Last week, the Congressional Budget Office published a blog exploring the role of fiscal policy in improving economic productivity. The subject is particularly interesting given how frequently politicians propose to pay for their agendas, be they tax cuts or spending increases, with dubious claims of improved economic growth. CBO identified four main fiscal tools that can actually result in increased growth through higher productivity:
Increasing funding for federal research and development (R&D)
Incentivize private investment in R&D through tax credits
Increase federal spending on education
Increasing loans or loan guarantees for businesses pursuing innovative technology
While federal lending programs can be difficult to quantify, the first three of these are easily measured and are worth putting in perspective relative to other areas of the federal budget.
In Fiscal Year 2017, the federal government is projected to directly spend just under $126 billion on four categories of R...