In 1948, Congress and President Truman adopted the Marshall Plan that at its peak provided about 2 percent of total US gross domestic product to aid Europe’s recovery from World War II—close to ten times the level of international assistance provided today.
After leading the world in the production of vaccines, why hasn’t the US created a Marshall-like plan to help to vaccinate the world?
True, the US participates in a worldwide COVAX vaccine effort, but much more could be done. Even the director of the World Health Organization (WHO), a leading delivery partner in that program, notes that wealthy nations’ new efforts to provide booster shots at home “make a mockery of vaccine equity.”
No doubt today’s tumultuous and anarchic political process presents one barrier. But here I want to demonstrate how our current budget policies are so out of whack that they create a huge barrier against progress on this and so many other fronts.
The Marshall Plan did far more than provide cash for the European economic recovery. It provided hope to millions of people, helped stabilize a chaotic postwar world, and established alliances that lasted for decades.
It also led to net benefits, not costs, to the US as the worldwide economic recovery increased demand for US-made products. Further, it limited post-war military conflicts and the costs of responding to them.
Passage of the Marshall Plan was not easy, but there was one little noted reason why a foreign aid effort of this magnitude passed Congress.
It was because the federal government had fiscal space or slack to devote resources to something new without simultaneously having to trim back other commitments. This slack normally is a benefit of economic growth that adds to revenues without requiring newly legislated tax increases. Throughout the early postwar period, outside of the Korean conflict, dramatic cuts in the size of the military budget relative to national income and government revenue also added to the slack that could then be used for domestic priorities.
In Dead Men Ruling, I recounted how fiscal slack has since been eliminated. For most of US history, fiscal slack meant that Congresses and presidents continually had to legislate new types of spending (or tax cuts) to avoid the buildup of large surpluses with the potential to slow economic growth. In today’s world, however, Congress has built in so much future spending growth without a corresponding increase in revenues—the main cause of our ever-rising deficits even before the pandemic hit—that there is little room for new initiatives.
Now Congress can only achieve long-term fiscal sustainability by reneging on past promises and either raising taxes or cutting planned spending. Both are politically unattractive acts that often lead to losing elections.
When Congress has flexibility to spend money, lawmakers reach compromise easily, and responsible politicians can hold out for less popular uses of resources, such as foreign aid. There’s plenty of yet-uncommitted money to spend.
But today, to attain a sustainable budget, the president must propose new taxes and spending cuts to cover the cost of both any new initiative and unfunded growth in already legislated spending. Or dodge the sustainability issue and pretend that both new and old unfunded programs don’t need to be paid for—just yet.
Given the shrinking US share of the world economy, a Marshall plan for world vaccination would have to continue to engage other countries to share further in the expenses of an expanded COVAX effort. Many logistic issues arise as well in these worldwide efforts, though it’s doubtful they are worse than feeding a starving Europe during the chaotic postwar period.
Still, without discounting these difficulties, a Marshall Plan for world vaccination would be good for the country, achieve great diplomatic benefits, and likely lead to a more vibrant world economy that would boost demand for US goods and services.
Many in the Biden Administration want to expand our international vaccine efforts at a much faster pace, especially after ensuring that vaccines are readily available for everyone here. To do this, they’ll have to confront long-standing congressional opposition to foreign aid and reflexive Republican opposition to almost anything Biden proposes.
But they also must manage a broken budget process that requires higher taxes, cuts in other spending, or adding to unsustainable deficits, even if the initiative makes total economic sense.
An international vaccine initiative is only one example of the problems created when the nation’s tries to change course in the face of an already unsustainable set of budget policies. Global warming and many domestic policy initiatives face the same gigantic budget hurdle. Only restoring fiscal slack will allow the nation to make more rational choices about the best use of our resources, especially when crises such as a pandemic demand that we set new priorities.