Sunday, April 06, 2014

Infrastructure spending in long term decline relative to GDP

What follows are the highlights of various government spending levels, as a percent of GDP, focused on building sustainable and constructive growth in the economy.  The numbers, not the words, are from a research report written by a major private bank.  The numbers that follow are estimates from imprecise graphs so may be off by a fraction of GDP or off slightly as to the exact time.

---Transportation spending, defined as spending on navigation facilities, airport construction, next generation satellites, high speed rail, urban bus, subway and rail systems; and the national highway system among other projects, was 0.70% of GDP in 1977 and 0.72% of GDP in 1981.  Those were the high points over the last 50 years.  After a steady and slightly erratic decline today's spending is approximately 0.38% of GDP and in 2017 it is projected to be 0.31% of GDP based on current plans and appropriations.

---Natural Resources and Environment Spending, defined as spending on dams, canals, rivers, flood protection, hydropower, deep water ports, air and water quality R&D, the EPA Superfund program, and other related projects peaked at 0.54% of GDP in 1977 and 1982, is now at 0.24% of GDP, and is projected to be at 0.19% in 2017.

---Training, employment and social services programs, defined as job training, dislocation programs, providing certification in machining, welding, masonry, electrical, firefighting, and other trades, and vocational and apprenticeship programs for youths aged 16 - 24, peaked in 1978 at 0.57% of GDP, is at 0.14% of GDP today and is projected to be at 0.06% of GDP in 2017.

---Energy spending, defined as renewable energy integration,  SmartGrid research, energy efficiency research, R&D energy projects with the private sector, among other projects, peaked at 0.34% of GDP in 1982 and now is at 0.08% of GDP and is projected to be at 0.04% in 2017.

Other important spending levels which can have a large impact on all of the above are:

---Defense spending, which peaked 9% of GDP in 1962 and again in 1970, now is at 4% of GDP, and is currently projected to be at 2.5% of GDP in 2017. (current events suggest that this 2017 estimate could go up)

---Entitlement spending, which at the beginning of the related chart was at 4.5% of GDP in 1973, now is at 9.6% of GDP and is projected to be at 10.5% of GDP in 2018. (what is included in entitlement spending is not detailed in any way, but if it includes social security which has been funded by individual and employer contributions to a trust, that is a subject of considerable debate)

All of the above can be interpreted as one sees fit.  Here it is obvious that the first four categories are in a significant decline as a percentage of GDP from the not too distant past.  These are the attributes that lay the groundwork for future economic growth.  Private enterprise could possibly be replacing a small portion of the spending that these declines suggest, but these are primarily public spending projects that have waned in financial support.  What this could mean is that without this investment in economic growth, the rise in entitlement spending will continue unabated.  Should I have begun the last sentence with "What this will mean..."

The facts, which should be startling and disturbing, are open to interpretation but cannot be ignored.







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