Jonathan asks how budget policy could be changed to get investment and consumption spending sorted out. The most important reform would be a separate federal capital budget. With a unified budget, completely different kinds of expenditure, some with immediate payoff, like welfare payments and hiring park rangers, and others whose benefits keep flowing in for years and decades, like infrastructure projects, compete with each other in a deeply uncomprehending and dysfunctional debate. Nobody compares the full price of a house purchased this year with the full price of a week’s groceries.
I haven’t heard anything about this for years, but it still sounds like a good idea both for better use of public funds and for improving the quality of public discourse. The federal government should have two separate budgets, one for operations and one for capital investments, and the capital budget needs to be able to commit a stream of expenditures for most projects over several budget cycles. The separation isn’t airtight, of course; many capital investments entail ongoing maintenance and operation costs, and these should in principle be funded with the initial investment. But the basic distinction between consumption and investment deserves explicit recognition at the top of the budgeting process.
UPDATE: Eric Patashnik points us at a CBO report on this from May; i’m pleased to see the idea is on the table (though CBO pours some cold water on it).
Author: Michael O'Hare
Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training.
He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management.
Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs.
At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.
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