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The budget squeeze will probably become even worse later in the 1970s. Lawrence S. Ritter, professor of finance at New York University, calculates that during the rest of the decade, public spending will have to average $46 billion a year above 1970 levels for just four purposes: rebuilding mass-transit systems, cleaning up pollution, upgrading law enforcement and improving education. Spending needs would rise even more if the U.S. decided to rebuild its cities or start a nationwide system of low-cost health care, as it should. There is no excuse for the world's richest nation to rank 13th in infant mortality and 17th in life expectancy for men.
If the country's governmental units follow their present course, they will respond partly by further raising some taxes, partly by rejecting some badly needed programs, and largely by plunging deeper into debt. That is a self-defeating course. Keynesian economists have oversold the idea that public debt does not hurt because "we owe it to ourselves." Interest on the debt—currently $12 billion a year for the Federal Government —devours tax dollars that are urgently needed for other purposes.
Debt service is now the third highest public expense, exceeded only by spending for defense and education; most of the money goes to banks, which are the major buyers of bonds that governments at all levels sell to cover their deficits. Moreover, debt functions as a wrong-way income redistribution device, channeling tax money that is paid in large part by the poor and the middle class into the pockets of wealthy holders of trust accounts or stock in banks.
How did the U.S. get into such a mess? One reason is poor federal management of the economy. Inflation has raised government costs for construction, supplies and utility bills more than tax planners had foreseen. Recession has caused tax collections to fall below expectations, while joblessness has jacked up government expenditures for unemployment compensation and welfare. Although it has become an intellectual fad to question the need for vigorous economic growth, no Governor, mayor or federal budget director can have any doubt about the meaning of a halt or even a slowdown: fiscal disaster.
Changes in demography and society have also put the U.S. through a budgetary wringer. Population growth has brought a more than proportional increase in the need for public services. A more crowded society multiplies demands for housing, parks, garbage collection and police protection. A skewed demographic pattern also has pressed a relatively small working and taxpaying population into paying for the medical, educational and welfare requirements of rapidly rising numbers of the very young and the very old. During the 1960s, the number of people aged five to 24 rose 28%, and the number aged 65 or over increased 21%; meanwhile, the group aged 25 to 44 expanded less than 3%.
The U.S., no less than the underdeveloped world, has also been going through a revolution of rising