Budget deficits and early childhood programs

For better or worse, it appears we are engaged in a debate about how to reduce projected future budget deficits. This is true both at the federal level and in many states.

What relationship, if anything, do early childhood programs have to this debate?

First, high-quality early childhood programs can significantly reduce budget deficits. This is particularly true for long-run budget deficits.

In the short-run, high-quality early childhood programs can reduce budget deficits by reducing a variety of remedial K-12 system costs. The most important short-run cost savings are in special education costs. Depending upon the exact situation, budgetary savings from reduced special education costs grow over 13 years to between half of early childhood program costs up to a third more than early childhood program costs.

In the medium-run, high-quality early childhood programs begin to reduce budget deficits by reducing the costs of juvenile crime. These cost savings from reduced crime increase over time as former child participants age and become adults.

In the long-run, high-quality early childhood programs have their most profound impacts by increasing adult earnings for former child participants. These increased earnings lead to both increased tax revenues and reduced spending on welfare programs.

Long-run budget deficit projections include projections by Lynch that preschool programs yield budget savings of 2 to 3 times their costs, and projections from Dickens, Sawhill, and Tebbs that the federal revenue increase alone from preschool programs will in the long-run be over five times costs.  The latter projections by Dickens et al are more dynamic projections that allow initial growth to spur capital formation that accelerates growth.

Second, high-quality early childhood programs increase per capita earnings, which is closer to an ultimate goal than reducing budget deficits.

Why are we interested in reducing budget deficits? From any rational perspective, the only reason to be frightened of future budget deficits is that they might interfere with the ability of the U.S. to achieve greater economic prosperity for most Americans.  If budget deficits grow to be difficult to sustain, they impose interest costs on future generations, and may contribute to lower levels of private investment. The lower levels of private investment will reduce future earnings per capita before taxes, and higher interest charges will reduce per capita earnings after taxes.

Economic policy should be aimed at a broad-based economic prosperity, shared by all. A smart plan to reduce future budget deficits can be part of such a policy, as a means to the end of shared prosperity. But an equally important part of such an economic policy plan is to provide the resources needed for cost-effective public investments that will increase the future productivity of the economy. Among the most rigorously proven of such public investments are investments in high-quality early childhood programs.

We should not allow fear of budget deficits to reduce needed investments in early childhood programs, which will reduce budget deficits in the long-run as well as promoting the true ultimate goal of economic policy, which is broad-based prosperity.  Both public and private investments are crucial to future American prosperity. As we try to reduce budget deficits, we should remember this saying: don’t throw the “babies” out with the bathwater!

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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