The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
The text below is an excerpt from the complete document. Read the full report in PDF format. A data appendix is also available.
The information in this report was summarized in an issue brief, "Losing Ground: Federal Investments in Children Will Shrink Over the Next Decade if Present Policies Continue."
Abstract
We chart U.S. federal spending on investment in total and for children from 1965 to 2017. Five major categories can be considered—some more so than others—to be investment or to have investment components: education and research, work supports, social supports, physical capital, and defense investment. Relative to domestic spending, the most direct investment—education and research—for the nation as a whole, and crucially for children, fell over the 1970-2006 period though with some recent rebounds. More important, projections of current policies show that overall government investment and especially investment in children are threatened to decline in relative and sometimes absolute importance, squeezed out mainly by faster, automatically growing programs that tend to favor consumption. These data raise the question of what relative priority the government should place on investment, and particularly investment in children.
Introduction
The term "investment" popularly conjures up stock or mutual fund purchases. But investments can take many forms. Broadly speaking, an investment is the use of resources to increase future production output or income rather than to finance current consumption.
To ensure long-term economic growth and rising standards of living, nations require investments in human capital, basic research and science, plants and equipment, and national infrastructure. Some of this investment represents more of a social good than a private good. That is, because many types of investment provide benefits to society, voters sometimes ask the government to interfere to garner those benefits. Societal benefits from research, for instance, often spread among many households, but companies and individuals engaged in research often do not garner the gains they provide to others nor, sometimes, even find the means to cover their costs. Poorer parents, in turn, often cannot afford quality education for their own children, even though all of society may benefit from a better-educated citizenry. Further, when in the modern economy government becomes large, extracts resources through taxation, and spends much on consumption, it may without intention reduce societal investment unless it takes some offsetting measures. In sum, a vital issue for government policy is how well government revenues are spent and invested and how they affect overall well-being not just now but for the future and for future generations.
Given these obvious concerns, it only makes sense to try to track the "investment budget"—the amount of money the government allocates to investment activities. This report charts how different categories of federal investment have fared in recent history and, perhaps more important, how the sums and proportions within each category are scheduled to change if current policies are continued.
Investment in children is given special attention. Since children have their entire lives in front of them, investments in them require long timetables for payoffs relative to such other investments as enhancements to infrastructure and the capital stock. Unlike investment in plant and machinery, which depreciates over time, investment in human capital may even appreciate if passed from generation to generation.
(End of excerpt. The entire report is available in PDF format. A data appendix for this publication is also available.)
This research was sponsored by the Partnership for America’s Economic Success.
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