While I was working out this morning, I was watching the supercommittee hearings on CSPAN (pretty lame, huh). And Doug Elmendorf was explaining all the categories that the committee had to be conscious of…discretionary vs nondiscretionary, defense vs nondefense, security vs nonsecurity.
And it struck me that we were missing the most important budget categories: investment vs consumption. Yes, I know that this is an age-old debate, whether the federal government needs a capital budget. But it would really clarify a lot of the debate.
The investment budget would of course include physical capital such as infrastructure; human capital such as education and training; and knowledge capital such as R&D.
I think that the main thing that the committee should do is protect the federal investment budget. We don’t want federal investment going back to the low levels of the 1980s and 1990s.