"This is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy. This is not normal government policy. ...this is a form of looting."
"This is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy. This is not normal government policy. ...this is a form of looting."- George A. Akerlof, 2001 Nobel Prize Laureate in Economics referring to the Administration of George W. Bush
The wealthiest person, who's ever lived, lives today. His name is unimportant here. Suffice to say his fortune is estimated at around $40 billion.1 I mention this princely sum only that it might appear as chump change when compared against the treasure our nation's president has at his disposal. Yes, I said disposal.
As a frame of reference one need only consider the fiduciary legacy left to us by America's most recent chief executives.
When Richard Nixon left office, the federal budget was essentially balanced. Call that a good thing. When Ford/Carter left office their combined administrations built a $6 billion deficit, accruing about $100 billion more in federal debt. Again, chump change, even at the time, but it was the start of peacetime deficit spending policy that is being repeated today. But it's wise to remember and keep in mind what happened to interest rates during the Carter years; they soared to 14 percent if memory serves.
(Economists write volumes on this stuff, but I prefer to think of it as a back alley crap shoot. Sometimes you're ahead. That's when a smart shooter builds a kitty, plays the other guys' money. It's when a dumb shooter buys a Cadillac to improve his image. When the dice get cold, you dip into the kitty. If you've failed to build a kitty, you go into the hole. That's when you turn to the shy - the money lender - who's now crouched right behind you. After all, you're still a pretty good bet, and there's always the Caddy. The shy agrees, and stakes you on the cheap. You blow on the bones, hedge your bets, ride a hot shooter's streak, and try to come back. If you go for broke, you can drive away still looking good, or you can turn to the shy again. He'll stake you again, but not on the cheap this time. Now you're playing with his markers only. If your luck doesn't turn, the vig gets higher, the shy keeps raising the price of his markers. The deeper you get, the colder you get, the more the markers cost. You crap out. The shy takes the Caddy. With no collateral, the vig gets bigger than the stake. You can't walk away. Sweating now, you borrow again. This is the leading proximate cause of injury and death among back alley crapshooters. You roll the dice...)
When Ronald Reagan left office, he left America $150 billion in the hole.2 If I've got the math right, that's a 1500-fold increase in deficit spending over that of his immediate predecessors. In one splendiferous move, Reagan slammed the door on chump change economics forever, leaving us with the largest peacetime deficit in our nation's history.
Sophomoric economic dichotomies notwithstanding, few would say this president was not about charting new territory. They even gave it a name: Reaganomics. He imposed an asymmetrical tax cut, which pacified the masses, while diverting the bulk of reductions to the wealthiest taxpayers.2 In isolation such a policy can be argued as equitable. It's an argument posed ad-nauseam by TV economists: the rich pay more taxes to begin with; wealth trickles down, so on. But economic theories are only as viable as their execution. Reagan's execution was irrational. Because while sharply reducing the government's income, he and his administration continued to spend the public's money like a bunch of heroine addicts (270 million heroine addicts, really). And while few would dispute that spending $150 billion more than you take in is a splendid bit of philandering, we had not yet reckoned with the Bushes. George Bush, the elder, doubled Reagan's best. What it took Ronald Reagan eight years to accomplish, Bush senior did in a mere four. Sure, his predecessor's tax cuts, paired with an anemic economy left Bush One at a disadvantage going in. But he clearly exacerbated the problem by catching his tail in his own ill considered "Watch my lips. No new taxes," trap. The deficit grew to $300 billion.2 Now, as any economist on Fox News will quickly tell you, though deficit spending builds debt, it is not necessarily a bad thing. In isolation, debt is neither good nor bad. It's simply debt. If, as with the household budgeting practice of most Americans, money is needed for a necessity such as a home mortgage, a car, a school loan, medical bills, whatever, we readily borrow that money. But generally such indebtedness is undertaken in anticipation of a favorable return. For example, if one needs a coronary bypass operation, but can't afford to pay for it in cash and insurance, one must either borrow the money, steal it, or die. Most adults understand and accept this. Decisions, including the decision to make no decision at all, yield consequences. Looking on the brighter side, school costs are a common reason we borrow. Student loans generally yield a better educated, intelligent, functioning adult with improved commercial prospects and philosophical insights that easily obviate the assumed debt over time. Like most intelligent, rational mammals, we accept that resource planning is fundamental to survival. Eating ourselves when the food money runs out is not consistent with rational planning.
With Reagan - Bush, there was no rational plan to deal with the inevitable shortfall of deficit spending coupled with the self-imposed revenue reductions that characterized their combined tenure. They ignored, as do most recent administrations, the implications of such deficit spending to future debt service entirely. From their earliest days, government spending began climbing at a rate that quickly surpassed revenue and there were to be no new taxes (read my lips) or viable potential for return on expenditure. This is the equivalent of living exactly at your means, then taking a pay cut, deliberately increasing your rent, food, and car payments, all the while deluding yourself that your standard of living has improved, and fully expecting, perhaps through reliance upon Devine providence, to either come out flush in the end, or move in with your kids. When Ronald Reagan was pressed for an answer to this apparent fiscal dichotomy, the chief executive of the United States, custodian of our treasure, said something very much like this. "A pessimist gets handed a box. He looks inside and sees only manure. An optimist gets the same box. He looks inside and says, 'With all this manure, there must be a pony in here too!'"
During this period of quixotic economics, we saw no improvement in the national infrastructure or GNP that might be objectively considered as equivalent to the level of spending, but both administrations continued to tout the tax cut. They also managed to scare up an annual foreign crisis. Both of which managed to keep the bulk of America's citizens alternately blissful, and otherwise occupied. We were consumed by the myth that the mighty United States was ostensibly under constant threat from insolvent countries or dictatorships most Americans couldn't point to on a map. Russia, China, Granada, Panama, Iran, El Salvador, Nicaragua, Libya. One red herring followed another, each intent to murder us in our beds. A wacky, highly selective xenophobia characterized these years, culminating in the first Iraq turkey shoot, and allowing this pair of simplistic patriots to swell both the debt and the balance of trade deficit, while keeping the collective public mind tenuously concentrated on holding the foreign evil-doers at bay. Meanwhile, in the shadows, American manufacturing declined, taxes actually went back up, and unemployment grew to 9.7%.3 These conditions exacerbated the original tax shortfall, making it more difficult to reduce federal spending. The balance of trade mattered not a wit to the government or the media. We were becoming a service economy. That's what they told us. If an American needed something, she could count on good foreigners, such as the Japanese, to build it for her: smarter, better, cheaper. Remember? In return, Americans could sell each other hamburgers cooked with our secret recipe. It was a recipe for failure, a failure from which we seem to have learned but little.
The simple fact is this, by the time the first President Bush handed the reins of office to Bill Clinton by popular mandate, George the First and his immediate predecessor had plunged our nation into a $300 billion annual budget deficit. If you find that difficult to swallow, just check the facts. I recommend the American Association for the Advancement of Science's web site. Science, being knowledge-based, generally feels the pinch of ignorance first. So the AAAS put together some easy to understand graphs gleaned from the not-so-easy-to-understand federal record.2
Fortunately, during Clinton's ensuing eight-year tenure, we not only climbed out of that $300 billion black hole, but also accrued a $300 billion surplus.2 Through a fiscal discipline (somehow attributed to Ronald Reagan by radio talk show hosts wiser than I) we saw a $600 billion dollar gain in the public coffers in eight years.2 Income outpaced spending. The Clinton administration returned billions to the treasury. Many believe these billions would have been better put against the growing $6 trillion national debt.8
But let's call the Clinton administration's practice better than spending it all. Then, while imposing an 8% tax increase as compared to the 14% aggregate increase of its immediate fiscally conservative predecessors, the reviled Clinton people still found enough cash to run the government.2 That's effectively cheaper. In turn it allowed them to pay down the enormous deficit, build an equally enormous surplus, and still set aside enough cash to build all those smarter weapons today's dumber leaders seem to so enjoy using. Smarter, better, cheaper. See? Turning Japanese, I think I'm...
But I digress.
What happened then, you ask, rhetorically? Did Clinton get a medal, a pay raise, an airport named after him? What?
The loyal opposition impeached him.
Why might they do such a thing following so stellar a fiscal performance? Was it because of Bubba's alleged sexual misconduct in the White House?
Try this. It makes a lot more sense. With all that money now just lying about in the federal coffers, and so much more coming in every day, the Republicans had their own interpretation of what was inappropriate presidential behavior. It had little to do with Clinton's alleged sexual proclivities, or with defiling the White House as shrine. In fact, to these guys, getting a little head in the Oval Office could be a good thing. In fact, it could be a very good thing - especially if that little head was the one that sat atop their president's neck. And these cons (short for conservatives, of course) knew just the candidate who fit that description. So, they rigged the ensuing election, thus handing the greatest budget surplus in our nation's history, and the greatest monetary treasure in the history of history, to their new quiz kid president, George W. Bush. "The Businessman President." Yahoo! God bless America!
He promptly spent all of it.
Though GWB the politician was one of only six Americans (seven if we count Rush Limbaugh) who understood the legal abstractions attendant to his being appointed President of the United States, GWB The Businessman seems blissfully unaware of the business world's axiom that income must at some point equal and perhaps even exceed expense.
We the people seem hardly more acquisitive. That $300 billion surplus that the Businessman President squandered was your money. It was my money. It was every other taxpaying American's money too. But we didn't guard it, and those to whom we subsequently and in hindsight, foolishly, entrusted it, proved unworthy of trust. The money's gone. Some of it was squandered through George W. Bush's popular tax cut. But much of the pittance the vast majority of Americans, including the middle- and upper-middle earners, will regain has already found its way from your pocket into big oil's pockets. It went there through our $2.25 per gallon gas tanks and elevated utility bills, and it went there in record time. Every other penny of the incredible surplus we'd built up as a society has been spent, and another $350 billion that we don't have will be gone by year's end.3 America is hopelessly in debt again, deeper than ever, and we're now deficit spending another $79 billion we've not yet accrued, by blowing up Iraq.4
Unfortunately, as the Iraqi smoke clears, its dissipation along with that of our nation's life savings will yield but a single certainty: the future prospects of seeing Osama bin Laden and Saddam Husein on CNN are far better than those of Robert Novak. Oh, yes, and the American treasure will have changed hands forever. In this shell game that began some 27 months ago, $600 billion has been skimmed from the public coffers, and much of it transferred to the bankrolls of the masters of war and the masters of oil.
Not content to steal America's private pensions, like the Enrons and Arthur Andersons of the world, the private-sector fat cats along with their instruments of government power will now dispense with your country's treasure and your state's future too. Rather than going through the tedious process of picking over what's left after the federal government pays its bills with our tax money, the Haliburtons who will optimize Iraq's untouched oil fields, the Bechtels who will rebuild her decimated infrastructure, and the Boeings who will develop the unapproved and scientifically dubious missile defense system11 to "protect' us from future non-existent WMD, will get to have your tax money (with no small assist from their Washington stooges) diverted directly to them. Think of it as direct deposit. Pretty good scam, eh? Getting depressed? Well, it ain't over yet, in fact it's hardly started.
At this rate (rate being the operative word), in something just under six years, the federal government will have to come up with about a trillion dollars a year, swelling to $4- trillion a year in ten years. That's money it simply does not have. That's not a joke. It's the projected federal deficit under a reelected Bush.5 $4,000,000,000,000.00! If it isn't collected in taxes, it will have to be borrowed - or printed. So figure a trillion or two in interest we'll also have to borrow every year against the deficit and burgeoning debt service. Do the math and you'll have your kids' future tax environment pretty well mapped out. But to hell with them. What does all this mean to you and me? Simple. Kiss your 5% mortgage rate goodbye. Kiss your 0% APR auto loan goodbye. Kiss your cheap student loan goodbye. Kiss your home equity goodbye. Because when the Fed empties the banks and private lending institutions of trillions of bucks annually just to keep the government's lights on, the simple laws of supply and demand will drive interest rates through the roof - again. Sure, you'll be paying lower income taxes (if you have a job), but you'll be paying higher interest - a lot higher interest. Simply stated, yes, Bush Jr. lowered taxes, but that was just to divert your tax money to his friends and handlers without subjecting them to too much congressional red tape, Appropriations Committee scrutiny, GAO audits and all those other tiresome processes that would bog down public money allocation in a functional democracy.
There's nothing wrong with moving money back into the private sector, you say.
There is when joblessness in that same private sector skyrockets during that same period, I say.
Still depressed? Not to worry, the Bush administration and his Republican dominated congress have plans to limit government spending. For example, congress has already approved huge spending cuts designed to offset the projected $38 billion annual costs of homeland security.6 One big way they'll do that is by cutting veteran's benefits $24-billion over the next ten years.10 Inappropriate you say. Sounds to me like you're criticizing our compassionately conservative government. Knock it off. That sort of treasonous behavior will hurt the morale of our troops overseas. Let's stick to business. Here's another one. Bush has asked for $79 billion to fund the war in Iraqi so far.4 That's about the same amount the IRS under Bush has already approved in annual tax breaks for American corporations who've moved their operations offshore., 9 Think of how much money the government will save by not having to process those time consuming corporate tax forms and employee W-2s.
But there's more, much more. It appears there's a plan to actually recover the economy, too. It's just as rational, relies on the petroleum industry to come to our national rescue, and is only marginally more terrifying than what we've seen from this administration so far.
It goes something like this. The current petroleum output of OPEC member states is limited by quota to 2 million barrels per day. That's about 750 million barrels a year. It's what allows the bad foreigners to control prices by limiting supply.7
All of which brings us back around to Iraq.
Iraq, though it floats atop the second largest petroleum reserve in the world, posts a pathetic output currently limited not by OPEC, but by international sanctions and second-rate scud-era extraction technology.
Under U.S. control, however, oil production more consistent with a democratic, sanction-free Iraq's vast reserves is possible. Add to that Dick Che... I mean Haliburton's equally vast technology, and the oil industry's immeasurably vast avarice, and Iraq's output could be literally pumped up to $7 million barrels per day without breaking a sweat.7 This would blow a hole in OPEC the size of Texas. Yippee.
American oil prices would tumble (sure they would). OPEC would flounder and perhaps even collapse. The United States and Great Britain would reign supreme, the U.S. economy would recover, and we'll all live happily ever after.
But what will actually happen if we allow a free election in Iraq? Would the vast Shiite majority (the sect of the Iatolla Khomeini) win such a vote? If so, I might submit that predicting the actions of a freely elected Islamic fundamentalist government requires no leap of imagination. But perhaps it does. Perhaps something we hadn't foreseen would take place. For example, might the Shiites continue a not-so-hated policy of the hated Saddam Hussein? On November 6, 2000, Saddam took Iraq's oil trade off the world standard U.S. dollar, and based it on the euro.7 Would an Iraqi Shiite government follow the example of their Shiite neighbor, Iran, which has also agreed to begin trading its go-goop in euros?7 Oh, did CNN miss this stuff in their 670 hours of continuous incisive, probing coverage of Operation Iraqi Freedom? Maybe they couldn't find time, what with all the dog-bites-man excitement of the actual trouncing itself to report. So they probably also didn't tell you that North Korea, too, has begun buying oil in euros only.7 If you find this interesting, I suggest you check out a scholarly, exhaustively researched paper by grad student William Clark, entitled: "The Real Reasons for the Upcoming War With Iraq." You'll find both its predictions and rationale substantively more accurate than the mainstream media's coverage of the actual smoke and mirrors-on-the-ceilings. Gee, you'd think these news conglomerates would be able to get better stuff from Ari Fliesher than some graduate student could dig up, especially when considering how much money they gave the Bush campaign.
But, back to why a piss ant country like North Korea might do such a thing? Could it be that we've been starving them to death with energy sanctions? Nah. After all, every other country in the world trades oil in U.S. dollars.7 That has always made America the "house" in the world's biggest crapshoot, the back alley shy. Nobody beats the house. Everybody loves America. They trust us and our dollars, especially these days. But, hmmm... Boy, if that sort of thing caught on, it could really screw up America's big recovery. What else do these three states - Iraq, Iran, North Korea - have in common... Axis of something or other comes to mind... Boy, these damned terrorists just won't play by the rules. Well, we know how to handle that, now, don't we?
But wait. Perhaps all that unpleasantness could still be avoided. Perhaps there could be some sort of Florida-like vote count in democratic Iraq. Perhaps it could be administered by Americans, people experienced in the delicate art of nullifying majority mandates. Perhaps such a miracle would actually cause OPEC to lie down and die quietly, plunging the region surrounding Iraq into relative poverty. I mean, c'mon, what is OPEC, anyway? Isn't OPEC just a bunch of sheiks from dusty, historically Muslim countries ruled by despised American imposed despots whose hold on power becomes more tenuous with each American inspired humiliation?
How will the 70 million-strong Muslim populations of these dusty countries respond to the new American induced austerity?
I freely and humbly submit that no one, not the despised American imposed despots, not CNN or Fox "News," not even the supremely knowledgeable Richard Perle or the equally quixotic Paul Wolfowitz can answer that question with authority. Events. Only events, events certain to unfold in the very near and continue through the very distant future will provide us such an answer. Given our government's historical record of dismal failure through intervention, we have no real choice but to wait and see.
So in the meantime, wave a flag, put one on your car, smile. America is in control.
But when our collective arms get tired of all that waving, as they surely will, most of us will be left to face the truth, which is simply this.
The American economy is now at great risk in this ever-smaller world. The recently coined euro currency has grown steadily and impressively stronger against the ever-shakier U.S. dollar on world markets.7 Be certain that our newly created enemies both in Europe and the middle have long since decided that they're tired of being pushed around. When their response is finally formulated it will not be military as our simplistic government pundits seem to expect. As we've learned in Iraq, or should have by now, there will be no headlong rush by the other nine-tenths of the world to impale themselves on America's swift swords. No. The world's response will be considered, coordinated, but unlike Iraq's, it will also be wholly economic. The European Union is now a $10 trillion economy, just like us.7 Prosperous Pacific rim countries are tired of investing in America's Enrons, and Worldcoms, and Arthur Andersons that go supernova in the blink of a Harvey Pitt eye. Our EU friends, while they might smile and make diplomatic nice today, are embarrassed and frightened by this administrations global hegemony, economic shenanigans, and unbridled hubris. Our American treasure is gone. The $600 billion the Bush administration has already blown through will quickly grow to a $1-trillion, $2 trillion, who knows how many trillion-dollar deficit. Measured against a federal budget of $2.2-trillion,8 this is roughly akin to your earning $50,000.00 per year, and spending $88,000.00 while giving yourself annual pay cuts over the next ten years, and pissing off your customers to boot. It's also literally a ton of money that will not be available for your parents' healthcare; it will not be available for your healthcare; it will not be available for our children's social security; it will not be available for their college subsidy; it will not be available to fight crime; it will not be available for medical research; it will not be available for public education; it will not be available for disaster relief; it will not be available for "homeland security." It will not be available to develop the sciences that have so abundantly gifted this country. And at least $24-billion of it will not be available to counsel America's latest generation of eighteen-year-old killer angels whose living nightmares playing out in Iraqi alleys and check points today, will leave so many of them to a life of nightmares yet to come.
No. America's treasure will not be available: Period, not to the likes of you. 12
But, how many tens of billions of dollars will somehow become available to rebuild Iraq?
He's already demanded another $87 billion as if it were owed him.
From where will it actually come? To whom will it actually go? Would we be traitors to ask such questions of our government? Would we be fools not to?
1. Richest man:
2. Budget deficit and surplus:
American Association for the Advancement of the Sciences: federal Budget & Deficit: a review of the twentieth-century presidencies.
Bureau of Labor Statistics.
4. Costs of the war:
New York Times, 4/17/2003: "Bush Urges Lifting Of Sanctions On Iraq,"
5. Projected Deficit and Debt:
New York Times, 4/9/2003: "No New Tax Cuts," by John Kerry, Sam Nunn, P.G. Peterson, Sam Rudman, Paul Volcker.
6. Homeland security costs:
Business Week, 3/14/2003: "Watch Out, The Deficit Is Growing"
7.Iraq and the Euro:
"The Real reasons For The Upcoming War With Iraq," by William Clark.
8. National Debt:
The 2003 Federal Budget
9. Offshore tax dodges
10. VA benefits.
11. MIT Technology Review, 4/2002: Why Missile Defense Won't Work.
12. Fiscal Doomsday: