Thursday, January 26, 2017

Building the New American Economy by Jeffrey D. Sachs

Hardcover, 152 pages Expected publication: February 7th 2017 by Columbia University Press ISBN13: 9780231184045

Jeffrey Sachs’ new book, which runs about 150 pages, has a Foreword by Bernie Sanders. Sachs directly addresses the new Trump administration, and makes suggestions about our nation’s priorities. Sachs wrote it fast, since the election, and it shows. He'd supported Bernie, but Sanders was not explicit when it came to running the government. These are Sachs' ideas, but knowing there is someone in political life that he supports helps to flesh out Sanders' ideas as well.

Sachs allows that we might be able to comprehend priority spending of the government, so shares some national budget particulars:
“Federal taxes account for about 18 percent of GDP, mostly income and payroll taxes…Together with state and local taxes, the total tax collection of all levels of government amounts to around 32 percent of GDP.”
On the spending side, first is military spending at 5% of GDP. Next is what Sachs calls “mandatory spending” but what Republicans call “entitlements:” Medicare, Medicaid, Social Security, income support programs, etc. This is a rising share of GDP, at 12.6%. The third category of spending is interest payments of government debt, which will rise when interest rates increase. Public debt to national income is about 75%, and average interest charges on that debt are at about 1.5% of GDP per annum. Finally, we have non security discretionary spending, or our investment in the future, which in the scenario Sachs talks about here, doesn’t even make it to the drawing board unless we take on further debt.

The reason Sachs gives us is that income taxes, etc are only 18% of GDP while military, mandatory spending, and interest payments alone are 19%. He is a smart guy, and he may be right, but if you are asking us to decide on which categories or programs to cut, I will need to see the whole budget, many thanks. [Unfortunately the graphs and charts are not reproduced in the ebook of this pre-publication galley.]

Anyway, Sachs suggests we cut military spending and increase discretionary spending commensurately, leaving the other categories to be adjusted in smaller ways. In theory, I don’t have a problem with this. I have lately weighed good and bad in American foreign policy in the past fifty years, and see lots of room for a reduced role, though one has to acknowledge the vacuum of leadership is going to be filled, perhaps by a country we don’t admire much, or at all.

When we abdicate as a superpower, we also jettison some of the trust and reliance of our allies, as some of their positions and spending were predicated on our own. It is a much more fragmented and divided world, a world that may not be so amenable to policies the U.S. supports. And Sachs’ proposals for the future are all about global cooperation. He suggests that we use our military spending instead on global development projects, which will keep some portion of goodwill headed our way.

Sachs also recommends a value-added tax like they have in Scandinavia which would raise another 3-4% of income. The huge discrepancies in income from top to bottom of the U.S. income ladder will still be there, they just won’t be as great, and more in line with the world’s other great democracies. Sachs is even willing to consider restructuring corporate taxes, like Trump has already proposed, but only “if combined with an end to corporate loopholes and foreign tax deferral provisions.” Definitely one of the main income disparities is who even pays taxes in the U.S.

Sachs looks not very far into the future and see some major changes in our economy: an end to internal combustion mobility and the beginning of a low-carbon lifestyle, regardless of government leadership. It would help if government was in front, using their think tanks and scientific offices to help direct some of the changes, but what we really have to guard against is allowing entrenched corporate interests to hijack our future and investment money. We can decide these things without government, though.

Trump has stated he wants states to make their own decisions on many things we have in the past asked the federal government to do. States with wealth, educated workforces, and well-funded universities (like Massachusetts, California, and New York) may make out very well, drawing more similarly-minded folks to them, and exacerbating the cross-talk divisiveness among the states. They’d have to capture taxes from individuals who wish to work, but not live, in their states. But my feeling is, if we can’t work together within our own country, how can we expect to work across national boundaries on important issues like climate change, exploration, and energy supplies?

When Sachs discusses the changes in the workplace, I find my credibility meter reading low. I agree that even educated workers will be replaced in the modern economy as computers and machines get more capable. But Sachs is suggesting that older, experienced workers pay some part of their wages to younger people who cannot find jobs.

Hello! We’re already doing that! It’s called taxes, and it is a stupid idea. Older workers, whether they want to believe it or not, are going to die, and if they haven’t mentored young people to get experience and be able to take on the stress of creativity everyday, they may be surprised when the whole show goes tits up. [This was Hillary Clinton’s problem. She thought she needed to do everything herself.]

We cannot continue to have older workers stay in the workplace as long as they want—and continue to decline—keeping younger folk from earning and gaining experience, let alone spur creativity. May I suggest this is a real problem? People who have been working for forty or fifty years cannot keep up, no matter what they believe about themselves. And it is not good for the country.

Sachs has one idea towards the end that is kind of interesting: that Wall Street be tasked with earning and churning the financial investment monies for our infrastructure retooling. I actually really like that idea, and think the incentives could be restructured to focus on this. Once the wonky windfall profits not only on Wall Street, but everywhere in corporate America, are tempered with reasonable tax policy and closing of tax havens and loopholes, people might remember they must play well with others. We don’t have long, however: we should already be well into flood abatement.

There are lots of other things lightly touched on in this book, including a discussion of why “free trade” is not free for everyone. Sachs has a blog where he makes notes and posts articles and media accounts that he find interesting or thinks we need to discuss. In the summer of 2016, his important and informative discussion about the election, globalization, immigration, and Brexit was subsequently picked up by NPR and discussed on radio. He pointed to what is now called “populist” anger and explains the real substantive issues behind this. Jeffrey Sachs is professor of economics and sustainable development at Columbia University, former director of the Earth Institute, and special advisor to UN Secretary General Ban Kin-moon. He is the author of The End of Poverty.

You can buy this book here: Shop Indie Bookstores

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