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Jeffrey Sachs

America's Political Class Struggle

As in many countries, conflicts over public morality and national
strategy come down to questions of money. In the United States, this
is truer than ever. The US is running an annual budget deficit of
around $1 trillion, which may widen further as a result of the new tax
agreement. This level of annual borrowing is far too high for comfort.
It must be cut, but how?

The problem is America's corrupted politics and loss of civic
morality. One political party, the Republicans, stands for little
except tax cuts, which they place above any other goal. The Democrats
have a bit wider set of interests, including support for health care,
education, training, and infrastructure. But, like the Republicans,
the Democrats, too, are keen to shower tax cuts on their major
campaign contributors, predominantly rich Americans.

The result is a dangerous paradox. The US budget deficit is enormous
and unsustainable. The poor are squeezed by cuts in social programs
and a weak job market. One in eight Americans depends on Food Stamps
to eat. Yet, despite these circumstances, one political party wants to
gut tax revenues altogether, and the other is easily dragged along,
against its better instincts, out of concern for keeping its rich
contributors happy.

This tax-cutting frenzy comes, incredibly, after three decades of
elite fiscal rule in the US that has favored the rich and powerful.
Since Ronald Reagan became president in 1981, America's budget system
has been geared to supporting the accumulation of vast wealth at the
top of the income distribution. Amazingly, the richest 1 percent of
American households now has a higher net worth than the bottom 90
percent. The annual income of the richest 12,000 households is greater
than that of the poorest 24 million households.

The Republican Party's real game is to try to lock that income and
wealth advantage into place. They fear, rightly, that sooner or later
everyone else will begin demanding that the budget deficit be closed
in part by raising taxes on the rich. After all, the rich are living
better than ever, while the rest of American society is suffering. It
makes sense to tax them more.

The Republicans are out to prevent that by any means. This month, they
succeeded, at least for now. But they want to follow up their tactical
victory -- which postpones the restoration of pre-Bush tax rates for a
couple of years -- with a longer-term victory next spring. Their
leaders in Congress are already declaring that they will slash public
spending in order to begin reducing the deficit.

Ironically, there is one area in which large budget cuts are certainly
warranted: the military. But that is the one item most Republicans
won't touch. They want to slash the budget not by ending the useless
war in Afghanistan, and by eliminating unnecessary weapons systems,
but by cutting education, health, and other benefits for the poor and
working class.

In the end, I don't think they will succeed. For the moment, most
Americans seem to be going along with Republican arguments that it is
better to close the budget deficit through spending cuts rather than
tax increases. Yet when the actual budget proposals are made, there
will be a growing backlash. With their backs against the wall, I
predict, poor and working-class Americans will begin to agitate for
social justice.

This may take time. The level of political corruption in America is
staggering. Everything now is about money to run electoral campaigns,
which have become incredibly expensive. The midterm elections cost an
estimated $4.5 billion, with most of the contributions coming from big
corporations and rich contributors. These powerful forces, many of
which operate anonymously under US law, are working relentlessly to
defend those at the top of the income distribution.

But make no mistake: Both parties are implicated. There is already
talk that Obama will raise $1 billion or more for his reelection
campaign. That sum will not come from the poor.

The problem for the rich is that, other than military spending, there
is no place to cut the budget other than in areas of core support for
the poor and working class. Is America really going to cut health
benefits and retirement income? Will it really balance the budget by
slashing education spending at a time when US students already are
being outperformed by their Asian counterparts? Will America really
let its public infrastructure continue to deteriorate? The rich will
try to push such an agenda, but ultimately they will fail.

Obama swept to power on the promise of change. So far there has been
none. His administration is filled with Wall Street bankers. His top
officials leave to join the banks, as his budget director Peter Orszag
recently did. He is always ready to serve the interests of the rich
and powerful, with no line in the sand, no limit to "compromise."

If this continues, a third party will emerge, committed to cleaning up
American politics and restoring a measure of decency and fairness.
This, too, will take time. The political system is deeply skewed
against challenges to the two incumbent parties. Yet the time for
change will come. The Republicans believe that they have the upper
hand and can pervert the system further in favor of the rich. I
believe that they will be proven wron