Monday, February 14, 2005

The Budget's Misguided Parsimony

Business Week has an op-ed piece by its chief economist, Michael Mandel. It's a fairly dry and technical discussion of multifactor productivity (MFP), but the conclusion is unambiguous:

"Unfortunately, in an attempt to cut the budget deficit, the Bush Administration has held down government spending on R&D and education. The budget proposal calls for federal nondefense R&D spending for fiscal year 2006 to fall by 1% compared to the previous year, after inflation, while real outlays on education and training are proposed to drop by 6%. This misguided parsimony can only hurt the nation's ability to maintain a rapid pace of multifactor productivity growth. Putting more resources into technology and education is the best way to ensure that the bounty of higher MFP continues in the future."

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