Jeffrey Sachs, economist at Columbia University, posted yesterday on the work of the Super Committee. I sure hope these guys didn’t get paid extra for all their work on behalf of the American people. He writes:
There are two forces that account for the deep divide between Wall Street and Main Street, the two separate economies that now exist in our country (one doing quite well and the other in crisis). The first is globalization, with manufacturing jobs shifting overseas since 1979. The housing bubble propped up things until that too collapsed. Decent jobs for those without a college degree are a thing of the past. With cuts to public education and federal need-based aid, the situation is getting worse.
The second force is politics. Both parties champion the 1 percent, the Republicans openly and the Democrats sheepishly. Both parties are responsible for the tax code and today, tax collections as a share of national income have shrunk to 15 percent, the lowest in modern American history.
One big argument against raising taxes is that the US economy would end up like Europe’s. Sachs responds. Europe is not in crisis. Southern Europe is, but Northern Europe, where taxes are higher, is vastly outperforming the US. Consider three dimensions of the economic crisis: high unemployment, large budget deficits and an export/import imbalance. He creates an index he calls the Misery Index equal to the sum of these three indicators. In 2010, our Misery Index was 23.4, ranking us 5th highest out of 20 (US, Canada and Western Europe). Ireland, Spain, Greece, Portugal and then us.
The lowest indices are all in Northern Europe. Norway followed by Switzerland, Luxembourg, Netherlands, Sweden, Germany and Denmark. All seven of these countries have lower unemployment rates, smaller budget deficits as a share of GDP, and lower foreign deficits as a share of GDP than the US. And, miracles of miracles, he writes, these seven countries collect more taxes as a share of GDP than does the total US government (counting state, local and federal). Our percent in 2010 was 33.1%, compared with an average of 45% in those other countries. These countries enjoy much better public services, better educational outcomes, more gainful employment, higher trade balances, lower poverty, and smaller budget deficits.
Sure makes one think. Grover Norquist, who runs Americans for Tax Reform, was featured on 60 Minutes last night. That’s the group that has gotten thousands of state and federal legislators to sign the no new tax pledge. Some call Norquist the most powerful man in America today. Stephen Colbert interviewed Norquist this summer. Stay tuned in until the end. Wow.