Since academia is dominated by the left, politicians on the right love to dunk on academics by cherrypicking examples of research that are easily mocked. They claim that the researchers are wasting taxpayer money, and the left - because they're asymmetrically dependent on right-leaning voters to stay in power - leaves the researchers out to dry instead of defending them.
In the postwar and Cold War eras, there was a clear consensus to spend on all research as a national security issue. The rise of global competitors to American economic dominance cross-pressured this indiscriminate spending, so the research budget was reduced to line items strictly justifiable under national security, and it was tossed in that big bloated military budget, which right-wing voters eagerly support.
It's always because research maybe does something good some number of years from now, and everyone wants to show something shiny and new by the end of this term, so the money goes somewhere else.
You could make this argument for the R&D tax credit, but actual government funding of basic research that facilitates the development of whole new areas of practical research? Or government research that eventually gets commercialized (like the internet)? That just has massive positive results for everyone. There's not really anything about those processes that would push for higher or lower inequality; we just have higher inequality in the post-Reagan era because the government actively pushed for more inequality, by busting unions and otherwise cramming down labor, while also slashing taxes on big fortunes.
Observing that GDP growth goes mostly to the top 20% is not remotely sufficient to demonstrate that research — let alone subsidized research (isn't all research subsidized by someone?) — is a big contributor to inequalities in income and wealth.
I fail to see anything resembling significant redistribution. Real wage growth is now negative and the 35% of Americans who don’t
own homes are facing exploding costs. No amount of credits or R&D or green energy is going to fix these structural issues which the administration chooses to ignore.
Treasuries will be rolled over at 0 interest, Social Security will be adjusted so it doesn't consume more than the trust fund provides. Health care costs are the big problem here. But they have nothing to do with Bidenism.
One could argue that it is health care costs that are such a huge problem that unless we fix that nothing else really matters. We are close to spending 20% of GDP on health care, or roughly 2x what the rest of the OECD spends, with some of the weakest outcomes. So this 10% of GDP is pure waste, economically it is producing zero real output wrt other countries. With current demographic trends, and the anti-immigrant zeal in part of the population, the US is an aging country which almost certainly means our health care spending, ceteris peribus, is going to increase. (e.g. a drug of questionable efficacy for Alzheimers that costs over $50K/yr).
We absolutely need more spending on research, but it is a small problem compared to health care costs.
Health meaning Pharma medium and big? Adding then medical centers, hospital infrastructure and staff? I'd look at their inherent cost rises of the last decades. Place those graphs aside to the total number of patents and market constrains that shape the myriad of suppliers there.
I´d venture to say that, yes results (treatments, pharmacological products, etc) have been greatly growing and improving... together to the rise of causes to _demand_ the attention of the Health system.
///At the end, what part of the GDP spent in Health finds a cause linked to pollution, poisoning, etc that was not even there 4 or 5 decades ago?
Plus, what are the out-of-the-market causes of such expenditure? Precisely here is where we need URGENT change; where are the patent CAPs? or the institutional evolution to counteract the asymmetries and the excessive rents of many acting below the Health umbrella?
Ironically, that questionable Alzheimer’s drug that we can’t afford was probably derived from taxpayer-subsidized research, and wouldn’t be bothered with if a crazy health-care system wasn’t going to pay for it.
So your basing everything on the assumption that inflation and interest rates will NEVER pick up. That people will forever just loan us whatever we want expecting nothing in return? I don't think you realize how well and truly fucked we will be if your wrong.
No, it has nothing to do with Bidenism, but that's not my point. My point is that you can't have your Bidenism unless you address the above problems. Biden can't wisely steer the ship of state unless a people agree to loan him 5-10% GDP expecting nothing in return.
The aging thing is a problem but Europe, Japan and Russia are already well ahead of where we'll every be, so I'm not that worried about it. And if the returns on these new investments outperform the interest on the debt, they'll be a help to the budget, not a hindrance. Interest rates are still very low, so that's a relatively low bar to clear
Very conveniently, we’ll never know what better results may have flowed from leaving more of the wealth investment decisions in the hands of the clever people who created the wealth in the first place, as in what is normally considered a free country.
What would you call it when the government spends money to build an interstate or port, in the hopes that it will facilitate commerce, trade and ultimately tax revenues?
Unlike 90% of the proposed bill, those might properly be called infrastructure investments, but not necessarily wise or necessary ones. If private enterprise can create a worldwide cell phone service or an agriculture industry that feeds the world, it can certainly build a port or highway, if such will meet a real need rather than merely benefit construction contractors and labor unions.
The worldwide cell phone service wouldn't exist without government-funded research into semiconductors and communications technology. The 'private' agriculture industry that feeds the world couldn't exist as it is today without extensive government support through fuel subsidies, commodity price supports, and publicly-funded research.
Statist myths. Of course they want us to believe that. They have no evidence that they would not have come about anyway, perhaps even better in the case of agriculture. Of course, the government can speed things up by being an early customer in some cases. But that does not make them the managers of choice for directing research in non-governmental areas.
I guess you weren’t around in 1996, when people woke up to some of the facts about welfare and instituted more work requirements. Sure, welfare can relieve the misery of those truly unable to work and should be used for that purpose only.
UBI is an intriguing idea, but I have yet to see any pilots that were designed well enough to predict the effects of widespread adoption.
Setting aside whether or not the 96 reforms actually increased labor force participation, the whole point of the debate back then was the welfare cliff. You could actually lose money by working more hours and making too much for the benefit. The new CTC side-steps this by just giving the benefit to wealthier people.
People maybe should wake up instead to the fact that the Employment-Population Ratio (https://fred.stlouisfed.org/series/EMRATIO) has trended downwards, not upwards, since Clinton signed the Personal Responsibility and Work Opportunity Act into law. "Bringing back welfare dependency" and getting rid of work requirements seem like they could help, not hurt!
It’s not just the rich that create wealth, Noah. Almost everyone who works and/or invests does, or is at least attempting to, including you!
No one (or at least not I) is arguing that R&D doesn’t lead to wealth creation. The question is about the marginal utility of such research being directed by the state.
If I'm the CEO of a publicly-traded company in the current American economy, how do I justify putting corporate revenue into research when it doesn't contribute directly to corporate profit?
There's extensive research out there on this subject, I don't know that it's so convincing that it proves anything, but it at least suggests it's can be causal. It's what China is doing with their push to be an AI-leader, so the CCP is at least convinced
Well, yes, to the extent that subsidized or government research may have displaced privately funded research, or where private research was long suppressed, there could be a causal relationship at present. That history does not imply that additional government funded research is the optimal national policy in the long term. Government research on potential weapons systems such as AI could be an exception. It could also be an existential danger.
Well, I don't know if it's optimal or not, but China is definitely subsidizing and encouraging their domestic industries to invest in AI, because they think that encouragement will reap economic rewards.
But I'll grant you that weapons systems is an excellent example of Government investments yielding results that private industry couldn't.
I suspect the CCP is more interested in the power to be derived from AI than the economic returns. It’s hard to imagine a huge market for AI backed by the CCP.
Well I think it mostly comes in the form of subsidies for industries that adopt or advance AI. AI is probably a vastly overused term, but concretely I think that means things like self-driving cars, self-loading port machines and other machines that for now still need a human to operate. And also the big, profitable software companies like China's competitors to Facebook, Google etc. Probably most of China's economic output is backed by the CCP in the sense of subsidies and other stamps of approval or backing.
I actually worked for a US company in 2015-2016 that branded itself as "AI" to land tens of millions of Chinese investment. But as it turned out we were basically just doing statistical consulting and the investors took big Ls
But back to your comment - Economic returns are a big part of national power, right? I'd be surprised if you truly disagreed with that.
Been greatly enjoying the newsletter but if I can add one suggestion, cover antitrust and monopolies. For example how hedgefunds use rollups to reduce competition while maintaining the pretence of competition. Rather surprisingly this is a bipartition issue!
Matt Stoller, whom I assume you're already familiar with has written extensively on this.
"Oil produces the most revenue for Texas, which earned $16.3 billion from oil in 2019, an amount that made up 7% of the state’s revenue. Oil revenues accounted for 70% of state revenues ($1.1 billion) in Alaska in 2019, 52% of state revenues ($2.2 billion) in Wyoming in 2017, and 45% of the revenues ($1.6 billion) in North Dakota in 2017." H.C. Richardson
Where are the regional innovation hubs going? What Repubs voted for/against?
Interesting that one of the qualities required in a CEO is imagination. The previous paradigm shifts showed imagination. Perhaps something will happen to improve the research budget?? But like you say - the direction is the right one. But what would I know? I'm writing from New Zealand.
How come there's an apparent tendency in the US to cut research spending? Who's interest is that in? (Nobody's, it seems to me)
It's massive foot-shooting.
You must not be from 'round these parts.
Since academia is dominated by the left, politicians on the right love to dunk on academics by cherrypicking examples of research that are easily mocked. They claim that the researchers are wasting taxpayer money, and the left - because they're asymmetrically dependent on right-leaning voters to stay in power - leaves the researchers out to dry instead of defending them.
In the postwar and Cold War eras, there was a clear consensus to spend on all research as a national security issue. The rise of global competitors to American economic dominance cross-pressured this indiscriminate spending, so the research budget was reduced to line items strictly justifiable under national security, and it was tossed in that big bloated military budget, which right-wing voters eagerly support.
It's always because research maybe does something good some number of years from now, and everyone wants to show something shiny and new by the end of this term, so the money goes somewhere else.
Subsidized research is probably a big contributor to income and wealth disparity. Look at who ultimately benefits the most.
???????
Where is the GDP growth going? To the top 20% mostly, no?
You could make this argument for the R&D tax credit, but actual government funding of basic research that facilitates the development of whole new areas of practical research? Or government research that eventually gets commercialized (like the internet)? That just has massive positive results for everyone. There's not really anything about those processes that would push for higher or lower inequality; we just have higher inequality in the post-Reagan era because the government actively pushed for more inequality, by busting unions and otherwise cramming down labor, while also slashing taxes on big fortunes.
Observing that GDP growth goes mostly to the top 20% is not remotely sufficient to demonstrate that research — let alone subsidized research (isn't all research subsidized by someone?) — is a big contributor to inequalities in income and wealth.
I fail to see anything resembling significant redistribution. Real wage growth is now negative and the 35% of Americans who don’t
own homes are facing exploding costs. No amount of credits or R&D or green energy is going to fix these structural issues which the administration chooses to ignore.
Child allowance!
In 10 years the budget will consist of:
1. Interest payments
2. Medicare/Medicaid
3. Social Security
4. Maybe the courts or something very cheap
This will be Bidenism. It doesn’t matter if your vision would work or not, it can’t be implemented for more than a year or two.
Treasuries will be rolled over at 0 interest, Social Security will be adjusted so it doesn't consume more than the trust fund provides. Health care costs are the big problem here. But they have nothing to do with Bidenism.
One could argue that it is health care costs that are such a huge problem that unless we fix that nothing else really matters. We are close to spending 20% of GDP on health care, or roughly 2x what the rest of the OECD spends, with some of the weakest outcomes. So this 10% of GDP is pure waste, economically it is producing zero real output wrt other countries. With current demographic trends, and the anti-immigrant zeal in part of the population, the US is an aging country which almost certainly means our health care spending, ceteris peribus, is going to increase. (e.g. a drug of questionable efficacy for Alzheimers that costs over $50K/yr).
We absolutely need more spending on research, but it is a small problem compared to health care costs.
Health meaning Pharma medium and big? Adding then medical centers, hospital infrastructure and staff? I'd look at their inherent cost rises of the last decades. Place those graphs aside to the total number of patents and market constrains that shape the myriad of suppliers there.
I´d venture to say that, yes results (treatments, pharmacological products, etc) have been greatly growing and improving... together to the rise of causes to _demand_ the attention of the Health system.
///At the end, what part of the GDP spent in Health finds a cause linked to pollution, poisoning, etc that was not even there 4 or 5 decades ago?
Plus, what are the out-of-the-market causes of such expenditure? Precisely here is where we need URGENT change; where are the patent CAPs? or the institutional evolution to counteract the asymmetries and the excessive rents of many acting below the Health umbrella?
Ironically, that questionable Alzheimer’s drug that we can’t afford was probably derived from taxpayer-subsidized research, and wouldn’t be bothered with if a crazy health-care system wasn’t going to pay for it.
So your basing everything on the assumption that inflation and interest rates will NEVER pick up. That people will forever just loan us whatever we want expecting nothing in return? I don't think you realize how well and truly fucked we will be if your wrong.
No, it has nothing to do with Bidenism, but that's not my point. My point is that you can't have your Bidenism unless you address the above problems. Biden can't wisely steer the ship of state unless a people agree to loan him 5-10% GDP expecting nothing in return.
That’s some heavy duty Kool-Aid, man.
The aging thing is a problem but Europe, Japan and Russia are already well ahead of where we'll every be, so I'm not that worried about it. And if the returns on these new investments outperform the interest on the debt, they'll be a help to the budget, not a hindrance. Interest rates are still very low, so that's a relatively low bar to clear
Very conveniently, we’ll never know what better results may have flowed from leaving more of the wealth investment decisions in the hands of the clever people who created the wealth in the first place, as in what is normally considered a free country.
Wealth as in wealth generally.
As for the rest of your comment, I’m afraid I simply can’t comprehend it.
Yes, sorry, just misplaced my comment and further wrongly corrected its first word. Should read "Health"
As if anyone could or would dare to account for return on these “investments”.
They do! ROI is the whole point.
If “return” is measured in campaign donations perhaps.
What would you call it when the government spends money to build an interstate or port, in the hopes that it will facilitate commerce, trade and ultimately tax revenues?
Unlike 90% of the proposed bill, those might properly be called infrastructure investments, but not necessarily wise or necessary ones. If private enterprise can create a worldwide cell phone service or an agriculture industry that feeds the world, it can certainly build a port or highway, if such will meet a real need rather than merely benefit construction contractors and labor unions.
The worldwide cell phone service wouldn't exist without government-funded research into semiconductors and communications technology. The 'private' agriculture industry that feeds the world couldn't exist as it is today without extensive government support through fuel subsidies, commodity price supports, and publicly-funded research.
Statist myths. Of course they want us to believe that. They have no evidence that they would not have come about anyway, perhaps even better in the case of agriculture. Of course, the government can speed things up by being an early customer in some cases. But that does not make them the managers of choice for directing research in non-governmental areas.
Perhaps we should realize that too much concentration of economic power is just as bad as too much concentration of government power.
What's military spending, chopped liver?
Lol there's a simple answer that nobody likes. Raise taxes.
Don’t forget the war machine. It will always get its cut.
Bringing back welfare dependency seems like a bad idea.
But cash benefits don't cause dependency, they help boost people out of dependency. That's why it's a policy revolution. https://www.theatlantic.com/ideas/archive/2021/03/stocktons-basic-income-experiment-pays-off/618174/
I guess you weren’t around in 1996, when people woke up to some of the facts about welfare and instituted more work requirements. Sure, welfare can relieve the misery of those truly unable to work and should be used for that purpose only.
UBI is an intriguing idea, but I have yet to see any pilots that were designed well enough to predict the effects of widespread adoption.
Setting aside whether or not the 96 reforms actually increased labor force participation, the whole point of the debate back then was the welfare cliff. You could actually lose money by working more hours and making too much for the benefit. The new CTC side-steps this by just giving the benefit to wealthier people.
People maybe should wake up instead to the fact that the Employment-Population Ratio (https://fred.stlouisfed.org/series/EMRATIO) has trended downwards, not upwards, since Clinton signed the Personal Responsibility and Work Opportunity Act into law. "Bringing back welfare dependency" and getting rid of work requirements seem like they could help, not hurt!
“Bidenomics” to the extent that it exists seems to be deficit spending with vague promises of “the rich” paying. Hardly revolutionary.
On a less snarky note, is there a clear relationship between govt R&D spend and growth? I recall the verdict being mixed.
Biden isn't a soak-the-rich guy, in fact he's so far been very tax-averse. As for R&D and growth, check out this post: https://mattsclancy.substack.com/p/what-are-the-returns-to-r-and-d
Isn’t Biden’s entire tax program explicitly targeted at the rich? “Nobody under 400K” and all that? Plus the cap gains tax doubling.
Realize all just proposed but still.
It’s not just the rich that create wealth, Noah. Almost everyone who works and/or invests does, or is at least attempting to, including you!
No one (or at least not I) is arguing that R&D doesn’t lead to wealth creation. The question is about the marginal utility of such research being directed by the state.
You're right- the rich don;t create wealth, they just scoop it up.
Except I didn’t day that.
If I'm the CEO of a publicly-traded company in the current American economy, how do I justify putting corporate revenue into research when it doesn't contribute directly to corporate profit?
Ask all the CEO’s who do it year in and year out.
They probably correlate, but a causal relationship is probably just an article of faith.
There's extensive research out there on this subject, I don't know that it's so convincing that it proves anything, but it at least suggests it's can be causal. It's what China is doing with their push to be an AI-leader, so the CCP is at least convinced
Well, yes, to the extent that subsidized or government research may have displaced privately funded research, or where private research was long suppressed, there could be a causal relationship at present. That history does not imply that additional government funded research is the optimal national policy in the long term. Government research on potential weapons systems such as AI could be an exception. It could also be an existential danger.
Well, I don't know if it's optimal or not, but China is definitely subsidizing and encouraging their domestic industries to invest in AI, because they think that encouragement will reap economic rewards.
But I'll grant you that weapons systems is an excellent example of Government investments yielding results that private industry couldn't.
I suspect the CCP is more interested in the power to be derived from AI than the economic returns. It’s hard to imagine a huge market for AI backed by the CCP.
Well I think it mostly comes in the form of subsidies for industries that adopt or advance AI. AI is probably a vastly overused term, but concretely I think that means things like self-driving cars, self-loading port machines and other machines that for now still need a human to operate. And also the big, profitable software companies like China's competitors to Facebook, Google etc. Probably most of China's economic output is backed by the CCP in the sense of subsidies and other stamps of approval or backing.
I actually worked for a US company in 2015-2016 that branded itself as "AI" to land tens of millions of Chinese investment. But as it turned out we were basically just doing statistical consulting and the investors took big Ls
But back to your comment - Economic returns are a big part of national power, right? I'd be surprised if you truly disagreed with that.
Been greatly enjoying the newsletter but if I can add one suggestion, cover antitrust and monopolies. For example how hedgefunds use rollups to reduce competition while maintaining the pretence of competition. Rather surprisingly this is a bipartition issue!
Matt Stoller, whom I assume you're already familiar with has written extensively on this.
"Oil produces the most revenue for Texas, which earned $16.3 billion from oil in 2019, an amount that made up 7% of the state’s revenue. Oil revenues accounted for 70% of state revenues ($1.1 billion) in Alaska in 2019, 52% of state revenues ($2.2 billion) in Wyoming in 2017, and 45% of the revenues ($1.6 billion) in North Dakota in 2017." H.C. Richardson
Where are the regional innovation hubs going? What Repubs voted for/against?
Interesting that one of the qualities required in a CEO is imagination. The previous paradigm shifts showed imagination. Perhaps something will happen to improve the research budget?? But like you say - the direction is the right one. But what would I know? I'm writing from New Zealand.
Could be that Biden is really just enacting the Obama era vision with the Trump years being a very significant speed bump.
Maybe, but I think Trump's unorthodoxy may even have been a move in this direction.