Tag: Economics

A Path To Full Employment

By: L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, Stephanie A. Kelton

Despite reports of a healthy US labor market, millions of Americans remain unemployed and underemployed, or have simply given up looking for work. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. L. Randall Wray, Flavia Dantas, Scott Fullwiler, Pavlina R. Tcherneva, and Stephanie A. Kelton examine the impact of a new “job guarantee” proposal that would seek to eliminate involuntary unemployment by directly creating jobs in the communities where they are needed.

The authors propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour and offer a basic package of benefits. This report simulates the economic impact over a ten-year period of implementing the PSE program beginning in 2018Q1.

Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

EXECUTIVE SUMMARY

Despite headline-grabbing reports of a healthy US labor market, millions of Americans remain unemployed and underemployed. It is a problem that plagues our economy in good times and in bad—there are never enough jobs available for all who want to work. The problem is most acute for women, youths, blacks, and Latinos, although research also finds a persistent lack of employment for large numbers of working-age men.

This report asks a set of big questions:

  • What if we sought to eliminate involuntary unemployment across all demographic groups and geographic regions, by directly creating jobs in the communities where they are needed through a federally funded Public Service Employment program?
  • How could such a radical transformation of the labor market be implemented?
  • What would it cost, and what would it mean for the US economy?

A number of important implications emerge from this analysis. Joblessness, defined as the inability to secure a job at a living wage ($15 per hour), can be eliminated in every corner of America for every eligible person who desires to work. With a standing job offer—a “public option”—available at all times, the US labor market would transition to a permanent state of true full employment. Millions of American families would be lifted out of poverty, and the economy would grow as the benefits of the program spill over into the private sector.

Perhaps most astonishingly, this can all be done without the need to raise taxes and without creating an inflation problem.

We propose the creation of a Public Service Employment (PSE) program that would offer a job at a living wage to all who are ready and willing to work.

This is a “job guarantee” program that provides employment to all who need work by drawing from the pool of the otherwise unemployed during recessions and shrinking as private sector employment recovers. Federally funded but with a decentralized administration, the PSE program would pay $15 per hour for both full- and part-time positions and offer benefits that include health insurance and childcare. In addition to guaranteeing access to work on projects that serve a public purpose, the PSE program establishes effective minimum standards for wages and benefits. We have simulated the economic impact over a tenyear period of implementing the PSE program beginning in 2018Q1. Drawing from the unemployed, underemployed, and those who are out of the labor force, the program would attract roughly 15 million people into the PSE workforce, based on our higherbound estimates of likely program participants.

While the report also presents lower-bound estimates, the results highlighted here correspond to this higherbound scenario:

  • Real, inflation-adjusted GDP (2017Q4 dollar values) would be boosted by $560 billion per year on average, once the PSE program is at full strength (from 2020 to 2027).
  • The economic stimulus generated by the PSE program would also increase private sector employment by up to an additional 4.2 million private sector jobs relative to the baseline, due to the “multiplier effects” of the program.
  • Even though it boosts GDP by over $500 billion per year, adds more than 19 million private and public service jobs, and raises wages nationwide above $15 per hour, the program’s impact on inflation is minor: the boost to inflation peaks at 0.74 percentage points higher than the baseline projection and then progressively falls to a negligible 0.09 percentage points higher than the baseline by the end of the simulation period.
  • The program’s net impact on the federal budget averages 1.53 percent of GDP in the first five years of the program (2018–22) and 1.13 percent of GDP in the last five years (2023–27). These net budgetary impacts could be significantly overestimated, since the simulation makes very cautious assumptions about offsetting reductions in Medicaid and Earned Income Tax Credit (EITC) expenditures that would result from higher employment and wages. Executive Summary 2 Public Service Employment
  • State-level government budgets are improved by a total of $53 billion per year by boosting employment and growth.
  • Based on the demographics of estimated PSE participants, the program would disproportionately benefit women and minorities.
  • One full-time worker in the PSE program could lift a family of up to five out of poverty. With one full-time and one part-time worker, a family of eight could rise above the poverty line.
  • In addition to these measured benefits, the PSE program would lower spending by all levels of government, as well as by businesses and households, on a range of costly problems created by unemployment. It is possible that the program would “pay for itself” in terms of savings due to reduced crime, improved health, greater social and economic stability, and larger reductions in Medicaid and EITC expenditures than those assumed in the simulations.
  • The projects undertaken in every community would provide visible benefits, meeting specific local needs through work that involves caring for people, strengthening communities, and protecting and renewing the environment. This report develops a blueprint for the design, jobs, and implementation of the PSE proposal for the United States. Unemployment, hidden and official, with all of its attendant social harms, is a policy choice. The results in this report lend more weight to the argument that it is a policy choice we need no longer tolerate. True full employment is both achievable and sustainable.

Download The Full Report Here: A Path To Full Employment

Associated Program: Employment Policy and Labor Markets

Related Topic(s): Economic Policy, Employer of Last Resort (ELR) Policy, Employment Guarantee, Job Guarantee

A New Grand Coalition For Germany and Europe

With America AWOL and China ascendant, this is a critical time for Germany and the European Union to provide the world with vision, stability, and global leadership. And that imperative extends to Germany’s Christian Democrats and Social Democrats.

Friends of Germany and Europe around the world have been breathing a sigh of relief at the newfound willingness of Germany’s Christian Democrats and Social Democrats (SPD) to discuss reprising their grand coalition government. The world needs a strong and forward-looking Germany in a dynamic European Union. A new grand coalition working alongside French President Emmanuel Macron’s government would make that possible.

The SPD’s initial decision to go into opposition after its poor election result in September may have been sincere, and even strategically sound. But it is not timely. Diplomacy almost everywhere is fractured.
The United States is reckoning with a psychologically unstable president, a plutocratic cabinet, and a Republican congressional majority. Europe is in the throes of multiple economic, social, political, and institutional crises. China, by contrast, is dynamic and outward-looking – providing good reason for the EU to assume vigorous leadership and engage in constructive partnerships with China on key initiatives (such as sustainable infrastructure across Eurasia).

In short, this is a critical time for Germany and Europe to provide vision, stability, and global leadership. And that imperative extends to Chancellor Angela Merkel’s Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the SPD.

But the CDU/CSU and the SPD need to do more than merely extend the previous government, which was too parochial in outlook and temperament. The world and Europe need an outward-looking Germany that offers more institutional and financial innovation, so that Europe can be a true counterpart to the US and China on global affairs. I say this as someone who believes firmly in Europe’s commitment and pioneering statecraft when it comes to sustainable development, the core requirement of our time.

Economic growth that is socially inclusive and environmentally sustainable is a very European idea, one that has now been embraced globally in the United Nations’ 2030 Agenda and its 17 Sustainable Development Goals, as well as in the 2015 Paris climate agreement. Europe’s experience with social democracy and Christian democracy made this global vision possible. But now that its agenda has been adopted worldwide, Europe’s leadership in fulfilling it has become essential.

A grand coalition government in Germany must help put Europe in a position to lead. French President Emmanuel Macron has offered some important ideas: a European finance minister; Eurobonds to finance a new European investment program; more emphasis on innovation; a financial transactions tax to fund increased aid to Africa, where Europe has a strategic interest in long-term development; and tax harmonization more generally, before the US triggers a global race to the bottom on taxing corporations and the rich.

Contrary to the Germans who oppose such ideas, a European finance minister and Eurobonds would not and should not lead to fiscal profligacy, but rather to a revival of investment-led green growth in Europe. China has proposed the Belt and Road Initiative to build green infrastructure linking Southeast Asia and Central Asia with Europe. This is the time for Europe to offer the same bold vision, creating a partnership with China to renovate Eurasia’s infrastructure for a low-carbon future.

If Europe plays its cards right, Europe’s (and China’s) scientific and technical excellence would flourish under such a vision. If not, we will all be driving Chinese electric vehicles charged by Chinese photovoltaic cells in the future, while Germany’s automotive industry will become a historical footnote.

A European finance minister would, moreover, finally end Europe’s self-inflicted agony in the aftermath of the 2008 financial crisis. As difficult as it is to believe, Greece’s crisis continues to this day, at Great Depression scale, ten years after the onset of the crisis.

This is because Europe has been unable, and Germany unwilling, to clean up the financial mess (including Greece’s unpayable debts) in a fair and forward-looking manner (akin to the 1953 London Agreement on German External Debts, as Germany’s friends have repeatedly reminded it). If Germany won’t help to lead on this issue, Europe as a whole will face a prolonged crisis with severe social, economic, and political repercussions.

In three weeks, Macron will convene world leaders in Paris on the second anniversary of the climate accord. France should certainly take a bow here, but so should Germany. During Germany’s G20 Presidency, Merkel kept 19 of the 20members of the G20 firmly committed to the Paris agreement, despite US President Donald Trump’s disgraceful attempt to wreck it.

Yes, the corruption of US politics (especially campaign funding by the oil and gas industry) threatened the global consensus on climate change. But Germany stood firm. The new coalition should also ensure that the country’s Energiewende (“energy transition”) delivers on the 2020 targets set by previous governments. These achievable and important commitments should not be a bargaining chip in coalition talks.

A CDU/CSU-SPD alliance, working with France and the rest of Europe, could and should do much more on climate change. Most important, Europe needs a comprehensive energy plan to decarbonize fully by 2050. This will require a zero-carbon smart power grid that extends across the continent and taps into the wind and solar power not only of southern Europe but also of North Africa and the eastern Mediterranean. Once again, Eurobonds, a green partnership with China, and unity within Europe could make all the difference.

Such an alliance would also enable a new foreign policy for Europe, one that promotes peace and sustainable development, underpinned by new security arrangements that do not depend so heavily on the US. Europe, a magnet for hundreds of millions of would-be economic migrants, could, should, and I believe would regain control of its borders, allowing it to strengthen and enforce necessary limits on migration.

The political terms of a new grand coalition government, it would seem, are clear. The SPD should hold out for ministerial leadership on economic and financial policy, while the CDU/CSU holds the chancellorship. That would be a true coalition, not one that could bury the SPD politically or deny it the means to push for a truly green, inclusive, EU-wide, sustainable development agenda.

With Merkel and SPD leader Martin Schulz in the lead, the German government would be in excellent, responsible, and experienced hands. Germany’s friends and admirers, and all supporters of global sustainable development, are hoping for this breakthrough.

US Must Transition To Low-Carbon Energy

Energy is the lifeblood of the economy. Without ample, safe, and low-cost energy, it is impossible to secure the benefits of modern life. For two centuries, fossil fuels — coal, oil, and natural gas — offered the key to America’s and the world’s growing energy needs. Now, because of global warming, we have to shift rapidly to a new low-carbon energy system.

President-elect Donald Trump has vowed to resurrect coal, promote gas fracking, and restart the Keystone XL pipeline project to bring Alberta, Canada’s oil sands to market. He won’t get far. Today’s low world prices of oil, coal, and gas reflect the fact that newly installed power generation and vehicles worldwide are shifting decisively to low-carbon energy.

The world has far more fossil fuel reserves than can be safely used. Many will stay in the ground, forever. Saudi Arabia, not Alberta, is the low-cost oil supplier. Investors in a resurrected Keystone would go broke, as have investors in coal. Wall Street figured this out long ago.

Nonetheless, Trump may well try to resist the tide at the start. In that case, climate change would quickly become his biggest controversy, costing decisive political capital as the climate debate engulfs his nominations, undercuts America’s diplomacy, and stymies infrastructure plans as well. The US government would be challenged in courts across the country. We are not back in 2001, when George Bush pulled out of the Kyoto Accord. Now the entire world, not just a group of high-income countries, has signed on to climate action.

What’s also clear is that climate change, together with mega-student debt and the loss of entry-level jobs to robots, will trigger a millennial revolt. Twenty-five-year-olds starting out in the workforce, and 35-year-olds with young children, are not going to settle for a septuagenarian president repeating climate falsehoods and squandering their future.

While the president-elect and a few self-serving coal and oil executives might still pretend that climate change is overblown, the rest of the world knows better. For 120 years, scientists have known that burning fossil fuels adds to the carbon dioxide in the atmosphere and thereby warms the planet. Last year was the warmest year since record keeping began, in 1880, and 2016 will be warmer than 2015. Around the world, people observe and suffer the consequences.

For this reason, every nation in the world, including the United States, agreed in Paris, in December 2015, to shift to a low-carbon energy system. The Paris Climate Agreement went into force this month. The global agreement aims to keep human-caused global warming to “well below 2-degrees Celsius” (3.6 degrees Fahrenheit) and to aim for no more than 1.5-degrees Celsius (2.7 degrees Fahrenheit), all measured relative to the earth’s temperature at the start of the fossil-fuel era (around 1800). The warming of the earth up to 2016 is already around 1.1 degrees Celsius, more than halfway to the globally agreed upper limit.

Climate scientists have come up with a tool called the “carbon budget” to guide us back to climate safety. Roughly speaking, the earth’s warming is proportional to the cumulative amount of fossil fuels burned or carbon release into the atmosphere by cutting down forests. To have a “likely” (that is, two-thirds) probability of staying below 2-degrees Celsius warming, humanity has a remaining carbon budget of around 900 billion tons of CO2.

To put the remaining 900 billion tons into context, the world as a whole is currently emitting around 36 billion tons of CO2 into the atmosphere each year. At the current rate of fossil fuel use, the world therefore has only about 25 years remaining to stay below 2-degrees Celsius, with a two-thirds probability (and still a hefty one-third chance of exceeding 2-degrees C). The key is an energy “transplant” that replaces coal, oil, and gas, with zero-carbon energy such as wind and solar power, or that combines the continued use of some fossil fuels with technologies that capture CO2 and store it safely underground (known as carbon-capture and storage, or CCS). Such an energy transplant may seem impossible, but it’s actually well within reach, in fact underway.

Most of the key changes will hardly be noticed by most of us. Instead of driving a Chevy Malibu, with a gasoline-burning internal combustion engine under the hood, we will instead drive a Chevy Volt, with an electric motor under the hood. Instead of charging the Chevy Volt with the electricity currently generated by a coal-burning power plant, the power plant will instead use wind, solar, nuclear, hydroelectric, or some other noncarbon energy technology (such as CCS) to generate the electricity.

Forward-looking engineers have already given us a pretty good roadmap from fossil fuels to zero-carbon energy. There are three guidelines.

The first is energy efficiency. We need to cut back on excessive energy use by investing in energy-saving technologies: LED lighting rather than incandescent bulbs; smart appliances that do not draw energy when not in use; better housing insulation and passive ventilation that cut heating needs (and heating bills); and so forth.

The second is zero-carbon electricity. Depending on where you live, your power today is generated by a mix of coal, natural gas, nuclear power, hydroelectric power, and a bit of wind and solar power. By 2050, electricity should be generated entirely by noncarbon sources (wind, solar, hydro, geothermal, nuclear, tidal, biofuels, and others) or fossil fuels with CCS.

The third is called fuel switching. Instead of burning gasoline in the car, you would use electricity in its place; instead of burning heating oil to warm the house, you would use electric heating. For every current use of fossil fuel, we can find a low-carbon fuel substitute. Most of us would hardly notice the difference. The main thing we would notice is a slightly higher electricity bill and a vastly safer climate. But even the slightly higher costs are likely to be transitory. As producers slide down the learning curve, the costs of electric vehicles, industrial fuel cells, fourth-generation nuclear power plants, and solar grids are likely to fall significantly.

We’ll also enjoy the new low-carbon technologies more than we do today’s. Smart electric vehicles will not only be cleaner and safer but will also drive you to work while you read the morning news. The shift from coal to renewable energy and from gas-guzzlers to electric vehicles will clear the deep smog that now envelopes Delhi, Beijing, and other places now literally choking on their air. That’s why China politely reminded the United States this past week that the global climate agreement is here to stay.

The challenge is to make the energy transition quickly, seamlessly, and at low cost, without destabilizing the energy system or putting America’s industrial companies at a competitive disadvantage with enterprises in China, Mexico, and India. The beauty of the Paris Climate Agreement is that all countries are now in this effort together.

Is the energy transition worth it? Much of the transition will pay for itself, in the sense of cleaner air, better appliances, and better services. Yet some parts will require a small extra cost for essentially the same energy services, at least at the start.

But here’s a critical point to keep in mind. The last time the earth was less than 1 degree warmer than now (about 130,000 years ago, in a geological period called the Eemian), the ice sheets in Antarctica and Greenland had disintegrated to such an extent that the global ocean level was around 5-6 meters higher than today. Today’s small-island economies would disappear.

I’m not talking only about the Maldives and Vanuatu. Manhattan would be inundated, and Boston, too, would be mostly under water.

But the risks transcend the disasters facing New York City, Boston, New Orleans, and countless other low-lying cities around the world. Global warming has already destabilized food supplies in many parts of the world, and there is much worse ahead unless we undertake the energy transplant. Syria, to name just one case, experienced its worst drought in modern history between 2006 and 2010, leading to impoverishment, hunger, forced migration, and social instability that provided tinder for the war that broke out in 2011.

Many Americans understandably fear the job displacements that would hit today’s coal miners and oil roustabouts. Fortunately, the news on this front is reassuring. At latest count, the total number of coal miners in America is around 16,000, out of a labor force of 150 million. Total extraction workers in coal, oil, and gas combined is around 150,000, around 0.1 percent of the workforce. These workers, whose physical health is routinely crushed for corporate profits, can easily be compensated and retrained for much healthier work and better wages. Other workers in the fossil-fuel sectors — accountants, managers, programmers, and the rest — will be needed directly in the new-energy sectors and in other parts of the economy.

There are a few true economic “losers” in America’s energy transformation, and David and Charles Koch are perhaps among them. The Koch brothers own the largest private oil company in the world. In their narrow private interest, it might be better for them to defend their $100 billion oil industry investment and wreck the rest of the world. After all, they can afford to buy new property above the rising sea level. Yet even on that narrow and extremely callous calculus, uncontrolled climate change is certainly not better for the Koch family children and grandchildren, who would suffer dire consequences from their parents’ and grandparents’ selfish disregard for humanity’s needs.

Recent excellent work by my colleague Dr. Jim Williams and other energy specialists has charted the US energy transition to 2050. Just this week, the White House issued a superb United States Mid-century Strategy for Deep Decarbonization along the same lines. It turns out indeed that renewable energy, nuclear power, and carbon-capture and storage technologies offer a range of possible pathways to decarbonization. North America is blessed with vast stores of renewable energy, including solar power in the southwest, wind power in the Midwest and eastern seaboard, and vast hydroelectric potential in Canada. And if you don’t like nuclear power or CCS, it’s still possible to make the transition to low-carbon energy, but at a higher cost. (Not surprisingly, the costs rise a bit when options such as nuclear energy are taken off the table).

The bottom line of these scenarios is reassuring. According to Williams’s study, the cost of decarbonizing the US energy system is less than 1 percent of national income per year, perhaps much less. While one percent of GDP is not negligible, it will be a very small price to pay for global climate safety. Similar calculations, and similar bargains, will be the case for the energy transplant operation in other parts of the world. A few lucky places, with magnificent wind, solar, or hydroelectric power will find the incremental costs of zero-carbon energy systems to be negligible.

If the energy challenge is all so clear, why isn’t it happening? First, some part of the energy transformation is already underway, with a rise in deployments of wind and solar energy. Now that the climate risk is finally appreciated worldwide, the entire world is ramping up for energy-transplant surgery. The second is that powerful vested interests, including the Koch Brothers, ExxonMobil (until recently), and Peabody Coal told the American people lies about climate change for years and, even worse, funded the campaigns of politicians who have been willing to oppose climate legislation in return for campaign dollars.

And third, stunningly, because of the same lobbying pressures, long-term energy thinking has been largely blocked. The first step for Trump and Congress in January should be to call on the National Academy of Engineering to mobilize the great engineers across America to come up with a climate-smart energy strategy that makes sense for all regions of the nation. Then the president’s new infrastructure program would build the right kind of future.

Why We Need Rise-Up Economics, Not Trickle Down

How to build the economy? Not through trickle-down economics. Tax cuts to the rich and big corporations don’t lead to more investment and jobs. 

The only real way to build the economy is through “rise-up” economics: Investments in our people – their education and skills, their health, and the roads and bridges and public transportation that connects them.

Trickle-down doesn’t work because money is global. Corporations and the rich whose taxes are cut invest the extra money wherever around the world they can get the highest return.

Rise-up economics works because American workers are the only resources uniquely American. Their productivity is the key to our future standard of living. And that productivity depends on their education, health, and infrastructure.
Just look at the evidence.

Research shows that public investments grow the economy.

A recent study by the Washington Center for Equitable Growth found, for example, that every dollar invested in universal pre-kindergarten delivers $8.90 in benefits to society in the form of more productive adults.

Similarly, healthier children become more productive adults. Children who became eligible for Medicaid due to expansions in the 1980s and 1990s were more likely to attend college than similar children who did not become eligible.

Investments in infrastructure – highways, bridges, and public transportation – also grow the economy. It’s been estimated that every $1 invested in infrastructure generates at least $1.60 in benefits to society. Some research puts the return much higher.

In the three decades following World War II, we made huge investments in education, health, and infrastructure. The result was rising median incomes.

Since then, public investments have lagged, and median incomes have stagnated.

Meanwhile, Ronald Reagan and George W. Bush’s tax cuts on the top didn’t raise incomes, and neither will Donald Trump’s.

Trickle-down economics is a hoax. But it’s a convenient hoax designed to enrich the moneyed interests. Rise-up economics is the real deal. But we must fight for it.

The World Bank Needs To Return To Its Mission

The World Bank declares that its mission is to end extreme poverty within a generation and to boost shared prosperity. These goals are universally agreed as part of the Sustainable Development Goals. But the World Bank lacks an SDG strategy, and now it is turning to Wall Street to please its political masters in Washington. The Bank’s president, Jim Yong Kim, should find a better way forward, and he can do so by revisiting one of his own great successes.

Kim and I worked closely together from 2000 to 2005, to scale up the world’s response to the AIDS epidemic. Partners in Health, the NGO led by Kim and his colleague, Harvard University’s Paul Farmer, had used antiretroviral medicines (ARVs) to treat around 1,000 impoverished HIV-infected rural residents in Haiti, and had restored them to health and hope.

I pointed out to Kim and Farmer 18 years ago that their success in Haiti could be expanded to reach millions of people at low cost and with very high social benefits. I recommended a new multilateral funding mechanism, a global fund, to fight AIDS, and a new funding effort by the United States.

In early 2001, UN Secretary-General Kofi Annan launched the Global Fund to Fight AIDS, Tuberculosis, and Malaria, and in 2003 US President George W. Bush launched the PEPFAR program. The World Health Organization, led by the Director-General Gro Harlem Brundtlandrecruited Kim to lead the WHO’s scale-up effort. Kim did a fantastic job, and his efforts provided the groundwork for bringing ARVs to millions, saving lives, livelihoods, and families.

There are four lessons of that great success. First, the private sector was an important partner, by offering patent-protected drugs at production cost. Drug companies eschewed profits in the poorest countries out of decency and for the sake of their reputations. They recognized that patent rights, if exercised to excess, would be a death warrant for millions of poor people.

Second, the effort was supported by private philanthropy, led by Bill Gates, who inspired others to contribute as well. The Bill & Melinda Gates Foundation backed the new Global Fund, the WHO, and the Commission on Macroeconomics and Health, which I led for the WHO in 2000-2001 (and which successfully campaigned for increased donor funding to fight AIDS and other killer diseases).

Third, the funding to fight AIDS took the form of outright grants, not Wall Street loans. Fighting AIDS in poor countries was not viewed as a revenue-generating investment needing fancy financial engineering. It was regarded as a vital public good that required philanthropists and high-income countries to fund life-saving treatment for poor and dying people.

Fourth, trained public health specialists led the entire effort, with Kim and Farmer serving as models of professionalism and rectitude. The Global Fund does not stuff the pockets of corrupt ministers, or trade funding for oil concessions or arms deals. The Global Fund applies rigorous, technical standards of public health, and holds recipient countries accountable – including through transparency and co-financing requirements – for delivering services.

The World Bank needs to return to its mission. The SDGs call for, among other things, ending extreme poverty and hunger, instituting universal health coverage, and universal primary and upper secondary education by 2030. But, despite making only slow progress toward these goals, the Bank shows no alarm or strategy to help get the SDGs on track for 2030. On the contrary, rather than embrace the SDGs, the Bank is practically mute, and its officials have even been heard to mutter negatively about them in the corridors of power.

Perhaps US President Donald Trump doesn’t want to hear about his government’s responsibilities vis-à-vis the SDGs. But it is Kim’s job to remind him and the US Congress of those obligations – and that it was a Republican president, George W. Bush who creatively and successfully pursued the battle against AIDS.

Wall Street may help to structure the financing of large-scale renewable energy projects, public transport, highways, and other infrastructure that can pay its way with tolls and user fees. A World Bank-Wall Street partnership could help to ensure that such projects are environmentally sound and fair to the affected communities. That would be all for the good.

Yet such projects, designed for profit or at least direct cost recovery, are not even remotely sufficient to end extreme poverty. Poor countries need grants, not loans, for basic needs like health and education. Kim should draw on his experience as the global health champion who successfully battled against AIDS, rather than embracing an approach that would only bury poor countries in debt. We need the World Bank’s voice and strenuous efforts to mobilize grant financing for the SDGs.

Health care for the poor requires systematic training and deployment of community health workers, diagnostics, medicines, and information systems. Education for the poor requires trained teachers, safe and modern classrooms, and connectivity to other schools and to online curricula. These SDGs can be achieved, but only if there is a clear strategy, grant financing, and clear delivery mechanisms. The World Bank should develop the expertise to help donors and recipient governments make these programs work. Kim knows just how to do this, from his own experience.

Trump and other world leaders are personally accountable for the SDGs. They need to do vastly more. So, too, do the world’s super-rich, whose degree of wealth is historically unprecedented. The super-rich have received round after round of tax cuts and special tax breaks, easy credits from central banks, and exceptional gains from technologies that are boosting profits while lowering unskilled workers’ wages. Even with stock markets’ recent softness, the world’s 2000+ billionaires have around $10 trillion in wealth – enough to fund fully the incremental effort needed to end extreme poverty, if the governments also do their part.

When going to Wall Street, or Davos, or other centers of wealth, the World Bank should inspire the billionaires to put their surging wealth into personal philanthropy to support the SDGs. Bill Gates is doing this, with historic results, for public health. Which billionaires will champion the SDGs for education, renewable energy, fresh water and sanitation, and sustainable agriculture? With a clear SDG plan, the World Bank would find partners to help it fulfill its core, historic, and vital mission.

Senator Bernie Sanders’ Economic Advisor Stephanie Kelton Shreds Trumponomics

Though Barack Obama presided over a recovery from the 2008 economic recession, the economic benefits disproportionately went to the wealthiest top 10 percent of Americans.

Though Democrats point to the job creation and low unemployment rate Obama passed onto Trump as an indication that Obama’s economic policies, the status quo, needed no revisions, that “America is already great,” in reality the benefits of this economy and the experiences under it weren’t felt by large demographics of Americans in the working, middle and low income classes. These persistent economic anxieties, coupled with an anti-political climate incited by the establishment corrupting American politics through massive corporate lobbying and campaign donations, enabled the rise of Donald Trump.

All early signs of Trump’s Administration have made it clear, through filling his cabinet with billionaires and Wall Street bankers, that he has no intention to representing or improving the lives of working, middle class, or low income Americans. Promises to “drain the swamp” have been broken with filling of the swamp with even more wealthy and establishment elites. Even without enacting any policy or legislation to help those in economic need, the continued economic recovery may help Trump feign the appearance of helping these demographics, but as Bernie Sanders Former Chief Economic Advisor Stephanie Kelton, a Professor of Economics at University of Missouri-Kansas City, notes in a recent paper, there may be no more room for economic recovery given the economy has reached its true employment potential, or as Kelton puts it, ” output is near its full employment ceiling not because the economy rose to its potential but because we lowered the definition of what we believe our nation’s productive capacity to be. It’s a bit like giving up on the idea that your child is capable of achieving straight As, relaxing the goal to a 2.0 GPA, and then celebrating when he presents you with across-the-board Cs.”

Kelton compared the current output gap with the 2007 estimate of potential GDP, which indicates based on previous definitions of America’s productive capacity that the current GDP gap would be close to 14 percent and not closer to zero. She cites several economist who have noted that the U.S. labor market is still far from full employment, though its unclear if Trumponomics will squeeze out more growth from the economy because, “less than three months into the Trump presidency, there is no formal budget and no precise blueprint that describes the full range of policies and programs that the administration intends to pursue.” Despite this, an economic agenda is beginning to take shape, one that is likely to center around massive spending cuts to compensate for increases in defense spending.

Like Reagan, massive spending cuts and an economic agenda predicated on increasing the wealth and income of the top 1 percent resulted in economic growth, and helped Reagan get re-elected in a landslide. Trump’s Administration is shaping to be similar in its pro-business model that will provide gains to wealthy who have aligned with the Trump Administration and filled his cabinet. Already Trump has promised massive tax cuts for the rich, and the Obamacare repeal effort will provide even more tax cuts to the wealthy. Kelton added, “taken together, Trumponomics includes a hefty serving of Reagan-inspired trickledown economics along with a side of protectionism, a dash of military Keynesianism and a social agenda that is anti-worker and anti-immigrant.”

Trump’s promises to “Make America Great Again” come up far short in every simulation conducted by Goldman Sachs and Moody’s, Though an economic doomsday scenario may not result immediately from Trumponomics, with some initial growth possible, Trump’s economic policies will be a disaster for the sick, working, middle class, and low income Americans.

The Ethics And Practicalities Of Foreign Aid

Recently, the Trump administration proposed a budget for the upcoming year. That budget included “plans of the Trump administration to slash US foreign aid.” Sanders Institute Fellow Prof. Jeffery Sachs objects to this part of the budget and wrote a compelling argument for the need for foreign aid. Below are excerpts from his argument: 

“Instead of cutting aid to fund a $54 billion increase in military spending, we should be slashing $54 billion (or more) in defense to increase aid for health, education, renewable energy, and infrastructure, as well as urgently needed spending at home.”

“My own support for foreign assistance is based on morality. “Justice, justice shall you pursue,” we are told in the book of Deuteronomy. Those who fail to help the poor cast themselves outside of the moral community. “For I was hungry and you gave me nothing to eat, I was thirsty and you gave me nothing to drink, I was a stranger and you did not invite me in, I needed clothes and you did not clothe me, I was sick and in prison and you did not look after me,” warns Jesus in the Gospel of Matthew.

Charity (zakat) is a bedrock of Islam. Compassion is the very core of Buddhism. Indeed, for all systems of morals, both religious and secular, treating others as we would be treated is the very essence of morality. If my own children were hungry, without medicine, or without schooling, I would desperately want them to be helped. Our responsibility is equally clear. Moreover, I believe, along with the teachings of the ancient prophets, that a nation built on iniquity cannot long survive. It will come apart at the seams, as America may be doing today.

I also know, as a development practitioner now for 32 years, that foreign aid works — when we put in the honest effort and thinking to make it work. I am not talking about the kind of US aid that is handed over to warlords, as in Iraq and Afghanistan. I’d cut out that aid in a moment. I’m not talking about aid that is handed out by the US military. I do not believe in the Pentagon and the CIA’s campaigns for “hearts and minds,” designed by people whose real training lies not in providing public health, but in killing. And I’m not talking about the aid delivered largely by American expatriates in somebody else’s country. Almost all local service delivery should be carried out by locals except in exceptional circumstances (e.g., in the immediate aftermath of natural disasters when all hands are needed).

Aid works when its main purpose is to finance supplies such as medicines and solar panels, and the staffing by local workers in public health, agronomy, hydrology, ecology, energy, and transport. US government aid should be pooled with finances from other governments to support critical investments in health, education, agriculture, and infrastructure, based on professional best practices. That’s how the Global Fund to Fight AIDS, Tuberculosis, and Malaria works, as one important example. It’s a model of success.

This kind of aid is not “the White Man’s Burden,” as has been alleged. The responsibility to help the poor is carried by no race for any other race. This is not about whites helping blacks, or about greens helping blues for that matter. It is about the rich doing what they should for the poor. “From everyone to whom much has been given, much will be required,” says Jesus in the Gospel of Luke. Or as John F. Kennedy put it, “If a free society cannot help the many who are poor, it cannot save the few who are rich.”

Nor is good aid about “the poor in the rich countries helping the rich in the poor countries,” as foes of aid have quipped. When aid funds are directed towards the basics — safe childbirth; immunizations; control of diarrheal diseases, malaria, and HIV/AIDS; irrigation for smallholder farmers; information and communications technologies for e-governance, e-finance, e-education, and e-health; ensuring access to schooling; protecting biodiversity; and restoring degraded lands, the beneficiaries will be the poor. And as long as America maintains fairness in the US tax system, the rich will be bearing their fair share. It is true that a politically viable aid program goes hand in hand with a fair tax system.

There is a lot of negative propaganda about foreign aid since foreign aid is an easy target. There are very few knowledgeable people around to defend it, and the recipients kept alive by it don’t vote in US elections. We certainly hear an earful: Aid is wasted; aid is a huge budgetary burden; aid demeans the recipients; aid is no longer needed in the 21st century. Aid, in short, does not work.

The simple fact is that some aid is wasted and other aid is used brilliantly. The main issue is whether the aid directly supports the work of local professionals saving lives, growing food, installing rural electricity, and teaching children, or whether the aid goes instead to foreign warlords or overpriced American companies. Our responsibility is to fund the aid that works, and when aid has been demonstrated to work, as in public health and education, to expand the assistance as it’s needed by the poorest of the poor.

Aid is a tiny part of our budget, around 1 percent of the Federal Budget, and less than one-fifth of one percent of national income. It is 25 times smaller than the outlays on the military (adding together the Pentagon, intelligence agencies, nuclear weapons programs, veterans’ outlays, and other military-linked spending). And as Trump himself has acknowledged, military spending has squandered many trillions of dollars in Middle East wars that have only exacerbated global threats and US insecurity.

Aid is not demeaning. Aid enables HIV-infected mothers to stay alive and raise their children. Demeaning? Aid enables a child in an impoverished country to escape death or permanent brain damage from malaria, a 100 percent treatable disease. Demeaning? Aid enables a poor child to go to a school fitted with computers, solar power, and wireless connectivity.

Aid is definitely needed still, albeit by a smaller and smaller share of the world. In the 1940s, aid was vital for Europe; hence the Marshall Plan. By the 1950s, Europe had “graduated” from aid; the focus was on Latin America and parts of Asia. Most of those countries too have long since graduated. Aid today should focus on the countries that are still poor — roughly the 1 billion or so people in the low-income countries and the poorest of the middle-income countries. By 2030, with open-world markets, improved technologies, and a boost from adequate aid flows for health, education, agriculture, and infrastructure, these remaining countries too could graduate from aid by around 2030.

Another myth is that the United States carries the aid burden while other governments shirk their responsibility. This is plain wrong. The United States spends less as a share of our income than other countries spend as a share of their income. US aid is now just 0.17 percent of US Gross National Income (GNI), roughly $32 billion in aid out of a GNI of $18 trillion. The average aid spending by other donor governments is more than twice the US share, around 0.38 percent.

The best aid giver among our last three presidents was George W. Bush, who created successful US-led efforts to fight AIDS and malaria and thereby saved millions of lives. By contrast, Bill Clinton and Barrack Obama did very little during their presidencies. Obama’s main contribution was to continue Bush’s programs but without funding the rising needs.

The moral justification of aid, as powerful and adequate as it is, is matched by an equally important case of self-interest. Aid is a matter of US national security and economic interest.

Regarding the links of aid and national security, there is no need to listen to a moralizing economist. Listen directly to the generals. More than 120 retired generals and admirals recently wrote to the congressional leaders of both parties to defend aid as a critical bulwark of national security:

“The State Department, USAID, Millennium Challenge Corporation, Peace Corps, and other development agencies are critical to preventing conflict and reducing the need to put our men and women in uniform in harm’s way. As Secretary James Mattis said while commander of US Central Command, ‘If you don’t fully fund the State Department, then I need to buy more ammunition.’ The military will lead the fight against terrorism on the battlefield, but it needs strong civilian partners in the battle against the drivers of extremism — lack of opportunity, insecurity, injustice, and hopelessness.”

“[Under this proposal] the United States would be slashing its own aid precisely when China is ramping up its aid. China is signing and financing major development projects across Southeast Asia, South Asia, Central Asia, Western Asia, and Africa. China may already be the world’s largest aid giver. Trump’s plans would accelerate the transition to China’s preeminence. Who will find diplomatic support in the next global crisis, China or the United States? And whose companies will win the next round of major infrastructure projects? Both the United States and China can and should do their part.

We must ultimately acknowledge another more radical, and more accurate, perspective: that this is not aid at all, but justice. There are two senses in which “aid” is absolutely the wrong word when it comes to helping the world’s poor.

The first returns us to morality. In his wonderful encyclical “Populorum Progressio” (1967), Pope Paul VI noted this of giving to the poor: “As St. Ambrose put it: ‘You are not making a gift of what is yours to the poor man, but you are giving him back what is his. You have been appropriating things that are meant to be for the common use of everyone. The earth belongs to everyone, not to the rich.’”

Yet this question of “appropriating things . . . for the common use” is appropriate in a dramatically literal sense as well. The rich countries, including our own, have long robbed and despoiled the planet for our narrow economic gain. Britain, the United States, and other powers have made a career of stealing the oil, gas, and minerals out from under the sands of other nations. Our countries transported millions of African slaves to work the plantations stolen from indigenous populations. Our multinational companies have routinely bribed foreign leaders for land and oil reserves. Our government has launched dozens of coups and wars to secure oil, gas, copper, banana and sugar plantations, and other valuable resources. Our fishing fleets have illegally and recklessly scoured the seas, including the protected economic zones of the poorest countries. And our reckless emissions of greenhouse gases are directly responsible for droughts, floods, and extreme storms around the world, with a president and oil industry too evil even to acknowledge the basic scientific truths.

There is a real question: Who has aided whom over the past centuries? And can we live in morality and peace?”