This article traces patterns of consumption, low productivity, debt accumulation and slow economic growth. Rather than calling for an increased emphasis on market and corporate incentives, the author calls for increased public investment. He favors particularly increases in scientific research and development and technology, in public works to rebuild the infrastructure, and calls for a public administration associated with increased investment in government.

The New Deal and the Great Society established the foundations of the public policy and administration of consumption—income transfer, entitlement, loan, loan guarantee, credit, subsidy, tax expenditure, and related programs designed to maintain or improve the income levels and social and economic well being of many elements of the United States population. Such programs now constitute approximately 50 percent of the federal budget. In the late 1980s, the United States entered into a new international economic, technological, and demographic order in which the public administration of investment will be increasingly important. The “public administration of investment” is defined as the administration of policies designed to produce future benefits for the nation through investment in people, knowledge and technology, the environment and public infrastructure, and public systems and public service.

Several trends in the 1980s contributed to the increasing importance of the public administration of investment. The first trend was the continuation of the low rate of productivity growth in the United States, a condition that has persisted since the early 1970s. (1)

Despite low productivity growth, the United States as a nation continues to spend as if productivity were increasing at pre-1973 rates and to borrow from other nations to make up the difference. The result has been large public and private debt. Increased productivity growth will require additional public as well as private investment if the United States is to maintain its standard of living and capacity to pursue social justice and other values into the next century.

The second trend has been the globalization of technology and the economy. The United States has been losing the comparative advantage it once enjoyed in many scientific and technological fields, as technological know-how has spread throughout the world. The United States fell further behind in the 1980s in the development of new production processes and in the commercialization of new processes and products in consumer electronics, semiconductors, and other fields.(2) There is compelling evidence that both the private and public sectors underinvested in developing the scientific and technical workforce that will be essential in the global technological competition of the future.(3) More generally, by many measures the education system of the United States has not been producing a well-educated workforce or well-educated citizens.(4)

The third trend of the '80s was the maturation of the baby boom generation. This generation is now in the high consumption stage of its life cycle—homes, cars, and other consumer goods. The aging of the baby boom generation in the early decades of the twenty-first century will pose a complex challenge to public policy and administration. Early in the twenty-first century, the baby boomers will enter a stage of life usually marked by reduced consumption and higher saving.(5) At the same time, increased longevity suggests growing demands on both public and private systems for income maintenance, health care, and social services. New technologies will compound health care costs. Unless saving and investment are increased now to partially support the baby boom generation in retirement, the “baby bust” generation that followed the baby boom will face a heavy burden of support.(6) Currently, the Social Security Trust Fund does not have a single penny in it because the Treasury is borrowing the funds to reduce the federal deficit. Substantially increased productivity or substantially higher taxes will be necessary to replenish the fund in the early twenty-first century.

To compound the problem, by the year 2050, for the first time in American history (according to the middle series of Census projections), there will be more old than young Americans. The age cohort 60 and older will make up 28 percent of the population, while the age cohort 1-19 years will make up about 23 percent of the population.(7) This is in stark contrast to the 16 percent of the population 60 and over, and the 32 percent of the population 1-19 years, in 1980. Greatly increased saving, increased productivity, substantially lower standards of living for working people, extended working years, or an influx of immigrant workers will be needed to produce the benefits that are promised in the entitlement programs of the federal government and expected by the American people.

Finally, many observers perceived an increase in private greed during the last decade in the United States and a growing indifference to common concerns—eroding public infrastructure, the highest infant mortality rate among industrialized nations, the highest rate of child poverty, and similar social conditions. They see a preoccupation with current pleasure at the expense of future benefits, and a decline in social discipline and civic virtue. To some observers, the United States has been in a temporary cycle of preoccupation with private needs.(8) To others, civic virtue in the United States has been in decline.(9)

In any event, diminishing growth may intensify each individual's desire to protect his or her interests. In this context, redistribution in the pursuit of social equity will become increasingly difficult.

Volume 21

Numbers 6-8