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.
For now, however, Obama surely sounds mythic. The world adores us. We apologize for slavery, genocide, the cold war, and Hiroshima; you name the sin, Obama wrinkles his brow and provides the mea culpa. Brazilians love it. Egyptians now say we’re A-OK; even sourpuss Russians now smile. Listen to Obama apologize and you would have thought that Americans have leveled Grozny, or obliterated Hama, or swallowed Tibet.
Our administration officials praise the mass-murdering Mao, or talk up the UN “human rights” commission. We reach out to Ahmadinejad, Assad, Chavez, Putin, and others. We snub the Brits, the Europeans, the Japanese, Colombians, Israelis and eastern Europeans. Russia tries a simple gambit—a) lie about helping on Iran, b) in exchange get the US out of the anti-missile business in eastern Europe—it works so well that Putin brags that he expects more of this, as if he is sitting at a rigged roulette wheel in Vegas.
Like our spiraling debt, there will be a reckoning soon, maybe in a year or two—and it will cost more than boycotting the next Olympics.
Then there is energy. We are in a very temporary lull of cheap energy, as the world economy catches its breath. And while Obama was right to stiffen efficiency standards and promote alternate energies, he is neglecting the only mechanisms that can tide us over for the next 20 years—more natural gas, domestic oil, shale, tar sands, clean coal, and nuclear energy.
We should be on a dash to build nuclear plants for the coming demand from plug in hybrids and spikes in electricity usage. We should be leasing as much natural gas lands as possible, to gain the supplies to run energy plants and to power vehicles. There is plenty of oil in the Dakotas, California, Texas and in the Gulf and we should be drilling there like mad. Sorry, even Santa Barbara should either ban SUVs or have oil derricks on the horizon. Sarah Palin knows far more about ANWR than does Van Jones.
Instead, we talk grandly of cap and trade, solar and wind, and green lunacies, while very shortly it will cost $5 a gallon to fill up the fleet of Barack Obama’s SUVs. Putin, sly fox that he is, only welcomes a confrontation with Iran: a great way to drive oil speculation sky-high. Ditto the Saudis and the rest. We are one Middle East crisis away from a $100 fill-up.
Here is our anti-terrorism policy.
1) Euphemism: hope that words can change reality—“overseas contingency operations” aimed at “man-caused disasters” (this will mean there is no more terrorism as our enemies are no longer demonized)
2) Apologies to Islam: boast that Muslims fueled the Renaissance, invented printing, pretty much gave the world our present civilization, while we offended them after 9/11 (this will mean no more plotting inside the US to kill us all, as they sense our newfound empathy)
3) “Bush Did it”: a) blame Bush the Impaler for our unpopularity and shredding the Constitution to pacify the Middle East and Europe; while stealthily keeping in play most of his protocols like Predators (more attacks in last 9 months than Bush did in 3 years); tribunals, renditions, intercepts, wiretaps, and Guantanamo, etc.); (this will mean that we copy Bush, but blame him for our failures and claim success as our own).
4) Reach-out: Become socialist at home, and UNish abroad, to convince an Ahmadinejad, Assad, Chavez, Putin, and others that we are a declining, 1950s British-like socialist state, a threat to no one, exceptional in the manner that Greece is, and becoming, as Pravda boasts daily, more like them than they like us (this will mean, why hate us when we are one of you?)
5) Declare victory and leave: there is a reason why Afghanistan and now Iraq have flared up since Obama took office, and it may well have to do with the fact that radical Islam, defeated in Iraq, stalemated in Afghanistan, suddenly bets that with a little push here and there, Obama will declare victory and leave, with something like “We can’t win Bush’s wars.” If I were a terrorist, I might think, “One or two more big death days, and this American government will Mogadishu its way home”).
In a year or two, al Qaeda will begin to suspect we are the weaker horse. They hated us when we were strong, but they will hate us even more when we appear weak. There will be renewed plots at home, and a fiery Middle East within two years—with all sorts of opportunists like China and Russia ready to capitalize.
Why the pessimism? I think there are a few truths that transcend politics and remain eternal. In life as a general rule, debt has to be paid back, and with greater pain and anger than it was to borrow it. Bullies do not respect magnanimity, but tragically interpret it as weakness to be exploited rather than to be admired.
Hoping that something good comes true —like being self-reliant through solar and wind—does not make it true; neglecting the riches at hand to dream about greater riches that do not exist is adolescent. Radical Islam hates the West, not because of what we do or say, but because of who we are: a dynamic, mercurial culture that challenges all the protocols of a traditional, tribal and religiously fundamentalist society.
Diplomacy is a tool to lessen, but not eliminate, tensions—a way to conduct foreign policy, not a foreign policy in and of itself.
I hope I am wrong about all of the above, and that human nature really has magically changed in the era of Obama. So close your eyes, listen to the Messiah’s voice, and repeat: “Debts will be forgiven by creditors; inflation will not follow from massive borrowing; breakthroughs in solar and wind will power our cars and heat our homes; enemies will admire our compassion and join us to achieve world peace; and terrorists are either misunderstood or provoked needlessly by our bellicosity that alone stands in the way of peace.”
Believe all that and you can lie back and enjoy the age of Obama.