Tuesday, September 6, 2011

Government Investment Can Mean Many Things

Following up on my post from earlier today, which has touched off a conversation about the need for infrastructure investment in the comments section between your editor and Colin, comes this post from Matt Yglesias.  Yglesias's point is that we've stopped investing in government infrastructure like we used to, but what jumped out at me was not the lines on the graph but the title: "Our Aging Capital Stock (average age of structures, equipment, and software)."

It got me thinking, what is the condition of the IT systems the government has right now? What's the average age of a PC that sits on the desk of a federal employee?  Have we considered different IT solutions for data and database management?

Just as Paul Krugman notes(NYT) that we're in a situation where the issue isn't a lack of cash, but a lack of motivation.  What sort of stimulative effect would we have it we upgraded every computer on every desk of every federal employee?  I don't know with any certainty, but as it becomes increasingly clear we have a lack of demand, we should start thinking about different ways to generate some.

**To be clear, I'm not advocating a bunch of blank checks and investment has strings attached, but I don't think we've done what we need to pick up the slack in demand.**

Peter Orszag thought IT investment would be a good idea back in 2010 (h/t CH):
Public sector productivity growth matched the private sector's until about 1987. But something changed in the late 1980s. From 1987 until 1995, private sector productivity rose by an average of 1.5 percent a year. Meanwhile, the public sector's productivity rose by only 0.4 percent per year - or about one-third as much - over roughly the same period...The best analysis we have, from the McKinsey Global Institute, suggest that since 1995 it appears that the public sector continued to fall behind the private sector which saw productivity surge during that period. 
Some of this increasing gap has to do with advances in management techniques in the private sector. Some, undoubtedly, has to do with the challenges the federal government has in attracting and hiring top talent. Keep in mind that the average time it takes to hire a new federal employee is 140 days - and by that time, many of the best candidates, understandably, have gone elsewhere.
But I believe that the biggest driver of this productivity divide is the information technology gap. At one time, a federal worker went to the office and had access to the most cutting-edge computer power and programs. Now, he often has more of both in a device clipped to his belt.
Closing the IT gap is perhaps the single most important step we can take in creating a more efficient and responsive government.


Colin said...

In other words, more calls for misguided Keynesianism that has never worked in the past, isn't working now, and never will work. It's utterly faith-based and a bunch of macroeconomic hocus-pocus. This notion that companies should just shovel money out the door willy-nilly, without regard for whether it's being used to productive ends, is utterly ridiculous. It's a recipe for impoverishment, not prosperity.

I have no idea why replacing perfectly serviceably computers, meanwhile, would provide any more of a boost to the economy than replacing perfectly good cars with newer ones -- as done with the ridiculous Cash for Clunkers -- which is to say none at all.

It's worth noting, meanwhile, that in recent years the federal government has spent nearly $200 billion on contracts with computer companies. Assuming a federal workforce of 2.7 million, that's over $70K per employee. If the computers are outdated despite the tens of billions spent, that is an indictment of federal inefficiency and indication we should keep as much money as possible away from them as it is essentially a wealth destruction machine.

Jason said...

The notion that companies should just shovel money out the door is ridiculous, but with slack demand what do we do to restart the economy? What's the alternative?

Colin said...

Easy -- improve the business environment. Make it easier to do business and you'll get more of it. We need to end this obsession with short-term fixes such as government spending and low interest rates that simply seek to reinflate the bubble.

Focus on the micro problems and the macropicture will take care of itself.