“The boundary of political discourse unfortunately is around 4.6% taxes “

“The  boundary of political discourse today unfortunately is around  4.6% taxes “

– Jeffrey Sachs, Special Advisor to UN Secretary General  and Professor of Economics at Columbia Uni.

In a talk which offered a crash-course in  economic history of the modern US, and gave a glimpse into the  implications of the current administration’s policies in not addressing the key issues before us, Jeffrey Sachs sought to offer a  “differential diagnosis” of the problems and also offered solutions, which he thought would address the systemic problems that plague the country, and threaten its leadership position in the world. These insights are presented in his newly released book “ The price of Civilization”. The talk was held at The World Bank last week.

“ 39 yrs ago when I got started in this business, I thought that the US would not need our help, and my country would not need any sort of urgent attention, and one could devote one’s life to problems overseas; where problems were more acute”, he said.

He added  : “Economically, the US today is  a mess and our political system is a mess too. Since the political institution is one block East of here, and the work that this institution works involves dealing with this mess, we really do need to dis-entangle what is happening in the US and what can be done about it. It is my own way to find my way through this puzzle. Not to find the specific problems associated with the problems of Lehmann brothers , or the specifics of debate about the last quarter.  I do write a lot about that. But the bigger challenge is what I seek to address through my book”.

He further noted that as he criss-crossed summits across the world in over 22 countries, he was amazed to see the total lack of American leadership voices.

“A very strange feeling that what we see inside is also visible on the outside. Our presence is felt in war-zones and in war-torn areas, but not in problem solving areas. I am not sure I have gotten to the core of it, but writing this book and analyzing the issues  feels like peeling an Onion. And I had to take a societal view, a holistic perspective of problems as they are all inter-connected”, he pointed out.

Taking a jab at the political parties, he pointed out “The Republican offer is simple “ Cut spending and cut taxes”, and taxes are the only thing in their model which can solve problems. In the Democratic model, they are all about “Stimulate”, and I don’t think it is an effective model to get us on track”.

America has become a two-tier society:

Sachs also sought to highlight the growing income disparities and pointed out that they were the key issue which subsequent administrations have ignored. Though president Obama came in with the promise of change, his policies have not done much to significantly address this complex issue.

“If Brazil has figured out a way to close the income disparities, we seem to have shunned this problem and ignored it altogether. Currently, the income share of the top 1% is 20-25 % of all household income and this is analogous to modern history. Up to 1980, the share was 10% and since then, we have had a steep incline in the gap. 12,000 households take home about 6% of household income. That’s a lot. That is more than the poorest 20 mn households”, he added.

Sachs also added that the current scenario is dismal, and one of the markers of this is that the peak of male household earning was in 1973, for 38 yrs there has been no increase in median earnings for male full-time workers. “Something clearly changed in American economy, something deeper than a financial bubble”, he pointed out.

Corporate America and the Political establishment :

The rise of  President Ronald Reagan clearly marked an era of the decline in American spending on “Non-security discretionary budgets” . This, Sachs remarked is one of the key reasons for the decline of the  American competitiveness and is a result of the “less government” movement in the country, which has had very negative effects on the economy as a whole.

“We got Wall-street to bail out Wall-street firms recently and this is a symptom of what ails our country” he added.

He concluded with the following note :” A differential diagnosis is what I have offered here. Once we have a better diagnosis, the way out is easier to find. I think that both political parties are not offering any serious approach to America’s problems”.  His solution to the problems facing the US included cutting defense spending by a few percentage points, by increasing the Non-security discretionary budget spending as well as looking at the problems holistically and taxing the rich, which seems to be the holy-grail of American political discourse.

Perhaps time will tell whether the political establishment heeds his advice. For now, President Obama seems to be busy trying to rally support for his jobs bill. Short-term gains seem to be the order of the day, when long-term strategic thinking is what is really needed. It is a time for visionaries, and perhaps, one for true leadership – which goes beyond rhetoric and realpolitik.

 

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