♠ Posted by Emmanuel in Credit Crisis at 1/15/2009 06:39:00 AMI was reading the current issue of TIME in the dentist's waiting room when I saw a blurb on the cover that read, "Jeffrey Sachs: How More Government Can Save America." It was as pleasant as a root canal to see. Let me say this about Sachs: he is not lacking in braggadocio, whether it be in planning The End of Poverty or saving America, for that matter. Who needs the second coming when we've got the joy of Sachs? (I lay claim to this pun.) Predictably, the Mises Economics Blog is all agog over this, and so is Mish Shedlock.
Ronald Reagan made a famous plea concerning "getting government off the backs of the people." Now, Jeffrey Sachs argues the case for getting government to take on serial market failures he discusses at some length. Is he right? Read the article. As for me, your more or less non-partisan correspondent doubts whether this government action results in more social benefits (health care, education, infrastructure) than social costs (future taxation). At least Sachs is forthright in saying that America will have to pay for all of this in taxes--something a sacrifice-averse electorate doesn't want to hear and a less than forthright government doesn't want to talk about:
President-elect Obama inherits the worst economic crisis since the Great Depression: the financial sector is in ruins; the budget is hemorrhaging red ink; debt-ridden households have clamped down on spending, thereby pulling the rug out from under the economy; unemployment is soaring; the country is in two wars; and the unmet social and environmental needs are vast. These conditions demand a fundamental realignment in strategy that ultimately comes back to taxation: Will we pay for the government we need? Obama's big domestic program, the American Recovery and Reinvestment Plan, proposes doubling renewable-energy production and making public buildings more efficient. It calls for better schools and classrooms and the rebuilding of our crumbling roadways and bridges. The President-elect wants our fill-out-the-forms health-care system to be computerized, which will save both lives and money.
He'll certainly have to add to that list. Don't forget bailing out the financial system, helping deficit-ridden state and local governments, revamping the auto industry and funding more global-development assistance to defeat terrorism and overcome instability. Add it up and it will require perhaps 5% of national income on top of our current spending, or approximately 25% of our total GDP.