No Free Lunch

The Piper Must Be Paid

I think the natural tendency of the US economy to rebound from recession, coupled with the enormous inflationary forces of borrowing another $2 trillion, will result in some sort of a brief economic recovery. But almost immediately we will be hit with a number of consequences that are now rarely voiced. Likewise the new ‘reset’ button foreign policy has a similar tab to come due. What to watch for the next year:

Energy. As the global recovery begins, oil prices will again climb, maybe even skyrocket. Will Obama continue his neglect of nuclear power, clean coal, and natural gas and oil exploration, or will he revert to his campaign expediency, and suddenly call for all such sources to be tapped? Wind and solar sound fine in campaign mode, and during a recession, but should gas hit nearly $5 a gallon again, talk of “green power” most certainly will not be enough. Sadly, this is precisely the time when government should be giving incentives to develop domestic energy of every sort, from nuclear to natural gas.

Taxes. Talking about new taxes in 2009 and paying them in 2010/11 are two quite different things.

Not long ago I tried to explain to an Obama supporter that he belonged to the targeted 5%, who, as an elite taxpayer, had “made out  like a bandit under Bush”, was obligated to “spread the wealth around” a bit, and should prove his patriotism by paying more. But it was a hopeless task: most well-off Obama supporters simply do not believe that their marginal tax rates are going up, that they may have to pay a health care surcharge, that the income caps of the FICA payroll tax will come off, subjecting much of their income to steep social security taxes, and that their state income tax in California is now over 10%.

In other words, a number of professionals in my state do not yet grasp that their own icon has them in the cross-hairs, and that within 2 years they will be paying perhaps 65% of their gross income to government—AND—receive no particular thanks by the rest of the population for their contribution, see no reduction in the federal deficit for the new bite out of their income, and probably be in line for future tax increases given their “wealthy” status.

So it will be quite interesting to see how the Obama elites react when they soon discover that they will have about 30-40% of their income to operate on. It is easy to talk about “higher taxes”, but so far all this is mere table chat. Wait until the real bite shows up in smaller monthly checks or larger quarterly estimates.

Interest. Interest rates to curb inflation will have to go up. But the problem is that we are going to be financing a new $2 trillion per annum deficit, on top of an expanding $11 trillion debt. It is relatively easy to do that now in times of crisis and recession by paying the Chinese or Japanese or U.S. bond holders here in the states a mere 1-2% on their treasury holdings, but what happens in recovery when we have to pay 4-5% or even 7-8% on treasury-issued debt to attract buyers?

In other words, in the good times to come we will see enormous strains on the annual budget to pay out the sort of interest needed to attract new borrowers. My larger point is that the current mega-borrowing is scarcely sustainable in a period of low energy and low interest rates, but will become intolerable when prices and interest rates skyrocket. Stocks will plummet once capital diverts to T-bill and passbook holdings that pay well over 5%. Tragically, as we come out of the recession, this was the time to be prudent, balance the budget, and pay down debt at low interest before it climbs, rather than to borrow for cap-and-trade, new education entitlements, and nationalized health care.

Race. Some of us—who read literally and carefully Dreams from My Father, and its quite disturbing declarations about race—were worried about Obama’s racial obsessions. Rev. Wright and Father Pfleger only accentuated that concern. Add in the Pennsylvania slurs, Michelle’s various rantings, “typical white person”, Eric Holder’s “cowards”, and the latest “stupidly”, and I think we see that one cannot so easily be deprogrammed from 20 years of Trinity indoctrination. The point is, however, that ever so slowly the public is starting to become wary (note the reaction in the polls to Gates-gate), that their post-racial President is, in fact, rather angry and, more importantly, for most of his life has benefited by aligning himself with those forces of racial anger.

Note also that Obama’s first impulse, not his second, or third, was to damn the police as acting “stupidly” as culpable racial profilers. The beer summit stuff was damage control that was poll-driven—and never would have been raised had the matter not become an Axelrod political problem. In other words, we learn several things from the Gates matter: even on matters trite and insignificant Obama weighs in spontaneously in a fashion that reflects his racialist world view; two, such slurs are at odds with public opinion and require remediation; three, Obama never apologizes for his slander (Ahmadinejad or the EU, not the Cambridge police department, receives presidential apologies).

If anything, the last racial incident only makes the next one more likely: in some sense, Obama resents the need to explain his clingers speech, to clarify what Michelle or Holder said, to explain his association with Rev. Wright, or to have some irritating staged beer event. And such forced contrition only leads to yet another racial gaffe. Meanwhile, the public is getting tired of this; each new incident is beginning to chip away at his messianic race-healing status, at just the time when his actual policy initiatives are already very unpopular and depend on his erstwhile 55+ approval ratings.

Abroad. Here is the growing general impression, fairly or not, abroad: Israel is the problem in the Middle East. Iran has legitimate interests in nuclear acquisition. Russia was not at fault in the past—only Bush was. The excesses of the American war of terror, not Islamic radicalism and terrorism, are the greater dangers in the world today. Force is off the table in dealing with North Korea or Iran. South American communists and socialists have legitimate grievances; democratic leaders  in Columbia and Honduras are not really authentic statesmen, but naively parrot American positions. We care little about human rights abuses in Cuba, Iran, Syria, or Venezuela, which anyway do not approach those seen at Guantanamo. Europe, especially Britain, is a post-colonialist society, and does not represent the future of American strategic interest. Eastern Europe understandably belongs in the Russian sphere of influence; the former Soviet republics all the more so. We hope Iraq and Afghanistan make it once we withdraw, but we are not all that worried if they do not, given that our President’s Third World fides will be able to handle any thug that replaces American-fostered constitutional governments in Kabul and Baghdad.

The result is that we are in a sort of circular stand-off/shoot-out of the sort seen in Grade-B Westerns. A number of thugs are now in a larger circle, the US-inspired postwar order is in the center. Each is eyeing the other, waiting to see who fires first, and what our reaction will be. For now, past deterrence scares the would-be gunslingers, who fear that if they fire on us, we will blast them away—and all those at their side with similar ideas. But soon one will get the bright idea that it is OK to pull the trigger, given the anticipated feeble response. And if that should happen, all the rest will be fanning their six-shooters in unison, and it may become a very Carteresque world again, after all. If North Korea ratchets it up with impunity, so will Iran, and then Russia or China will get bolder, and then we will see more interesting things in South America, and then perhaps in the Middle East as well. Is the world really a nice place, or rather chaotic and dangerous without the US’s underappreciated role.

Mediterranean musings

I was in Corfu yesterday for the first time in 36 years, and the island seemed unrecognizable in its affluence—such is the effect of years of EU capital that has poured in, and the general wealth of Europeans buying second homes on the island. On the way in and out, I sat out on the deck and looked out at the waters of Lepanto, and tried to imagine how thousands of Italians and Spaniards could row in flimsy galleys in October, on their way to risk it all against the much larger Ottoman fleet, knowing that there would be no quarter given or asked. Defeat would mean the Adriatic was open to nearly 300 Islamic ships to do what they wished at will, even perhaps all the way north to St. Mark’s Square.

I rode a bike up in the hills overlooking the island and remembered Book Three of Thucydides and the stasis at Corcyra, in which oligarchs and democrats butchered each other below me, as the Spartan and Athenian fleets took turns coming into the bay below to capitalize of the various fortunes of their surrogates.

We are now heading east below the Peloponnese to Rhodes, in the opposite direction to Pericles’ great periplous during the first years of the Peloponnesian War when he circled the Spartan-held coast, and sought to humiliate his enemies by the brazenness of the Athenian fleet. I have been to Rhodes four times before, and always look forward to it, a beautiful island whose medieval ruins dwarf its classical remains. No harbor in the Mediterranean has had a more colorful history, whether we remember Demetrius’s surreal siege, the brief tenure of the Colossus’s legs, the Hellenistic slave trade, the traffic in mercenary slingers and archers, or the great writers and scholars such Apollonius and Aeschines who went in and out of the harbor.

The eastern Mediterranean is a sort of treasure house of Western civilization. Almost every coastline, each island that whizzes by has played some role in the formation, for good or evil, of our collective history—increasingly unknown to the average Western youth. Right now I’m between Crete and the mainland, and crossing in perpendicular fashion to the route of the desperate British naval retreat from Corinth, the Peloponnesian ports, and Athens to Crete, as the British army collapsed in spring 1941 and steamed in safety to Heraklion and Chania. More history has been made in these waters (imagine off the bow King Minos sending his fleet northward to Athens to fetch his mythical tribute of young Athenians for his Minotaur) than almost anywhere in the world, but one senses it is being forgotten as never before.

One last note. Two nights ago, Paul Johnson gave a rousing recitation of G. K. Chesterton’s 1915 poem “Lepanto”, (e.g., … For he heard drums groaning and he heard guns jar, (Don John of Austria is going to the war.) Sudden and still–hurrah! Bolt from Iberia! Don John of Austria is gone by Alcalar”), a majestic performance that ipso facto encapsulated a world of education now gone by. Meanwhile, back in the real world we worry about Gates-gate, and the strange spontaneous juxtaposition of Professor Gates’s colloquial “messin” and “your mama” with the oddly formal “Why, because I am a black man in America?”

Enough said.