https://www.epi.org/blog/mit-economist-simon-johnson-wants-to-ramp-up-federal-investment-on-science-and-technology-and-make-sure-taxpayers-get-a-cash-dividend-in-return/
There is no shortage of creativity in the American economy—as long as we get away from the myth that denigrates public investments and puts private business on a pedestal.
That's the message from MIT Sloan Economist Simon Johnson's new book, "Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream," which he presented during a talk and Q&A here at EPI this week.
Johnson, in a book co-authored with his colleague Jonathan Gruber, traces the history of America's rapid economic ascent after World War II in part to heavy doses of public spending and incentives for scientific discovery and technological innovation.
He says the government's abandonment of this commitment has not only chipped away at America's economic and cultural leadership globally but also cost workers and firms enormously in terms of lost productivity, wages, and profits.
Johnson highlighted a decline in federal spending on research and development from a 1964 peak of 2 percent of gross domestic product (GDP) to just 0.7 percent today.
"Converted to the same fraction of GDP today, that decline represents roughly $240 billion per year that we no longer spend on creating the next generation of good jobs," Gruber and Johnson write in the book.
The authors offer a number of creative solutions to the problems they identify.
First, they would like to return research and development spending to its 1983 level, around 1.2 percent of GDP, which would amount to $100 billion per year.
Second, Gruber and Johnson propose flipping the Amazon headquarters' totally lopsided and unproductive bidding process on its head, using federal funds and an independent commission to identify dozens of metropolitan areas ripe for large-scale science and tech spending.
Third, in order to ensure the benefits of productivity growth, which have accrued primarily to the very rich in recent decades (see chart below), are broadly shared, they call for the introduction of an "innovation dividend." This would be a regular cash payment offering returns on the initial public investments directly to the taxpayers that ultimately funded them.
"Let's aim to create a cash transfer for Americans based on, we argue, the real estate appreciation that will come from the creation of these new jobs," Johnson said during his EPI book talk.
The gap between productivity and a typical worker's compensation has increased dramatically since 1973Productivity growth and hourly compensation growth, 1948–2017
Notes: Data are for compensation (wages and benefits) of production/nonsupervisory workers in the private sector and net productivity of the total economy. "Net productivity" is the growth of output of goods and services less depreciation per hour worked.
Source: EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics (BLS) Labor Productivity and Costs program, wage data from the BLS Current Employment Statistics, BLS Employment Cost Trends, BLS Consumer Price Index, and Bureau of Economic Analysis National Income and Product Accounts
Updated from Figure A in Raising America's Pay: Why It's Our Central Economic Policy Challenge (Bivens et al. 2014)
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