007 reveal that city revenues, when accounting for inflationary factors, remained flat (growth of 0.1%), while spending increased by 3.0%;

❋ As finance officers look to the close of 2008, they predict that revenues and spending will decline in inflation-adjusted terms, with revenues decreasing by 4.3% and spending decreasing by 1.5%;

❋ Property tax revenues increased by 6.3% in 2007, but are predicted to decline by 3.6% by the close of 2008;

❋ Spending pressures stem from rising costs, such as energy and fuel prices, public safety and infrastructure needs, and employee-related costs for health care, pensions, and wages;

❋ To balance annual budgets and meet ongoing spending needs, many cities are increasing fees and charges for services; and,

❋ Ending balances, or “reserves,” remain at high levels and will provide a buffer against the current downturn.

Fiscal Survey of States

OurFuture.org Staff — Tue, 04 Nov 2008 07:09:49 -0500

Fiscal 2008 marked a turning point for state finances with a significant increase in states seeing fiscal difficulties, in stark contrast to the preceding several years. As the economy has weakened, so has the state revenue and spending picture. The decline of the housing sector along with a weak manufacturing sector have combined to cause significant declines in revenue for a number of states.

Findings include:

Thirteen states were forced to reduce enacted budgets in fiscal 2008. This is in stark contrast to the three states that had to reduce their enacted budgets in fiscal 2007.
Eighteen states assume negative budget growth for fiscal 2009 governors’ recommended general fund budgets, while four states are estimating negative growth budgets for fiscal 2008.
Medicaid spending from state funds is estimated to increase by 4.4 percent in governors’ recommended budgets for fiscal 2009; more than four times the rate of growth for the overall general fund. This increase in health care spending continues to place pressure on state budgets by exceeding overall spending.
Six states are recommending increases to their fiscal 2009 cash assistance levels under the Temporary Assistance for Needy Families (TANF) program, ranging from 0.1 percent to 30 percent.

State Budget Troubles Worsen

OurFuture.org Staff — Tue, 04 Nov 2008 07:01:34 -0500

At least 39 states faced or are facing shortfalls in their budgets for this and/or next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps have opened up in the budgets of at least 27 states plus the District of Columbia just three months after they struggled to close the largest budget shortfalls seen since the recession of 2001. And these problems are expected to continue into next year.

Economic Stimulus and Economically Distressed Workers

OurFuture.org Staff — Mon, 03 Nov 2008 23:46:53 -0500

Almost 21 percent of households in the U.S. are economically distressed, almost twice the official poverty rate. To reach full employment we need a stimulus package with sustained increases in government spending of $220 billion to generate a $330 billion increase in GDP required to create the new jobs. Economically distressed families also need structural economic reforms as well as the immediate benefits of the stimulus package

Assessing the Macro Economic Impact of Fiscal Stimulus 2008

Isaiah J. Poole — Mon, 03 Nov 2008 23:38:38 -0500

The president and Congress are quickly coalescing around a fiscal stimulus plan to shore up the flagging economy. As currently envisioned, the plan is expected to cost at least $150 billion and include a sizable tax rebate, short-term tax incentives for business investment, and temporary increases in unemployment insurance benefits and food stamps. This stimulus will not prevent a recession if one is already on its way, as its benefits will not be realized until summer; however, it could substantially mitigate the severity of any downturn.

A Green New Deal

OurFuture.org Staff — Mon, 03 Nov 2008 23:29:26 -0500

The Green New Deal Group, drawing inspiration from the tone of President Roosevelt’s comprehensive response to the Great Depression, propose a modernised version, a ‘Green New Deal’ designed to power a renewables revolution, create thousands of green-collar jobs and rein in the distorting power of the finance sector while making more low-cost capital available for pressing priorities.