Daily Archives: December 15, 2011

America’s squeeze on spending on all public services other than health and pensions means that it is ceding global leadership in education, science and infrastructure. Mr Obama speaks of investing in these areas to restore America’s jobs and competitiveness, but lacks the financial space to do it. The result is a dispiriting contradiction between his soaring rhetoric and the grinding cuts that he has agreed with Congress.

Republicans claim America’s low taxes and small government have spared it from the European disease. This claim is utterly false. The US is vastly outperformed by the countries of northern Europe, which tax heavily but spend efficiently, buying superb public health, childcare, public education, infrastructure, and remarkable social equality.

The results are lower unemployment, smaller budget deficits, much lower poverty and smaller trade deficits than in the US – as well as higher intergenerational social mobility, life expectancy and life satisfaction. Per capita income growth in these countries has been comparable to that in the US – but in the US, the gains have accrued mostly to the top of the income distribution.

Yet according to the July debt agreement between the White House and Congress, non-security discretionary programmes will be further squeezed to below 2 per cent of GDP by the end of this decade. The Republicans propose to strangle government once and for all. Obama’s policies suffocate federal programmes slowly.

To finance the outlays that are needed on education, infrastructure, family support and technology, taxes on high incomes will have to rise by several per cent of GDP, far beyond what Obama has dared to acknowledge. A brave presidential candidate, following in the footsteps of Theodore and Franklin Roosevelt, will win office some day soon and put the US back on a path towards high employment and a recovery of the middle class.
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