Government Investment Hits Lowest Level Since World War II


Gross capital investment from the public sector, or government spending on infrastructure, scientific research, education, and other long-term priorities, has fallen below any level since World War II, according to an analysis by the Financial Times. It now amounts to 3.6 percent of GDP, compared to an average of 5 percent after the war.

FT public investment

CREDIT: Financial Times

The biggest decline has been in infrastructure spending, which has fallen off a cliff since 2010, when the midterm elections swept in a wave of conservative Tea Party Republicans who have repeatedly demanded spending cuts and even pushed the country to the edge of multiple crises to get their way. Those Republicans have blocked President Obama’s attempts to invest in the country’s crumbling infrastructure, which will need about $450 billion a year for the next decade to get it up to snuff.

The FT notes that federal funding for research and development hasn’t fallen as dramatically, but sequestration is having a big impact and will get worse as it continues. It has had a devastating toll on research this year, with half of the country’s scientists saying they have laid people off and some even closing up their projects. Federal investment had already fallen by about 20 percent, and next year sequestration’s cuts will get even deeper.

Various budget proposals would make the situation worse, with Rep. Paul Ryan’s (R-WI) budget being the most extreme and forcing investment below 1.5 percent of GDP within a decade. But most other budgets would force investment to decline as well:

FT public investment budgets

CREDIT: Financial Times

Yet the continuing drive toward austerity and severe budget cuts comes at a time when the deficit has fallen dramatically. It is now half of what it was in 2009 and has fallen below $1 trillion for the first time in five years. Much of that has been from spending cuts — 72 percent of the $2.4 trillion in deficit reduction since 2011. There is plenty of other evidence that the U.S. doesn’t have a spending problem and in fact the economy would be better off with far more investment.