Graphs of the Day: How the Years Dulled America's Innovation Edge

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In the 1950s, the U.S. was in a road-building kind of mood. The Highway Act of 1956 set out to build a world-class network of roads that would tie our cities together with concrete expressways. These were the days when the U.S. spent twice as much on education than health care. We were a young country poised to dominate the rest of the 20th century, and we were in an invest-now mindset.

But in the last 60 years, federal investment in infrastructure has declined dramatically and our roads, bridges and dams, once the wonder of the developed world, now lie in relative disrepair. Here is what the free fall of U.S. infrastructure looks like ...

declining infrastructure.png


... and this is what it has wrought:

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These graphs come from investor and analyst Mary Meeker's treatment of the U.S. government as a corporation in need of restructuring.  Her prescriptions are familiar: We need to spend more on innovation and less on health care. But her slides crystallize something profound about the evolution of the country. We're getting old.

In the last 40 years, we've pumped the breaks on productivity-enhancing investments in infrastructure, education and technology, while health care and income security costs have accelerated dramatically. Like an aging couple shifting its spending away from the kids' clothes and tuition toward pills and doctor visits, the U.S. government has transformed itself from a defense-technology-infrastructure investor to a national insurance conglomerate for its aging population.

Below is a chart that breaks down U.S. spending into (probably oversimplified) categories of productive spending -- like defense and infrastructure that tries to build things -- and less-productive spending like entitlements and interest payments that try to preserve things. Entitlements and interest have doubled their share of the budget since 1970s. (To be clear: Entitlements are important and humane. But they're not investments in our future capacity to produce things. Instead, they preserve the health and dignity of the sick and retired.)

invest v care in us budget.png
Productivity-enhancing spending, according to Meeker, comes from three main sources: infrastructure, education and research and development investment. We've seen infrastructure spending collapse as a share of the budget since the 1960s. What about education and R&D?

In 1970, the U.S. (at the federal, state and local level) spent twice as much on education as health care. Twenty years later, health care closed the gap, and today, total government spending on health care is about 33 percent higher than education spending, which is more or less even with its 1970s levels.


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Second, look at technology. R&D spending exploded in the late 1950s and 1960s on the back of government investments in aeronautics and science. Fifty years later, federal R&D has fallen below 1950s levels as a share of GDP, while the private sector has picked up the slack.


technology investment.png
Source: KPCD.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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