2021年8月10日 星期二

The hard case for soft investment

Concrete and steel get you only so far.
Heidi Kottas works with Teddy Lin, 3, center, and Adrian Figueroa, 4, in Union City, N.J.Suzanne DeChillo/The New York Times
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By Paul Krugman

Opinion Columnist

What a difference a few votes in Georgia made! Actually, about $4 trillion worth of difference. Upset victories in the January Senate runoffs gave Democrats narrow control of Congress, and they're exploiting that narrow control to push a hugely ambitious spending agenda. President Biden might not get all of the public investment and social spending he's asking for, but it looks likely that he'll get most of it.

Part of the spending will come via a bipartisan infrastructure bill that passed the Senate today. The rest will come via a much larger bill, whose outlines were laid out Monday, that Democrats plan to pass on a party-line vote that bypasses the filibuster.

This two-step legislative process is playacting, and everyone involved knows it — although voters might not. Republicans went along with some infrastructure spending to create the (false) impression that they aren't implacably opposed to anything Biden might propose. Biden chose to let them play that game to create the equally false impression that he really believes in the possibility of bipartisanship.

One thing that struck me, however, is the interesting dividing line between what Republicans were willing to vote for and what they won't even pretend to support. The bipartisan bill is pretty much all about "hard" infrastructure; it's all steel and concrete. The Democratic resolution has some of that, especially things like clean-energy technologies. But the bulk of the proposed investment spending seems to involve "soft" stuff like child tax credits, child care, universal pre-K and free community college.

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Why this division of playacting — I mean labor? Republicans appear to believe, or at least think their constituents believe, that only tangible, physical investment is real.

This is, however, an outmoded view. Maybe we once had an economy whose productive capacity depended on visible assets like factories and machinery; these days our most valuable companies derive their value mainly from knowledge rather than physical capacity, and spending on intangible intellectual property accounts for more than a third of business investment:

The private sector gets less physical.FRED

Beyond that, it's a somewhat surprising fact that we have much better evidence for high returns on public spending on people, especially children, than we have for high returns on infrastructure investment.

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Why? Assessing the payoff to infrastructure spending is surprisingly hard, because we don't get to observe the counterfactuals. We can surmise that America would be significantly poorer today if Eisenhower hadn't created the Interstate Highway System, but we can't directly measure that alternate history. We can guess that the New York metro area's economic prospects would look a lot better if Chris Christie hadn't killed plans for a new rail tunnel under the Hudson, but we'll never know for sure how much damage he did.

Analysts can and do try to assess the benefits from individual infrastructure projects, like Boston's Big Dig — and it's far better to engage in that kind of analysis than to leave things purely subjective. But even for an individual project, that kind of analysis tends to involve a lot of assumptions — how much worse would traffic have been without the project? How much value should we place on time lost to traffic jams? And assessing the returns on a national infrastructure program in the hundreds of billions is, at best, an educated guessing game.

When it comes to investment in people, by contrast, we often do get to observe the counterfactuals.

The food stamp program, for example, was rolled out gradually across America, not introduced immediately on a nationwide basis. So was Medicaid, which was also enhanced in a series of discrete steps in the decades after its creation.

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These gradual rollouts provide us with natural experiments. Economists can compare the life trajectories of Americans who received food stamps or Medicaid in their early years with those of otherwise similar Americans who didn't, or the experiences of those who benefited from Medicaid enhancements with the experiences of slightly older Americans who didn't.

And what these comparisons show are big positive effects of social spending. Children who had access to food stamps grew up into healthier, more productive adults than those who didn't — so much so that the government eventually recouped much, possibly all, of what it spent upfront in higher revenue and lower spending on things like disability payments. Basically, enhancing the social safety net for children is an investment in the future, and the available evidence suggests that it's an investment with high returns.

In the months ahead, I'm sure we'll hear many conservative denunciations of wasteful spending and probably mockery of progressives who talk about "human infrastructure." But the evidence for big returns on spending on people is actually a lot more concrete than the evidence for payoffs to spending on, well, concrete.

Quick Hits

Scott Adams may have gone off the deep end, but in its heyday "Dilbert" was brilliant.

Child care increases female employment.

Which is not to say that inadequate physical infrastructure isn't a big problem too.

For what it's worth, the Democratic agenda polls well.

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