America's Fiscal High Noon
Right now, it’s 1941 all over again.
We’re just months away from another Pearl Harbor -- potentially -- and all we hear from President Barack Obama and company, as Governor Haley Barbour (R-MS) puts it, is “happy talk.”
According to the unclassified 2009 report “Economic Warfare: Risks and Responses” by financial analyst Kevin D. Freeman, what’s referred to as “Bear Raid II” -- phase III of an economic terrorist attack against the United States -- is poised to fatally hit the U.S. Treasury and the U.S. dollar, causing the collapse of America’s economy.
It was a threat former Secretary of State James A. Baker III underscored on CNN’s Fareed Zakaria GPS on April 10, noting if the dollar was replaced as the global reserve currency, it would be catastrophic for America.
Yet red flags galore signal that the train has already left the station.
Three weeks ago, George Soros hosted his Bretton Woods II summit, “CRISIS and RENEWAL: International Political Economy at the Crossroads,” focused on reordering the world’s financial architecture. At the same time, our political leaders were haggling over fiscal peanuts -- Obama proudly announcing at the 11th hour, crisis averted: the Washington Monument would remain open after all.
Three weeks earlier, Obama began bombing Libya. It was the straw that broke the camel’s back energy-wise, sending gas prices soaring, OPEC countries reaping rich rewards. It’s right out of the economic terrorism playbook Freeman writes about. But wiser heads are beginning to get it. As the Financial Times reports, “The western allies are in a fine Libyan pickle. The real mission of the British and French military ‘advisers’ being dispatched to the rebel camp is to explore what the west might do to get out of it.”
Then, just as Americans were wrapping up their taxes, BRICS (Brazil, Russia, India, China, South America) met in China, and announced that, it would, in fact, like to displace the U.S. dollar as the world’s reserve currency.
At the same time, the International Monetary Fund declared, as reported in Financial Times, “The US lacks a ‘credible strategy’ to stabilize its mounting public debt posing a small but significant risk of a new global economic crisis....”
Then, Standard & Poor’s issued its “stark warning” regarding America’s debt on Tax Day, sending stocks plunging. While maintaining our triple-A rating, for the first time since it began rating U.S. debt -- the same year as the Pearl Harbor attack -- S&P lowered its outlook from “stable” to “negative,” threatening a downgrade within two years.
And now the dollar has slid to its lowest level in three years given disappointing growth, higher inflation, and the Fed’s cheap money.
It’s almost a perfectly executed set-up for this potential economic Pearl Harbor.
Wake up, America! It’s no longer OK to say, let’s just issue ourselves another credit card and take some happy pills -- or happy spirits -- and everything will be fine.
Rather, as Republican and Democratic legislators alike ponder the debt ceiling vote, hurtling down the road at a dizzying pace, it’s critical that they admit and confront the reality that, unless we sober up vis-à-vis deficit spending, the party is over.
Fortunately, the impending debt ceiling is the perfect bucket of cold water to sober us up and fast. Treasury Secretary Timothy Geithner estimates the U.S. Treasury will run out of money by May 16 -- emergency interim steps allowing America to stay solvent until about July 16. After that it’s a new credit card or bust.
The debt ceiling vote is the only leverage Americans have to demand a serious, come-to-Jesus moment of fiscal sanity regarding the imperative to scrub the $1.6 trillion deficit for FY 2011.
To give an idea of how large that deficit is, every American household would need to pony up $15,000 to pay it off.
That’s a lot of lemonade stands.
Of course, there’s a better way. America has had a tsunami of red ink and, just like in other disasters where Americans step up to the plate and pitch in, now should be no different.
So why not ask key players to tighten their belts for one year, e.g., emergency across-the-board federal spending reductions and a one-time emergency tax levy on America’s richest corporations and individuals. In exchange, the government would lower tax rates on corporations and individuals to growth-inducing levels starting in FY ’12 -- to spur not class warfare but a humming "Morning in America" economy, which is the best safeguard against class animosity.
To find the remaining money, now would be the time to defund -- for real -- budget-busting ObamaCare. In its place, put the Patients’ Choice Act, introduced in the 110th Congress -- the most brilliant aspect of which is, according to one of its sponsors, Congressman Devin Nunes (R-CA), its Medicaid transformation -- which would: a) save the states a trillion per year, the feds $300 million, administratively; b) replace current third-rate medical care with first-class care; and c) provide a template to decelerate health-care spending across-the-board.
With these kind of steps, lawmakers could, in good conscience, raise the debt ceiling, as needed.
Failing such voluntary efforts, a big bucket of cold water will have to do.