Obama’s mega-borrowing is predicated on a rather thin margin of safety. We can service nearly $2 trillion in additional debt this year—on top of the existing $11 trillion—only because interest rates are so low.
But as a veteran of the near usury of the 1970s and early 1980s, I see no reason why interest rates won’t shoot up to 10% once the economy recovers and the U.S. has to convince lenders to buy our paper in an inflationary spiral. In other words, we could fork out each year about $150-200 billion in interest costs on our annual red ink, in addition to paying annually another trillion dollars to service the existing debt. (We forget that many of us young people in the 1970s and 1980s simply never bought anything new due to high interest: my first new car was not purchased until 1989 when interest was only 7.2% on it; my parents bought a small condo in 1980 for the unbelievably low rate of 8.8%, due only to redevelopment incentives in a bad neighborhood of Fresno. Inflation will be back, even in this quite different age of globalized competition and low wages.)
When Obama talks of a trillion here for health care, a trillion there for cap-and-trade, it has a chilling effect. Does he include the cost of interest? Where will the money came from? Who will pay the interest? Has he ever experienced the wages of such borrowing in his own life? Did he cut back and save for his college or law school tuition, with part-time jobs? Did he ever run a business and see how hard it was to be $200 ahead at day’s end?
What destroys individuals, ruins families, and fells nations is debt—or rather the inability to service debt, and the cultural ramifications that follow. When farming, I used to see the futility in haggling over diesel prices, trying to buy fertilizer in bulk, or using used vineyard wire—when each day we were paying hundreds in dollars in interest on a “cut-rate” 14% crop loan.
The difference between the 5th century BC and late 4th century BC at Athens is debt–and not caused just by military expenditures or war; the claims on Athenian entitlements grew by the 350s, even as forced liturgies on the productive classes increased, even as the treasury emptied. At Rome by the mid-3rd century AD the state was essentially bribing its own citizens to behave by expanding the bread and circuses dole, while tax avoidance became an art form, while the Roman state tried everything from price controls to inflating the coinage to meet services and pay public debts.
Integral to public debt are two eternal truths: a public demands of the state ever more subsidies, and those who pay for them shrink in number as they seek to avoid the increased burden.
Once the conservative Bush people started talking about trillions in debt in terms of percentages of GDP rather than of real money, I feared we were done for: if a so-called conservative is doing this, I thought, what will the liberal Congress do when it gets back in power?
(One more historical truth: the melodramatic language of people dying, starving, being ignored, etc. increases as the level of government services expands as the fears of public insolvency spread: in the late 1930s our grandparents thought tiny sums from social security were lavish godsends, now we assume a temporary suspension in cost-of-living increases on top of generous pay-outs is nothing short of a national disaster and proof of our collective selfishness.)
The same storm clouds pile up on the horizon of foreign policy. One can get away with Carterism for a year or two. Remember, Jimmy Carter was loved up until about 1978, as he bragged of human rights, slashed defense to use the money for more entitlements, promised to get troops out of Korea, sold out the Shah, intrigued with the exiled Khomeini, pooh-poohed communists in Central America, sold warplanes without bomb racks to our allies, lectured on the inordinate fear of communism and sermonized how no one would die on his watch.
We were his Plains Sunday school class, he the sanctimonious prayer leader. The lions abroad would lie down with us, the new lambs, at home. “I will never lie to you” Carter repeated ad nauseam. I used to listen to his call-in empathy radio shows while driving to work as a grad student, and at 24 thought “Does this adult really believe all this?”
And then somewhere around 1979 the world finally sized him up—and the result was a bleeding American goat crossing the Amazon as the piranha swarmed. Radical Islam was on the rise. The Soviet army invaded Afghanistan. Nicaragua blew up. Iran took hostages. And in reaction Carter devised brilliant strategies like boycotting the Olympics and arming jihadists in Pakistan—and more lecturing us from the rose garden. He wanted a flashy hostage rescue mission—after slashing defense in 1977-8: but the two don’t mix, as he learned.
Obama likewise is outside the mainstream of bipartisan Democratic foreign policy as practiced by Truman, JFK, LBJ, and Clinton. He’s to the left of Carter, and indeed, on both Afghanistan and Iran, to the left of France and Germany. Readers, none of you thought you would ever see Europeans wanting us to buck up in Afghanistan and get tougher against Ahmadinejad.