Saturday, April 23, 2011

The U.S. Has Been Eating Its Infrastructure Seed Corn for Decades

The Atlantic has a series of graphs (taken from "analyst Mary Meeker's treatment of the U.S. government as a corporation in need of restructuring") that starkly illustrate the decline of U.S. investment in our own infrastructure over the past several decades, to the point that our infrastructure, once the wonder of the entire world, is now in relative disrepair.

Here's what we have sown:


And here's what we have reaped:


The Atlantic's Derek Thompson puts it bluntly:
In the last 40 years, we've pumped the breaks on productivity-enhancing investments in infrastructure, education and technology, while health care and income security costs have accelerated dramatically. Like an aging couple shifting its spending away from the kids' clothes and tuition toward pills and doctor visits, the U.S. government has transformed itself from a defense-technology-infrastructure investor to a national insurance conglomerate for its aging population.

Below is a chart that breaks down U.S. spending into (probably oversimplified) categories of productive spending -- like defense and infrastructure that tries to build things -- and less-productive spending like entitlements and interest payments that try to preserve things. Entitlements and interest have doubled their share of the budget since 1970s. (To be clear: Entitlements are important and humane. But they're not investments in our future capacity to produce things. Instead, they preserve the health and dignity of the sick and retired.)

Meeker sees three kinds of investment as productivity-enhancing: 1) infrastructure, 2) education, and 3) research and development. Similar to infrastructure, federal government spending on research and development has fallen dramatically, as a % of GDP:


Education spending has not fallen as a % of GDP, but it has certainly not risen as fast as less-productive spending:

So, yes, the U.S. has been eating its infrastructure seed corn for decades - the Baby Boomers have been living off of the investments made by their parents, the Greatest Generation, without contributing much in return, and the Boomers are only set to demand and consume more and more as they enter retirement. But, there's still hope - more on the coming, but avoidable, Boomerpocalypse in a later post.

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