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Monday, January 31, 2011

Sachs: America's Ungovernable Budget

Jeff Sachs argues that we must raise taxes:

America’s Ungovernable Budget, by Jeffrey D. Sachs, Commentary, Project Syndicate: ...In his recent State of the Union address, President Barack Obama ... rightly emphasized that competitiveness in the world today depends on an educated workforce and modern infrastructure. ...
That is why Obama called for an increase in US public investment in three areas: education, science and technology, and infrastructure... He spelled out a vision of future growth in which public and private investment would be complementary, mutually supportive pillars. ...
But Obama’s message lost touch with reality when he turned his attention to the budget deficit. Acknowledging that recent fiscal policies had put the US on an unsustainable trajectory of rising public debt, Obama ... called for a five-year freeze on what the US government calls “discretionary” civilian spending.
The problem is that more than half of such spending is on education, science and technology, and infrastructure – the areas that Obama had just argued should be strengthened. After telling Americans how important government investment is for modern growth, he promised to freeze that spending for the next five years! ...
The truth of US politics today is simple. ... Both political parties ... would rather cut taxes than spend more on education, science and technology, and infrastructure. And the explanation is straightforward: the richest households fund political campaigns. Both parties therefore cater to their wishes.
As a result, America’s total tax revenues as a share of national income are among the lowest of all high-income countries..., not enough to cover the needs of health, education, science and technology, social security, infrastructure, and other vital government responsibilities.
One budget area can and should be cut: military spending. But even if America’s wildly excessive military budget is cut sharply (and politicians in both parties are resisting that), there will still be a need for new taxes..., and that – as George H. W. Bush learned in 1992 – is no way to get re-elected.

    Posted by on Monday, January 31, 2011 at 11:22 AM in Budget Deficit, Economics, Policy | Permalink  Comments (96)


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