Posted on 4-6-2002

Heart of Cheapness
By PAUL KRUGMAN

Poor 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.