Tuesday, 2 August 2011

America Stays Solvent, Just - But will Political Bankruptcy Remain?

I rarely comment on American politics, probably because it interests me about as much as ours does those who live across the pond, so I'm far from qualified to offer anything that might resemble an expert opinion. However, the developments of the last few days, finally 'resolved' as the US debt ceiling was once again raised by $2.4 trillion, has been both fascinating and immensely disappointing listening as an outsider. There's a lot to like about America, and I worry that some of her instincts as a nation (small government, personal liberty, self-reliance) are on the verge of being lost, destroyed by one political party who never believed in these principles anyway, and another whose leadership was too weak-willed to do something about it. I sincerely hope I'm wrong, since crossing the States off the list of countries worth moving to would leave only Australia, Canada, New Zealand and the Independent Peninsula of the Wirral (assuming it happens in my lifetime).

The 2009 Presidential race was a strange one in which I must say I didn't really want either side to win. A competition between the wannabe socialists of the Democratic Party and a bunch of crazed, warmongering NeoCon hawks really is a 'toss of a coin' affair, and I reasoned that Obama's victory would at least spare us from hearing about our latest ill-advised foreign adventure for a while. Oh well - it would appear that America's 'New Labour' moment was just as vacuous as ours, with the reality of recession soon stifling the (surely false?) sense of hope that met Obama's election. I was praying that just once, the Americans and ourselves might be faced with the possibility and opportunity to get involved in a foreign conflict somewhere, but would take the brave and correct decision not to do so. Of course, this bunny should have known a whole lot better.

Now, with the US state visa card maxed out, an increase on the debt ceiling was passed in Congress by a 76-24 majority. In return for this access to immediate additional credit, there is the prospect of $2.1 trillion worth of savings to be achieved over two years. Barack Obama hails this as "an important first step towards ensuring that we as a nation live within our means". There are a whole range of questions that come out of this series of events, but let's have three ice-breakers to start with. If Obama believes in America 'living within its means' then what was his flagship $800 billion stimulus package about? Even some Democrat supporters accept that this has 'not delivered what was hoped or promised' - well of course it hasn't, since you can only recycle or borrow so much of other people's money before the real economy is left to pick up the tab. There is only one 'stimulus' that stands a serious chance of reviving a dormant fiscal or economic patient, and that's tax cuts - backed up by deeper slashes to public spending if necessary.

Secondly, why do these numbers leave us with more questions than answers? While the US is allowed to borrow a further $2.4 trillion, the savings target to be achieved stands at only $2.1 trillion - moreover, this amount only needs to be found over the course of a decade. While the President appears to have achieved his immediate aim of kicking the insolvency of United States plc into the long grass until the next election, the notion that this 'solution' will restore confidence in the market and amongst Americans generally appears to be something of a hard sell. The extra credit is in the bank, but then we know that Statists have an autopilot tendency to oppose any reduction in government expenditure (with the possible exception of the military), even if it means cutting obvious waste or a program that can be clearly shown to have failed. Applying the brakes to spending will prove a whole lot more difficult than squandering someone else's shiny new dollars, of that I am utterly certain.

Most importantly, where have the Republican Party been in all this?

You can't blame the Democrats for their instincts any more than you might attack our own Labour Party for the same reason. Obama's response to being in a fiscal hole was to decide that America could just dig its way out, and the current increase in federal expenditure since he moved into the White House averages out at $300 billion a year. It may be the economics of the asylum, an eternal delay to the inevitable, but this is what Statists believe in. Got a fiscal itch? Just apply a bucket of hard currency to the wound and we'll even call it a 'stimulus' - you can then namedrop John Maynard Keynes so it doesn't sound quite as brainless as it actually is. Don't worry where it came from or what the long-term effects of this remedy are on the patient, simply repeat the treatment until insolvent, then leave someone else to clean up the mess. It's what Statists have been doing for the best part of a century, and it's in their DNA - they can't help themselves.

This someone else would be, at least in theory, the Republican Party, who at various points in time have believed in a smaller state, lower taxation and a greater level of control over federal expenditure. The main problem is that they haven't subscribed to this doctrine in its entirety for many years, and this makes their socially authoritarian streak even harder to stomach. In reality, the shambolic Bush administration is far from blameless for the current state in which America finds itself. While taking the natural and correct decision of cutting personal taxation, they also continued to increase public spending at an average rate of $150 billion per year, with the predictable result of fiscal black holes. Sure, team Bush's profligacy was not on the same scale as what the US is burdened with now, and their deficits were also small in relative terms, but being as much as $400 billion down on an annual basis is not something one would expect from a committed fiscal Conservative.

That they have allowed the debt ceiling to be increased by more than the ten year savings target is itself a political own goal, and this appears to have handed the initiative straight to Barack Obama ahead of the 2012 Presidential race. With control of the House, the Republicans may never have had a better opportunity to press home the case for a shift away from the big government solutions of the previous decade that had demonstrably failed. Maybe facing up to their own years of recklessness was too much to take, or perhaps we now have a similar situation in the US to that which we face ourselves - two forms of competing Statism with but a hair's breadth separating them. Those Americans who genuinely believe in freedom and smaller government must feel right now akin to lions led by donkeys - it's they this bunny sympathises with.

The world needs a strong America as much as it ever has, and I suppose that while there's Ron Paul, there's still hope. Take it easy and I'll catch you tomorrow.

7 comments:

  1. Ron Paul 2012. WIth LPUK owned by a cabal of authoritarians he is the only hope, not just for America.

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  2. Well said MNN

    I just pray that the Palin doesn't run...

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  3. Nice post Daz! I don't know a great deal about US politics or their economy, but you explain it well to a thicko like me! Keep up the good work; and don't stop writing!

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  4. Eric Poupart Lefarge3 August 2011 at 16:17

    Do you really think Rupaul running for President is a good idea?

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  5. TC - I've read some of your blog and can assure our readers you are not a thicko or anything vaguely resembling one.

    Many thanks for your continued enjoyment of the site. Take care, and don't let them grind you down...

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  6. Eric Poupart Lafarge4 August 2011 at 17:46

    I think TC probably does vaguely resemble a thicko

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  7. Eric - go fuck yourself.

    Thanks

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