Reclaiming America’s History of Public Investment

24 Mar 2016 |
Reclaiming America’s History of Public Investment

Government spending — a perennial topic for political debate in the United States — has become an even more polarizing issue in the lead-up to the 2016 presidential campaign as both parties grapple with how to boost the economy and address widening income inequality. While Democrats are proposing large public investments to address aging infrastructure and create jobs, Republicans staunchly oppose these plans, favoring private market solutions over government ones.

But large government investments weren’t always such a divisive issue. Grand endeavors, like universal elementary education, the G.I. Bill, and the extension of the federal highway system are a crucial part of America’s legacy and growth as a nation. At the same time, the benefits of these programs were rarely distributed equally, and in many cases, programs actively excluded or disadvantaged people of color. 

Why has the nation turned to the kind of tighten-the-belt policies that marked the post-recession years? What insights can we gain from our history of investment that can help us chart a more equitable, inclusive course in the 21st century? America’s Tomorrow posed these questions to William Spriggs, chief economist at AFL-CIO and former assistant secretary for the office of policy at the United States Department of Labor (2009 to 2012). In this interview, Spriggs challenges readers to revisit America’s history of public investment and the ambitious national projects that indelibly shaped opportunity and prosperity in the nation.

Citing a rising deficit, Congress took a conservative stance toward government spending in the wake of the Great Recession. How does this compare to past economic downturns?

If we look back in our history, in all other recoveries Congress understood that it would take some investment by the government to get out of a recession. Even as recently as Reagan or George W. Bush, both presidents ran up huge deficits to stimulate the economy and the Republicans cheered them on. But with this recession, Republicans have done the opposite — they voted against all of Obama’s initial economic stimulus plans, sought to shrink the government further, and essentially removed the valuable role that government can play as a source of economic boost.

Republicans tend to portray government as always part of the problem and never part of the solution, but this is a misconception. The private sector isn’t the only sector to create jobs. The government has to buy things, build things, provide services for the people, and all of this has the potential to create jobs and put money into the economy. 

This economic recovery actually stands out because we’ve had 13 straight quarters of growth and the economy is bouncing back in spite of the federal government being either a drag on the economy or just neutral. At the same time, we can’t say that we’ve made a total recovery because for all workers wages have remained flat, so despite putting more people to work, families aren’t seeing enough income growth. And of course for African Americans in particular, they’re seeing little to no recovery on all fronts: unemployment rates have not recovered, incomes have not recovered, and poverty rates remain exceedingly high.

Historically, what has been the relationship between government investments and the economic climate of the time?

Conservatives tend to gloss over the depth and breadth of our history of public investment and the ways in which that has been fundamental to our greatness as a nation.

In the depths of the Civil War, Congressman Morrill introduced the Morrill Land Grand Act that used public funds to endow each state with resources for a major university, initially for agricultural training. These land grants would create MIT, Penn State, University of California, Cornell, and others. The government also subsidized the transcontinental railroad during this time, which revolutionized business and investment and communication. This was a nation in deep war, with the biggest debt we’d ever seen as a nation, with a populace deeply divided politically, but they decided to double-down, and triple-down on public investment and we’ve reaped the benefits so many times over in terms of wealth generated. They made that decision while in war, with a GDP per capita equivalent to that of current day Kenya. The decision to provide free K-12 education was made in an America with a GDP per capita equivalent to Brazil’s or Argentina’s today. We didn’t make these investments because we had so much wealth, we made them to build future wealth.

This is not necessarily a Republican-Democrat thing, as much as it’s a conservative-liberal thing. President Eisenhower was a Republican, but he envisioned a huge public investment in the interstate highway system in 1956 that we still benefit from today. Large government investments have historically been part of a vision and belief that America as a nation can do anything, solve any problem. But what we hear today is fundamentally different: we live in an America that says, “no.” No we can’t fund higher education, we can’t restore highways, we can’t fix bridges.

I think part of what’s going on has to do with race:  some people see others achieving because we provide this public good and they ask, “Why do I have to help them? They don’t look like my children, so why am I paying for that?” We’re now seeing how that was implicit in funding for college, because now that tuition has become a problem for the White middle class, tuition-free college is becoming a topic of national discussion. Whereas before, poor students — and disproportionately poor students are Black — were routinely priced out of higher education, but no one was saying anything about that.

Throughout the recovery, conservative lawmakers have argued in favor of market-based solutions for stimulating the economy, including lowering taxes across the board in order to increase capital for private investments. How does this preference for the private market affect equity and opportunity, particularly for low-income communities and communities of color?

The market sounds very democratic because we have choice — we get to decide if we want the blue pickup or the green minivan. But people forget that dollars are the rationing tool of the marketplace: I’m free to choose what to buy, but if it’s priced above what I can pay, I’ve just been rationed out of that choice. If my prescription is $8,000 and I don’t have $8,000, the fact that it’s available at every pharmacy doesn’t mean anything to me.

That’s because of a fundamental difference between government spending and the private market: in government, it’s one person, one vote; in the market, it’s one dollar one vote, meaning only those who can put enough money on the table can get what they want. If I don’t want to empower the populace, if I don’t want to pay attention to their needs, then I want to push as many things into the private market as I can, because it will favor those who already hold the majority of the dollar votes — the wealthy. So this bias towards the private market concentrates power in nefarious ways. The top 1 percent of earners become 20 percent of the vote in the marketplace. They decide what services will be provided, what jobs will be created, and what goods will be produced.

People have ennobled the marketplace in this weird way. It’s as if I pull money from my right pocket for taxes and they buy something, say health care — that’s somehow fundamentally worse than if I pulled it out of my left pocket and bought private health care. You’re paying for it either way. The true question is, which one will be more efficient? Which one addresses all the needs we have as a nation? To really evaluate those questions, however, we need a shift in thinking: Not just “what do I need,” but “what does the nation need?” And if you point the lens on the latter question, what works best is often not the private marketplace.

Part of what’s at stake in meeting the nation’s collective needs is a vision that is equitable and inclusive of everyone. Given this concern, how do we shift the narrative around public investment?

When we fail to invest in all our people, we’re only robbing ourselves as a nation. We know from the research that inequality only hurts growth, because talent isn’t distributed according to who your mommy and daddy were. Talented people come from everywhere and we need all of them to get as much training and education as we can get them so they can be part of a thriving economy.

Politicians keep saying we want to recapture “America as a land of opportunity,” but we’re forgetting that we deliberately made it a land of opportunity by investing in infrastructure, in providing the people with resources. So when I hear this conservative rhetoric around government needing to “get out of the way,” it makes me think we need to recall our own history, because we became the wealthiest nation by allowing government to get in the way.