The case for bigger government

Aside from the article on ewaste, last week's Time magazine also had a featured article by economist Jeffrey Sachs, of Columbia University. I'm generally most interested in Mr Sachs' ideas, as they tend to be quite creative and often provocative. Most of all, I always find I learn interesting new facts and perspectives when I read his essays. In his latest piece, he is arguing, much as I did, that Mr Obama's planned deficit spending 'in the trillions for years to come' is completely unreasonable, as foreign nations like China are rapidly losing confidence in America's public finance system. And Mr Sachs, also as I argued in my own essay, advocates suppressing George Bush's tax cuts for the rich and cutting America's losses in Iraq and Afghanistan immediately.

Mr Sachs then goes on to draw an interesting comparison with Europe when it comes to services that the government can often do better than private business, such as health care and education, and arrives at the conclusion that increasing government investment into such services would in the end save Americans a lot of dollars. Most importantly, Mr Sachs explains how such investment in goverment services ought to be financed through tax increases, as opposed to deficit spending, as President-elect Barack Obama is planning to do. Yet Mr Sachs ultimately refrains from advocating to completely nationalize all education and health care in America as in the EU, as he observes, 'The U.S. will not mimic Europe for many reasons — size, diversity, tradition and, of course, vested interests — but we can learn from Europe.' I couldn't agree more and I would add-Europe can learn from the U.S. in other areas such as encouraging business creation.

On the whole I would say I agree with Mr Sachs' main argument, that in the long run the U.S. will probably have to rely on the federal government more in several areas such as health care and education. Where I respectfully disagree, however, is when he contends that 'deficit spending is needed to help revive the economy from recession'. In fact I completely disagree with the whole idea that, at this point, there is anything at all that the U.S. federal government can effectively do to 'jump-start' the U.S. economy. This is mainly because the economic crisis is now global in scale and other countries' difficulties are already weighing down heavily on the American economy. The whole problem has grown out of its initial national proportions, it is now essentially out of the U.S. government's control and spending a few hundred billion dollars more will not make much of a difference. On top of that, the crisis is being continuously fueled from within the U.S. by all the personal and business bankruptcies that are bound to increase both in numbers and severity this coming year. In that sense, resolving this crisis is really about changing American people's spending habits and this won't happen in a day. And again, as I have been arguing repeatedly, the U.S. Treasury simply has no money left to spend in its coffers and rapidly dwindling credibility with foreign investors to borrow money from abroad, China in particular.