Early Investment in Kids = Huge Payoff to Taxpayers

October 19, 2004. New York press release:

A new study being released today by the Economic Policy Institute finds that increased federal and state investments in comprehensive high quality early childhood development programs would more than pay for themselves – generating more than $2 in returns to taxpayers for every $1 invested. The overall economic benefits would be even greater – more than $8 in benefits to society for each $1 invested.

The report, Exceptional Returns: Economic, Fiscal, and Social Benefits of Investment in Early Childhood Development, also finds that investing in the health and education of 3 and 4 years olds will eventually produce significant increases in economic productivity and the rate of economic growth, while reducing both the public costs and the personal burdens of remedial education, welfare, crime, and widespread poverty.

The author of the report, Dr. Robert G. Lynch, is the Chair of the Economics Department at Washington College in Chestertown, Maryland. Earlier in his career, Lynch was a professor of economics at SUNY Cortland and the chair of that college’s Economics Department. The full report is available on the Economic Policy Institute’s website at http://www.epi.org/publication/books_exceptional_returns/

According to Dr. Trudi Renwick, a Senior Economist with the Fiscal Policy Institute in Latham, New York, “This report’s findings are particularly important for New York State where the child poverty rate was 19.9% in 2003. The most recent data from the Census Bureau shows that almost one million of New York’s children are living in poverty.”

Renwick said that “The new report shows clearly that our failure to invest in the healthy development of young children leads to enormous problems, especially for poor kids –and enormous costs to taxpayers and society — as they go through school, and then enter the workforce (or often the criminal justice system) unprepared to be productive workers and citizens. But the report’s findings point to a hopeful future by documenting that intelligent investments in our youngest children would greatly reduce child poverty while improving our state and local governments’ financial situations, reducing crime, and helping our economy to grow.”

The new report examined the costs and benefits of a nation-wide program that would provide poor 3 and 4 year-old children (20% of all 3 and 4 year-olds in New York) with a high quality comprehensive program of early childhood development. While such a program would initially cost about $19 billion a year, it would generate substantial offsetting benefits by

  • reducing the amount of money that we spend on remedial and special education, the criminal justice system, and welfare benefits; and
  • increasing the income earned and the taxes paid back to society.

The net result, according to the report, is that within about 25 years, the offsetting annual budget savings (for all levels of government combined) would reach $31 billion (in 2004 dollars). And within about 45 years, the annual budgetary benefits would more than double the costs of the program, and the net budget savings would reach $61 billion (in 2004 dollars).

The report demonstrates that the young children we invest in today will become more productive workers, make higher income and pay more taxes in the future. That will strengthen our public finances and raise contributions into the Social Security and Medicare system, enhancing the solvency of these programs just as our public retirement system is expected to need more revenues.

The report also finds that, in addition to the returns to taxpayers, investing in poor young children is likely to have an enormously positive impact on the overall economy –

  • raising the Gross Domestic Product
  • improving the skills of our workforce
  • reducing poverty
  • strengthening the global competitiveness of the U.S. economy, and
  • reducing crime rates and the heavy costs of criminality to society.

“New York’s persistently high child poverty rate is an indicator of our failure to invest adequately in our children,” said Trudi Renwick of Fiscal Policy Institute. “This groundbreaking report shows that basic things like nutrition, health care, pre-K education, and programs to prepare and support parents are not only good for kids, they provide a real return to the taxpayers. If the federal and state governments fail to act on its findings, our whole country – not just the children involved – will suffer economically and socially.”

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