A new era of America beyond the fiscal cliff

While America is in the grips of the so-called “fiscal cliff”, a more fundamental question beckons about what kind of America people want in a looming new era beyond 2012. 

As the latest National Intelligence Council report “Global Trends 2030: Alternative Worlds” shows, the world as the West has known for the past two centuries has been dramatically transformed. 

Download National Intelligence Council - Global Trends - Alternative Worlds - November 2012

According to Jeffrey Sachs, Director of the Earth Institute and Professor of Health Policy and Management at Columbia University (“The Price of Civilization – Economics and Ethics after the Fall”, The Bodely Head, London, 2011) , “It is fair to say that more than two hundred years of North Atlantic dominance of global politics is coming to an end.” (P.89).

“Two thirds or more of Americans describe themselves as “dissatisfied” with the ways things are going in the United States,” up around from one-third in the late 1990s. A similar proportion of Americans described the country as “off track.” (p.11).

“America has vastly more land and natural resources per person than Europe does.” “The real point for us is that …….it has ended up with a lower average quality of life than in northern Europe. Yes, America’s GDP per capita is higher, but it is not bringing widespread benefits for the society.” (pp.225-226)

“……much of America’s higher GDP reflects higher healthcare costs, longer working hours and less leisure time, longer commutes, more military spending, and a higher proportion of income at the very top of the income curve.” (p. 225)

“Washington was still unable to come up with any long-term , serious responses to America’s waning competitiveness, instead turning again to the very same policy mix that had failed previously: easy money, tax cuts, large budget deficits, and starting in 2011, cuts in government outlays on education, infrastructure, science, and technology, the very areas in which the United States needs to regain its long-term competitiveness.” (p.103)

“Just when the government was needed to chart a course through the twists and turns of globalization, it went AWOL” in a “Rigged Game” of “America’s corporatocracy, a political system in which powerful corporate interest groups dominate the political agenda.” (p.105)

“In fiscal year 2011, the federal government covers 39% of its spending , roughly $1.4 trillion of 3.6 trillion, by borrowing”. “Today, we spend 1.5% of GDP to pay the interest. By 2015, it could be around 3.5% of GDP. By 2020, it could reach 4% of GDP or more”. (p.209).

Sachs advocates achieving fiscal responsibility and a healthier economy through savings, of say3% of GDP, by cutting waste, bloated costs, and non-essential expenditure. These comprise-

(a) implementing the cuts recommended by the National Commission on Fiscal Responsibility and Reform - amounting only to 0.5% of GDP; 

(b) true healthcare reform in curbing excessive costs – 1% of GDP; and 

(c) reducing the military budget to avoid excessive expenditure – scrapping Iraq and Afghanistan occupations – 1% GDP; reducing unneeded military procurement and outlay including more nuclear weapons and extended military bases - - 1.5% of GDP. 

In return, Sachs urges that “we must add back another 3% of GDP in spending to increase the supply of public goods”. These include (p. 220) –

• Job training (0.5% of GDP)
• Primary and secondary schools (0.3% of GDP)
• Higher education (0.4% of GDP)
• Childcare and early childhood development (0.5% of GDP)
• Modernisation of infrastructure (1% of GDP)
• Research and development (0.3% of GDP)
• Diplomacy and foreign assistance ((0.5% of GDP)

He also points out that it’s “time for the rich to pay (a fairer share of) their due” (p. 229) to “regain prosperity” (Chapter 10) and to create a more “Mindful Society” (Chapter 9).

However, Sachs rightly warns that his proposals “assume that defence outlays as a share of GDP can be reduced by half of the current level, from 5% to 2.5% (of GDP), an approach that will certainly be resisted by the Pentagon and many key interest groups.” (p.221)
 
At the end of the day, GDP is not everything. Sacks refers to the Gross Happiness Index (GHP) initiated by Bhutan which quantitatively measures national happiness in terms of (pp. 206-7) –

• Psychological well-being
• Time use
• Community vitality
• Culture
• Health
• Education
• Environmental diversity
• Living standard
• Governance

For “Our Ultimate Economic Goals” (pp. 205-6), Sacks quotes Robert F Kennedy, Jr.,

“Yet, the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play; it does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit or our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything in short except that which life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.”
 
As America confronts the fiscal cliff, it is never more opportune to grasp the nettle to put America back on track beyond the brink in a new era of competitiveness and prosperity. 

May God bless America.

Best regards,

Andrew

www.andrewleunginternationalconsultants.com