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Huge Payoff to Taxpayers from Early Investment in High Quality Early Education for Nation's Poor Children

News Release
October 18, 2004 Download PDF

Oregon Business Leaders Embrace Report Findings

On the heels of new data from the US Census Bureau showing a rise in poverty among children in the US, today the Economic Policy Institute in Washington, D.C. released a new study showing that annual investments in a comprehensive, high quality early childhood development (ECD) program for all poor three- and four-year-olds in the country would more than pay for themselves between now and 2050. A publicly financed, comprehensive ECD program for all poor children would cost billions of dollars annually, but would create much larger budget savings over time, according to the study.

The report, "Exceptional Returns: Economic, Fiscal, and Social Benefits of Investment in Early Childhood Development" by economist Robert G. Lynch, PhD., documents a growing consensus among conservative and liberal economists and business leaders that early public intervention to improve young poor children's health, brain development, family environment, and readiness for school represents one of the best and most productive uses for public funds.

The report calculates for the first time the impact on government spending of a public investment in providing quality early child development programs to all poor three- and four-year-olds starting in 2005 and continuing for the next 45 years.

The Lynch study for the Economic Policy Institute examines the costs and benefits of a nationwide program that would provide poor three- and four-year-old children, who make up approximately 20%, or one out of five, of all three- and four-year-olds in the US, with a high quality comprehensive program of early childhood development. Lynch calculates that it would initially cost about $19 billion a year.

Based on the results of well-documented studies of smaller-scale programs, Lynch finds that such a nationwide program would ultimately reduce government costs for remedial and special education, for criminal justice, and for welfare benefits and would increase income earned and taxes paid back to society.

According to the report, within 17 years the net effect on the budget would turn positive, and within 25 years the offsetting budget savings would reach $31 billion a year (in 2004 dollars). By 2050, or 45 years into the program, the budgetary benefits would more than double the costs of the program and the net budget savings would reach $61 billion (in 2004 dollars) a year.

"Investing in early childhood development today will deliver substantial savings to the public at the same time in the distant future that the Social Security program will need an infusion of new money," said Charles Sheketoff, executive director of the Oregon Center for Public Policy. Sheketoff noted that the Social Security program does not face solvency problems in the near-term future, as claimed by some advocates of Social Security privatization. "Today's investments in childhood development will be paying off big-time over the long term, allowing funds to be shifted into Social Security," he added.

Business Leaders and Children's Advocates Comment

One of Oregon's leaders in the business and children's advocacy communities, Gun Denhart, thinks the study makes good business sense.

"Having started a business that grew from our garage to stores all over the country, I know the value of investing early and of having a well trained workforce," said Denhart, founder, Hanna Andersson Clothing Company, Chair of Hanna Andersson Children's Foundation and of Stand for Children, and outgoing Chair of the Oregon Business Association.

"After years of donating clothes and grants to groups helping vulnerable children I am convinced that our society needs to make earlier investments in its youngest citizens so that we are not always playing 'catch-up,'" added Denhart. "This comprehensive study shows the value of making public investments over the long term."

Another business leader and longtime advocate for vulnerable children, Duncan Campbell, chairman of The Campbell Group and founder of The Children's Institute and Friends of the Children, was not surprised by the report's significant findings. "Investing early in a child's life makes good economic sense because it allows us to address the causes, not the symptoms of problems," said Campbell.

"It is great to see a report give hard numbers to show how investing in high quality early childhood programs for low-income children can save billions of dollars for taxpayers and communities over the long-term," Campbell added.


A copy of the report, "Exceptional Returns: Economic, Fiscal, and Social Benefits of Investment in Early Childhood Development," is available via the link at The embargo is lifted for Oregon media.

Dr. Robert Lynch is the Chair of the Department of Economics at Washington College, Maryland and can be reached by calling Karen Conner at the Economic Policy Institute, 202-331-5542. The Economic Policy Institute is a nonprofit, nonpartisan economic think tank founded in 1986. The Institute can found on the web at

The Oregon Center for Public Policy uses research and analysis to advance policies and practices that improve the economic and social opportunities of low- and moderate-income Oregonians, the majority of Oregonians.

Posted in Education.