The mismeasurement of investment and the resulting reinforcing of the idea that taxes should be low and that government budgets need to be balanced has played a critical role in undermining the quality of habitation. Ever since the 1970s, subnational levels of government have faced an ongoing fiscal crisis as the demand for services increased faster than the available revenues from taxes. In the U.S., the problem was briefly mitigated by federal revenue sharing, but that policy ended under the presidency of Ronald Reagan. The result has been decaying infrastructure, underfunded services, and an inability to address a growing crisis of housing affordability at the state or local level.

Most significantly, these fiscal pressures have resulted in diminished public spending on education. This is most dramatic in terms of support for public higher education. In many states in the U.S. fees at public colleges and universities were historically quite modest, making it possible for these institutions to be avenues of upward mobility for people from low- and middle-income families. However, for more than 40 years, the trend has been to reduce the amount of public support and rely to an ever-greater extent on tuition payments or student fees. The consequence is that fewer people from low- and middle-income households have been willing to take on the student debt loads required to cover tuition. This, in turn, means that the long historical trend towards higher levels of educational attainment has slowed considerably with other nations catching up and exceeding the U.S.

Moreover, spending on primary and secondary education has also been stagnant with the consequence that compensation for teachers has failed to increase. One study showed that between 1996 and 2021, weekly wages for U.S. school teachers were stable after adjusting for inflation while comparable compensation for other college graduates had increased by 33 per cent. In other words, the ongoing fiscal crisis works precisely to limit the kinds of investment spending that is most critical in a habitation economy.

In the U.S., governments at the state and local level do have the option of borrowing by issuing bonds that are used primarily to finance construction projects: infrastructure, schools, hospitals, and public buildings. The federal government has supported this market by exempting most municipal bonds from federal taxation.