May 31, 2002
Heart of CheapnessBy PAUL
KRUGMAN
oor Bono. He got stuck in a moment, and he couldn't get out of
it.
In one of the oddest enterprises in the history of development
economics, Bono — the lead singer for the rock band U2 — has been touring
Africa with Paul O'Neill, secretary of the treasury. For a while, the
latent tensions between the two men were masked by Bono's courtesy; but on
Monday he lost his cool.
The pair were visiting a village in
Uganda, where a new well yielding clean water has radically improved the
villagers' health. Mr. O'Neill's conclusion from this, as from the other
development projects he saw, was that big improvements in people's lives
don't require much money — and therefore that no big increase in foreign
aid is required. By the way, the United States currently spends 0.11
percent of G.D.P. on foreign aid; Canada and major European countries are
about three times as generous. The Bush administration's proposed
"Millennium Fund" will increase our aid share, but only to 0.13
percent.
Bono was furious, declaring that the projects demonstrated
just the opposite, that the well was "an example of why we need big money
for development. And it is absolutely not an example of why we don't. And
if the secretary can't see that, we're going to have to get him a pair of
glasses and a new set of ears."
Maybe the easiest way to refute Mr.
O'Neill is to recall last year's proposal by the World Health
Organization, which wants to provide poor countries with such basic items
as antibiotics and insecticide-treated mosquito nets. If the U.S. had
backed the proposed program, which the W.H.O. estimated would save eight
million lives each year, America's contribution would have been about $10
billion annually — a dime a day per American, but nonetheless a doubling
of our current spending on foreign aid. Saving lives — even African lives
— costs money.
But is Mr. O'Neill really blind and deaf to Africa's
needs? Probably not. He is caught between a rock star and a hard place: he
wants to show concern about global poverty, but Washington has other
priorities.
A striking demonstration of those priorities is the
contrast between the Bush administration's curt dismissal of the W.H.O.
proposal and the bipartisan drive to make permanent the recent repeal of
the estate tax. What's notable about that drive is that opponents of the
estate tax didn't even try to make a trickle-down argument, to assert that
reducing taxes on wealthy heirs is good for all of us. Instead, they made
an emotional appeal — they wanted us to feel the pain of those who pay the
"death tax." And the sob stories worked; Congress brushed aside proposals
to retain the tax, even proposals that would raise the exemption — the
share of any estate that is free from tax — to $5 million.
Let's do
the math here. An estate tax with an exemption of $5 million would affect
only a handful of very wealthy families: in 1999 only 3,300 estates had a
taxable value of more than $5 million. The average value of those estates
was $16 million. If the excess over $5 million were taxed at pre-2001
rates, the average taxed family would be left with $10 million — which
doesn't sound like hardship to me — and the government would collect $20
billion in revenue each year. But no; the whole tax must go.
So
here are our priorities. Faced with a proposal that would save the lives
of eight million people every year, many of them children, we balk at the
cost. But when asked to give up revenue equal to twice that cost, in order
to allow each of 3,300 lucky families to collect its full $16 million
inheritance rather than a mere $10 million, we don't hesitate. Leave no
heir behind!
Which brings us back to the Bono-O'Neill tour. The
rock star must have hoped that top American officials are ignorant rather
than callous — that they just don't realize what conditions are like in
poor countries, and how foreign aid can make a difference. By showing Mr.
O'Neill the realities of poverty and the benefits aid can bring, Bono
hoped to find and kindle the spark of compassion that surely must lurk in
the hearts of those who claim to be compassionate conservatives.
But he still hasn't found what he's looking for.
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