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from Jeffrey Sachs (prof at Columbia Univ & Director of the EarthRise Organization) on Charlie Rose last night Wednesday 10/05
Speaking on his book, "The Price of Civilization - Reawakening American Virtue & Prosperity)
"At the root of America's economic crisis lies a moral crisis; the decline of civic virtue among America's political and economic elite. A society of markets, laws and elections is not enough if the rich and powerful fail to behave with respect, honesty and compassion toward the rest of society and toward the world. America has developed the world's most competitive market society but has squandered its civic virtue along the way. Without restoring an ethos of social responsibility, there can be no meaningful sustained economic recovery. I find myself deeply surprised and unnerved to have to write this book."
"I think at this point the basic truth about American society is we do not collect enough tax revenues as a share of our national income to have a civilized nation and achieve the objectives as a society that we want with the tax system we have."
"We've lost sense of the most basic point that markets can do certain things but markets can't do other things" (in reference to highways, schools, basic science research)
"We are gutting the core of government" - right now 3% of national income and heading to 2% - that's education, environment, infrastructure, science & technology, international diplomacy - this is what the president & Congress agreed to in August
"There's a future for American manufacturing IF we invest in it - that's science, technology, infrastructure and skilled labor force. ... When President Obama talks about a jobs program, we're not seeing anything beyond a short-term gimmick. ... President Obama has gone for what I regard as gimmick after gimmick, so-called Keynesian policy, trying to raise demand but demand is not the problem in our economy. The problem is that we can't compete in large swathes of our economy in this international environment.
... People with a college degree can find a good job and earn a good income and people with a college degree can compete. and that's why the unemployment rate of people with a college degree is about 4% and their average income is over $60,000 a year. If you don't have a college degree the the unemployment rate for those without a high school diploma is 14-15%, for those with a high school diploma it might be 11-12% plus plenty of those drop-outs from the labor force and the income levels might be $30,000 or less. Because if you have inadequate skills to be able to compete against Chinese workers who earn a lot less than US workers then those jobs naturally migrate abroad. That's why our companies are flush with cash right now but they're not investing in the United States because there's no great profitability. They are investing in China and the rest of the world. That's why a lot of our CEO's don't really care too much about what's happening in the United States. Their big money is being earned abroad." (It's not demand that can be stimulated with purchases, it's about the mix of skills that they can find abroad vs here and the wages that they would have to pay)
Things started to go sour in the US thirty years ago (he points to Reagan and the Repubs "lower taxes" mantra"), it was globalization that gave huge opportunity at the top, provided a flow of cheap goods from China, led to a loss of jobs outside of the construction sector and the result was our society started to divide. Many other places faced with this started to invest in higher education & advanced skills, advanced technology (Sweden, Scandinavia, Denmark, Norway) - today they have high tax societies, much lower unemployment, balanced budgets or surpluses. Conservatives say that "that's Europe (social democracies) and we don't want to be like that" but they work much better than the US at this point, as evidenced because they invested in higher education, advanced technology, infrastructure, energy systems, - they did all their homework, didn't take a pass on all the investments that would make them competitive in the future, the didn't go with budget deficits, Keynesian stimulus of short-term gimmickry - rather they taxed themselves to make sure they remained modern, cutting edge, high-tech, well-educated, inclusive societies.
Short term stimulus when you have a long-term structural problem ends up being a bridge to nowhere. He advised Larry Summers and others to take the perspective of a decade because we need to rebuild our society and it couldn't be fixed in a year. He says the problem is structural and can't be solved a year at a time as this admin has been trying to do. 4 - 5 years would have been a reasonable expectation for laying & implementing structural change. Year after year of short-term stimulus (gimmicks) hasn't worked, the 800 billion stimulus program was a gimmick. The problem wasn't that it was too small but that there wasn't a long-term perspective, one of looking to to rebuild competitiveness & the foundations of our economy - and that would have been rebuilding over a decade, not short-term stimulus.
If our world is organized for the convenience of politicians, we won't get out of this. The 2 yr electoral cycle doesn't work from the point of the economy. 3 Years into the administration, there's almost nothing to show as results to Obama's efforts because he went for gimmickry rather than long-term solutions. If Obama had gone for long-term solutions, even those that would have taken 5 years to come to fruition, we'd be 3 years into that 5 years by now. We lost the opportunity (Rham's "never waste a crisis").
People who've been out of work should have been back in school being re-trained with gov't support, if necessary paid for w/proper taxation (especially from the top). If we taxed properly, we'd have income to direct to these purposes. Globalization pushed down the bottom and pushed up the top and then the political environment amplified the divide. Money buys power in this environment.
Money & Politics - We're the most legally corrupt system of modern democracy. Supports public financing of campaigns. He said President Obama has dinners night after night with donors at a cost of $35,800 per plate - "what kind of society is that where the president dines for months and months with the richest people? What kind of policies are we likely to get from that? We get policies that favor the richest people - they're the ones who are around the president day and night and in fact Congress is half millionaires to begin with and then the president is reportedly trying to raise 1 billion dollars for his re-election campaign. So that's a lot of dining with rich people.
"We have made a political system, right now, that caters to the top while the world economy is punishing the bottom. We have a political cycle that is the shortest (in the world) so we don't even have time to think straight, and I don't think there was an absolute gimmick or easy remedy to solve the unemployment problem that had built up to a massive bubble in 2009. The attempt to find such gimmick solved nothing, so I don't think that what I'm saying is somehow wrong-headed or naive."
There might have been something that could have been done in the short term to create demand and to enable corporations want to spend money and hire people - but it would have been something modest and at the margins, the tools are weak and unstable and unpredictable."
There's more if you're interested
Lots of other good stuff, if you can find a replay well worth a watch
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