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America Is Not a Third World Country ... Yet

A Commentary By Froma Harrop

Tuesday, April 19, 2011

Let's start with the assumption that America is not a Third World country. In poor countries, many people never see doctors. Only the elite go to college. Rattletrap trains take two hours to go 70 miles.

Visit the Third World, and you see a struggling middle class shoehorned between shanty-town poverty and a jet-setting plutocracy -- tiny in both numbers and tax burdens. The dirty air sickens the stomach.

What distinguishes poor from rich nations is that the latter invests in health care, education and transportation. They regulate what may go into the environment. These things don't come for free. They are paid for with taxes and, in some cases, higher prices.   

Republicans insist that we can't afford these amenities -- that government spending has become "unsustainable." If we don't do something radical, they say, America will go bankrupt. For them, ending Medicare as we know it is not too radical. Raising taxes from their lowest levels in decades is.   

Government programs are sustainable only if you sustain them. That's done primarily through taxes. Years of tax-cutting have helped drive revenues to a 60-year bottom relative to the gross domestic product.   

If low taxes are the key to economic growth, as Republicans claim, why aren't we doing better? What explains the phenomenal growth of the 1950s, when the top marginal rate hit 91 percent? Or the years following the Democrats' 1993 tax hike on high incomes, when the economy boomed, the budget ran a surplus and the rich did better than ever?   

The Republican House budget offers a Third World vision for America. More tax cuts for the jet-setters. Fewer government guarantees for those below them. The plan would curtail health care programs for the elderly and poor, law enforcement, environmental regulation, and nutrition programs for women and children. And they would repeal the Democrats' health care reforms guaranteeing coverage to all, even though they would reduce deficits over time.   

Ryan insists that his call for further tax cuts is actually "revenue neutral." Getting rid of tax breaks and loopholes, he says, would make up for revenue lost through lower marginal rates. Of course, he doesn't specify what loopholes should go. Curb the deduction for mortgage interest, anyone? (A great idea but hugely controversial.)  

In any case, America must go beyond revenue neutrality. We need more money!   

Before continuing, let the record show that the federal government wastes billions. Some regulations are stupid. And well-meaning social programs can do more harm than good. The spending side of the ledger always demands scrutiny.   

But how horribly difficult is it to balance budgets without amputating a third of government or hiking taxes to confiscatory levels? Not as hard as all the screaming suggests.   

Boston University economist Austin Frakt ran the numbers and found that, if Washington did ABSOLUTELY NOTHING about taxes or spending, the budget would come into balance some time around 2015. This assumes much: All the Bush-era tax cuts expire on schedule in 2012. Congress lets Medicare cut payments to doctors as required by law (which it never does). The health care reform law goes into effect unchanged and performs as expected.   

We don't want to do nothing. We want to raise some taxes and cut some spending. We want to direct our future.  

If merely letting the Bush-era tax cuts ride into the sunset would slice the deficit in half by 2021, balancing budgets should not be freakishly hard. Nor must we gut all the programs that make America a secure, beautiful and healthy place to live.   

Public benefits are what divide a rich-country way of life from the threadbare alternative. Let's assume that Americans want the blessings of the former.   

COPYRIGHT 2011 THE PROVIDENCE JOURNAL CO.

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