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<H1>America has lost the battle over government</H1>
<DIV class="byline "><SPAN>By <A
href="http://www.ft.com/intl/cms/s/0/21d103cc-e6c3-11e1-af33-00144feab49a.html?ftcamp=published_links%2Frss%2Fcomment_columnists_clivecrook%2Ffeed%2F%2Fproduct#axzz23dvqGMVy">Jeffrey
Sachs</A></SPAN></DIV></DIV></DIV>
<DIV id=storyContent><SPAN><BR>W</SPAN>ith Congressman Paul Ryan as the
Republican vice-presidential candidate, the US election is shaping up to be a
full-throated ideological brawl. President Barack Obama champions public
investment and social support for the poor, while Mitt Romney and Mr Ryan call
for a smaller state with lower taxes and spending. Yet for all the rhetoric, the
small-government agenda has already prevailed. No matter who is elected on
November 6, dangerous cuts in public goods and services are already in train.
There is considerable controversy about Mr Ryan’s budget plan, which exemplifies
an aggressive Republican pitch to cut government spending, tax rates and social
protection. Mr Ryan would reduce the top rate of personal income tax from 35 per
cent to 25 per cent and slash transfer programmes for the poor, such as Medicaid
and food stamps. His plan would also eliminate Mr Obama’s healthcare
legislation. Radical stuff.<BR><BR>There are also deep doubts about Mr Ryan’s
claim that top tax rates can be reduced in a “revenue neutral” way by plugging
loopholes. Mr Ryan invites these doubts by offering few details on how such
loophole-plugging would work. It is more likely than not we would repeat the
history of the Ronald Reagan and George W. Bush tax cuts: revenues would plummet
and the supposed offsets would never materialise. Today’s enormous deficits
would become even larger.<BR>Still, American liberals (those to the left of the
political centre), who are now vehemently blasting Mr Ryan’s budget should take
note. Their candidate has also already accepted a brutal shrinkage of government
programmes in coming years. The similarities of the Obama budget and Mr Ryan’s
are striking.<BR><BR>Mr Ryan’s plan calls for federal revenues of 18.4 per cent
of gross domestic product in 2016 and 18.5 per cent in 2020 (though his lower
tax rates would probably put those targets out of reach). His budget outlays
come in at 19.7 per cent and 19.5 per cent in 2016 and 2020, respectively. Of
the total outlays in 2016, Mr Ryan targets “discretionary” programmes at 5.9 per
cent of GDP; social security, 5 per cent; Medicare, 3.2 per cent; other
mandatory spending, 3.7 per cent; and interest payments, 1.9 per
cent.<BR><BR>Now consider Mr Obama’s budget unveiled in February. Federal
revenues are targeted at 19.1 per cent of GDP in 2016 and 19.7 per cent of GDP
in 2020, only about 1 percentage point above Mr Ryan’s revenue targets. In Mr
Obama’s 2016 budget targets, discretionary spending is set at 5.9 per cent of
GDP; social security, 5 per cent; Medicare, 3.2 per cent; other mandatory
spending, 5.8 per cent; and interest payments, 2.5 per cent.<BR><BR>In fact, Mr
Obama’s overall discretionary spending targets are essentially the same as Mr
Ryan’s. Whether Mr Obama or Mr Romney wins, the “non-security” discretionary
budget – for education, job skills, infrastructure, science and technology,
space, environmental protection, alternative energy and climate change
adaptation – is on the chopping block. Mr Obama’s budget would shrink
non-security discretionary programmes from an already insufficient 3.1 per cent
of GDP in 2011 to 1.8 per cent in 2020. That is the “liberal”
alternative.<BR><BR>In bemoaning Mr Obama’s budget, I do not mean to equate it
with Mr Ryan’s. Mr Ryan’s budget is nothing short of heartless in the face of
the dire crisis facing America’s poor. It is also reckless, guaranteed to leave
millions of children without the quality of education and skills they will need
as adults. Yet the sad truth is that the Democrats offer no progressive
alternative. Both parties are accomplices to the premeditated asphyxiation of
the state. Viewed from an international perspective, the constricted range of
the US fiscal debate is striking. Total US government revenues (combining
federal, state and local governments) in 2011 came in at about 32 per cent of
GDP. This compares with an average of 44 per cent in the EU and 50 per cent in
northern Europe.<BR><BR>Many Americans will say that they are dodging the
European curse by keeping taxation so low but they should look again. Northern
Europe (Germany, the Netherlands, Denmark, Finland, Norway and Sweden) gets
great value for its tax revenues: lower budget deficits, lower unemployment
rates, lower public debt-to-GDP ratios, lower poverty rates, greater social
mobility, better job training, longer life expectancy, lower greenhouse gas
emissions, higher reported life satisfaction and greater macroeconomic
stability.<BR><BR>America’s two political parties depend on wealthy contributors
to finance their presidential campaigns. These donors want and expect their
taxes to stay low. As a result, social divisions, broken infrastructure, laggard
educational attainments, high carbon emissions and chronic budget deficits are
likely to continue no matter who is elected, even though the public supports
higher taxes on corporations and the rich.<BR><BR>Only a big political
realignment, perhaps spurred by a third party bold enough to campaign on free
social media rather than expensive television advertising, is likely to break
the status quo. Until then, the demise of public goods and services will
continue apace.<EM><BR><BR>The writer is the director of the Earth Institute at
Columbia University and author of ‘The Price of Civilization’</EM>
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