Obama’s budget signals the retreat of US government

Jeffrey Sachs

April 11, 2013

    
President Barack Obama’s budget this week makes clear the real political equilibrium in the US. The federal government is shrinking. Discretionary spending in the new Obama budget would shrink to 4.9 per cent of gross domestic product in 2023, compared with 7.9 per cent of GDP in 2008. Both parties have signed on to this shrinkage. Neither will try to stop it.

The implications are enormous. Until 2017 at the earliest, there is likely to be no or very meagre action to address America’s growing underclass, gaping inequalities, decrepit infrastructure, persistent drought or worsening climate change. Slow growth, unemployable young people, a vast incarcerated minority population and gaudy excesses at the top will remain the norm. Even Mr Obama’s few new initiatives, for example for early childhood development and new infrastructure, are tiny drops in America’s ocean of unmet need.

The global implications of America’s shrinking budget are likely to be equally great. The defence outlays in the Obama budget fall from 4.3 per cent of GDP in 2012 to 2.4 per cent of GDP in 2023, with an almost identical decline in the Republican plan. The successful Republican campaign to “starve the government beast” of revenues will constrict the military as well and force the US to pull back on global engagements.

Much of this will be salutary on the global level. George W. Bush and Mr Obama squandered a vast American fortune in the wasteful wars in Iraq and Afghanistan. Future catastrophes of this kind are now somewhat less likely given the budget constraints. Yet salutary actions will also be far less likely as well. The world will begin to adjust to a small-bore US, which plays a much smaller role, for good or ill, in the world’s hotspots and in addressing global challenges such as extreme poverty and climate change.

The long and short of it is that Americans are no longer much interested in the federal government, and the rich have been allowed to excuse themselves from responsibility quite a while back. In the 1930s to 1960s, the federal government succoured the country during the Great Depression, helped win the second world war, invented the atomic bomb, built the highway system and went to the moon. There was considerably less government bashing back then and a higher readiness to pay for it.

Yet today the federal government seems to many like little more than a corrupted trough for special interests. When the government spends its seems to do so aimlessly, to boostdemand” rather than build highways or go to the moon. Americans would just as soon keep their money at home.

So the US has been and remains in a sustained period in which the federal government will not or cannot provide public goods. There are three possible outcomes. The first, and most likely, is continued drift and stagnation, the outcome of a long period of little public investment. The second is a new era in which federal public investments finally come back into fashion. I believe that a swing in politics towards a new progressivism is indeed likely sometime within a decade, but certainly not before the next presidency or even perhaps the one after that.

A third possibility is a growing mosaic of performance within the US, as various state and local governments partly or wholly fill the void left by the retreat of the federal government. If this becomes the case, I would bet on the two coasts, where skills, education and pro-government sentiments are highest. So too are vast renewable energy resources, both solar and offshore wind, that could give these regions clean and low-cost energy.

The short-term pain for the US heartland likely would be quite notable. The vanity of the red states biting the federal hand that feeds them would probably diminish over time. These laggard states might even eventually wake up to their poor performance and finally trace it back to their longstanding and irrational antipathy to government.

The ultimate irony is that the candidate of change in 2008 will serve two terms as the president of continuity, the one that caps the age of Reaganomics. For the next few years, the federal government is likely to remain the target of scorn and shrinkage rather than respect and reinvention.


The writer is director of the Earth Institute and author of the forthcoming book ‘To Move the World: JFK’s Quest for Peace

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