The approach to New York through the desperate ugliness of the industrial swamp surrounding the New Jersey Turnpike was shocking. The coal-fired power plants in front of Manhattan's skyline, the harbor cranes, the container trains and the endless oil storage tanks remind the commuter and visitor that the energy to power the screens on Times Square, the clothes in the fancy shops and the fuel to keep the yellow rivers of cabs flowing must come from somewhere. The swampy areas filling up the spaces in between the facilities suggest that New York is facing an adaptation challenge as sea levels rise. I was dropped off on 7th avenue in bustling Manhattan. What a city, so much alive. Sidewalks crowded with fashionable people, short blocks of towering building resting on lines of tiny and mega shops at street level. Compared to this, Washington, DC is a sleepy village. I took the subway to Columbia University's Morningside campus. Not so big a campus, I thought. Apparently I had assumed that the more big names the university has, the more space it requires.
Sachs showed that US federal taxes have been steady at 17-18% for the past 60 years. In the fifties and sixties budgets for initiatives like the highway system (fifties) and social security and medicare/medicaid (sixties) could be freed by reducing spending on the military. But when military spending bottomed out at 5% of GDP, non-military had to top-out, as raising taxes was just not an option: Joe the Plumber would not buy it. And that attitude toward taxes has never gone away since. The result: no significant government initiatives have been made for the past four decades. Today, all federal tax revenues are consumed by social security, medicare/medicaid, the military, veteran benefits and interest on debth. Everyhting else - from roads to child care, from sustainable energy to development assistance - has to be done on borrowed money. That's the paralysis. Paralysis is not the same as stability: it shows up in the poverty statistics as a steady increase in child poverty since the early seventies up to the point where nowadays 1 in every 5 children in the US live in poverty. The poverty rate in the US is 17.1% compared to 5.6% in those "socialist states" of Scandinavia. The trajectories of Europe and the US started to diverge when Europe introduced the value added tax (VAT) and America didn't. Since then, in Europe government revenues as share of GDP have risen to 10% points above the US level, allowing European governments to continue expanding and improving services, like education and health care.
Sachs doesn't see Obama breaking out of this lock-in. Obama ran is campaign on 'not raising taxes'. "Not raising taxes? How are they gonna fund the "change we want to see"?" cried out Sachs. The proposed budget cuts would only affect "the third decimal". Besides, Sachs is disappointed in how Obama does not put an end to the influence of special interests. He may define the topics, but leaves the policy making to Congress, and hence, to the powers of the uncountable lobbyists defending the interests of incumbent corporations. The paralysis blocks structural change and leaves not much more than tweaking some numbers here and there, like the FED's interest rate. But according to Donella Meadows' list of "places to intervene in a system", adjusting numbers is the least effective measure one can take change behavior of a system, yielding the least leverage. "I'm a big fan of the market," said Sachs,"but I don't want to see them in Washington. They should do business, innovate, not make the rules." Today, at the University of Maryland, Undersecretary of Energy Steven Koonin touched upon this lock-in by quoting what he was once told: "A price on carbon is never going to be high enough to make a difference, because when it does, the political system will oppose." Sachs's conclusion: "This is a very weird country, and I mean that scientifically by the way."
Although reasonable perhaps, I think it would be irresponsible to accept fatalistic arguments as a working theory. And I think Sachs does too. He presented a plan to get American economy back on track, requiring an extra federal revenue of 6% of GDP, meaning a 1/4-1/3 growth in government spending. Would a good plan be enough to break the paralysis? It sure is a good step, but how do we get people to be open to more taxes? Sachs recalled how he once was asked this: "You say Washington is doing it all wrong, and then you still want me to give 'em more money?" Would it help to 'reframe' the issue, like one woman in the audience suggested, focussing on the benefits, what we can and need to do for our children? Sachs agreed that that's part of the strategy. One thing to reframe could be the word 'tax' itself. At last weeks' Bioscience Day at the University of Maryland, Matthias Ruth had referred to the not very helpful ethymology of the word 'tax'. It means something like 'to drain', sucking the money out of you. The same for the Dutch word 'belasting', emphasizing the burden, which is only one side of the story. The german word is 'Steuer', meaning 'to steer', redirecting and allocating the money. That's a big difference. We need an organization, Sachs said, to tell the people what is going on. He then looked at demographics. Especially hispanics are quickly becoming a larger share of the population, and other ethnic groups are gaining share as well. As these groups have different cultural legacies, the receptivity to a dialog on taxing is likely to increase as well. But do we have time for waiting that long?
On the subway back to Penn station, I looked at the people around me, conversing vividly, listening to their iPods or scrolling their blackberries. Is this what a country in denial of its becoming an underdeveloped nation looks like? Poor boiling frogs. In the bus back to DC, in the front of its upper deck, with the ugliness hidden by darkness, I enjoyed the magnificent sight of all the little lights on the industrial facilities lining the Turnpike.
PS: Much of what he said, Sachs had written in this op-ed piece for the Financial Times.
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