The surest route to returning to the productivity, economic growth and employment the United States experienced in the post-World War II era and again in the late 1990s requires a substantial increase in public investments, a new report from the Economic Policy Institute (EPI) finds.

But the biggest obstacle facing any significant boost to public investments, writes EPI Economist Josh Bivens is “how myopic the economic debate about budget deficits has become in the United States.”

Slashing government spending to achieve near-term deficit reduction in the name of insuring that funds are available for private capital formation makes no sense if valuable public investments are sacrificed along the way.

Increasing public investment by just under $250 billion per year on average for the next 10 years (an increase equivalent to roughly 1.6 percent of overall GDP) would boost gross domestic product by 0.9 to 2.8 percent in 2021.

Public investment by federal, state, and local governments builds the nation’s capital stock by devoting resources to the basic physical infrastructure (such as roads, bridges, rail lines, airports, and water distribution), innovative activity (basic research), green investments (clean power sources and weatherization), and education (both primary and advanced, as well as job training) that leads to higher productivity and/or higher living standards. While private actors also invest in these areas, they do so to a much smaller degree, in part because the gains from public investment accrue not just to those undertaking the investment, but to a wide range of people and businesses.

Bivens provides substantial research demonstrating that the rate of return to public investment likely exceeds that of private investment. Click here for the full report.