fiscal deficits in the developed world are unsustainable.”
The numbers in the BIS study make this clear. For instance, in Greece71, the problem child of the moment that everyone is looking at with horror, government debt could reach 130 percent of gross domestic product in 2011. But Greece is far from alone. In the United Kingdom, it is expected to hit 94 percent, jumping more than 10 percentage points in one year. And in the United States, we could approach nearly 100 percent. As a Greek American, I’m enthusiastic about all the shared traits of my two countries, but I’d prefer not to add crippling debt to the list.
“While fiscal problems need72 to be tackled soon,” says the BIS report, “how to do that without seriously jeopardizing the incipient economic recovery is the current key challenge for fiscal authorities.”
Exactly. And those fiscal authorities need to remember that there is more to tackling the deficit crisis than just cutting spending. We need to think bigger—we need to re orient our economy so that it’s once more an engine for production and productivity, not a vehicle for gambling and speculation. As Mauldin says73 of the old—and still dominant—order on Wall Street: “Let’s be very clear. This was purely gambling. No money was invested in mortgages or any productive enterprise. This was one group betting against another, and a lot of these deals were done all over New York and London.”
Mauldin goes on to74 question why large institutional investors were even gambling on such things as synthetic collateralized debt obligations in the first place: “This is an investment that had no productive capital at work and no remotely socially redeeming value. It did not go to fund mortgages or buy capital equipment or build malls or office buildings.”
Commenting on our looming debt crisis, Prince ton economist Alan Blinder75 noted that “in 1980 [policymakers] knew about the year 2010 but that was really far away.” Well, it’s not anymore, and given that much of our deficit problem is about huge numbers of workers born decades ago now hitting retirement age, Blinder quipped, “The long run is now the short run and they’re combining.”
The needs of the past and the demands of the present exert a powerful pull on our attention, while the future doesn’t have many advocates—it’s always something we can get to later. There once was a time when we could get away with pushing our problems down the road, secure that our reserves would always bail us out. There was a strong safety net to catch those who fell through the cracks. Well, those reserves are gone now and the safety net is frayed and full of holes.
PERVERTED PRIORITIES
Another warning sign that we are on the way to becoming a Third World nation is the trillions of dollars we continue to spend fighting unnecessary wars and building ever more powerful weaponry while our people here at home do without.
You want Third World thinking? How about North Korea joining the nuclear club while its people starve? Since the fall of the Roman Empire, one of the hallmarks of nations in decline has been increased military spending at the expense of other essential priorities. Think of the Soviets trying to match America, nuclear warhead for nuclear warhead.
Historian Arnold Toynbee believed that76 civilizations almost always die from suicide, not by murder. That is, our future is dependent on the choices we make and the things we decide to value.
Partisanship pop quiz time77. See if you can identify the bleeding-heart liberal who said this: “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”
Noam Chomsky? Michael Moore? Bernie Sanders?
No, it was that unrepentant lefty78 five-star general Dwight Eisenhower, in 1953, just a few months after taking office—a time when the economy was booming and unemployment was at 2.7 percent. Yet today, while America’s economy79 sputters down the road to recovery and the middle class struggles to make ends meet—with more than twenty-six million people unemployed or underemployed and record numbers of homes being lost to foreclosure—the “guns versus butter” argument isn’t even part of the national debate. Of course, today, the argument might be more accurately framed as “ICBM nukes, predator drones, and missile-defense shields versus jobs, affordable college, decent schools, foreclosure prevention, and fixing the gaping holes in our social safety net.”
We hear endless talk80 in Washington about belt tightening and deficit reduction, but hardly a word about whether the $161 billion being spent in 2010 alone to fight wars of choice in Afghanistan and Iraq might be better spent helping embattled Americans here at home.
Indeed, during his State of the Union speech81 in January 2010, President Obama proposed freezing all discretionary government spending for three years—but exempted military spending, even though the defense bud get has ballooned over the last ten years. According to defense analyst Lawrence Korb82, who served as assistant secretary of defense in the Reagan administration, the baseline defense bud get has increased by 50 percent since 2000. Over that same period, nondefense discretionary spending increased less than half that much.
In fact, as Katherine McIntire Peters reported83 on GovernmentExecutive.com, President Obama is “on track to spend more on defense, in real dollars, than any other president has in one term of office since World War II.” In that time we’ve had Korea, Vietnam, the massive military buildup under Reagan, and Bush’s funded-by-tax-cuts invasions of Afghanistan and Iraq, but in the most trying economic times since the Great Depression, Obama’s outgunning them all.
This is not about ignoring the threats to our national security. And it’s certainly not about pacifism. To quote then Illinois84 state senator Barack Obama in 2002, “I don’t oppose all wars. . . . What I am opposed to is a dumb war.” Iraq was never about making us safer. And the original rationale for going to war in Afghanistan—taking on al-Qaeda—has been accomplished, with fewer than one hundred members85 of the group still operating in the country. The irrationality of continuing to spend precious resources on wars we shouldn’t be fighting is all the more galling when juxtaposed with our urgent and growing needs at home.
According to the Los Angeles Times,86 before the summer 2010 surge in Kandahar (cost: $33 billion)—a surge the military claimed was as important to Afghanistan as securing Baghdad was to Iraq—Joint Chiefs of Staff chairman Admiral Michael Mullen told an Afghan leader that the goals of the surge, as well as defeating the Taliban, included, in the words of the Times, “reducing corruption, making local government work and, eventually, providing jobs.” Talk about “mission creep”!
Is that why we are still fighting a war there nine years later, spending American blood and treasure—to provide jobs for the people of Kandahar? It’s like a very bad joke: “The good news is, the Obama administration is ramping up a multibillion-dollar program that will create a host of new jobs. The bad news is, you have to move to Kandahar to apply.”
The Bush-era rationale for these overseas misadventures was always “We’ll fight ’em over there, so we don’t have to fight