Posted on 10/14/2008 6:10:11 AM PDT by K-oneTexas
Liquidating the Empire
"Liquidate labor, liquidate stocks, liquidate the farmers."
So Treasury Secretary Andrew Mellon advised Herbert Hoover in the Great Crash of '29.
Hoover did. And the nation liquidated him -- and the Republicans.
In the Crash of 2008, 40 percent of stock value has vanished, almost $9 trillion. Some $5 trillion in real estate value has disappeared. A recession looms with sweeping layoffs, unemployment compensation surging, and social welfare benefits soaring.
America's first trillion-dollar deficit is at hand.
In Fiscal Year 2008 the deficit was $438 billion.
With tax revenue sinking, we will add to this year's deficit the $200 to $300 billion needed to wipe the rotten paper off the books of Fannie and Freddie, the $700 billion (plus the $100 billion in add-ons and pork) for the Wall Street bailout, the $85 billion to bail out AIG, and $37 billion more now needed, the $25 billion for GM, Chrysler and Ford, and the hundreds of billions Hank Paulson will need to buy corporate paper and bail out banks to stop the panic.
As Americans save nothing, where are the feds going to get the money? Is the Fed going to print it and destroy the dollar and credit rating of the United States? Because the nations whose vaults are full of dollars and U.S. debt -- China, Japan, Saudi Arabia, the Gulf Arabs -- are reluctant to lend us more. Sovereign wealth funds that plunged billions into U.S. banks have already been burned.
Uncle Sam's VISA card is about to be stamped "Canceled."
The budget is going to have to go under the knife. But what gets cut?
Social Security and Medicare are surely exempt. Seniors have already taken a huge hit in their 401(k)s. And as the Democrats are crafting another $150 billion stimulus package for the working poor and middle class, Medicaid and food stamps are untouchable. Interest on the debt cannot be cut. It is going up. Will a Democratic Congress slash unemployment benefits, welfare, education, student loans, veterans benefits -- in a recession?
No way. Yet, that is almost the entire U.S. budget -- except for defense, the wars in Afghanistan and Iraq, and foreign aid. And this is where the axe will eventually fall.
It is the American Empire that is going to be liquidated.
Retrenchment has begun with Bush's backing away from confrontations with Axis-of-Evil charter members Iran and North Korea over their nuclear programs, and will likely continue with a negotiated peace in Afghanistan. Gen. Petraeus and Secretary Gates are already talking "reconciliation" with the Taliban.
We no longer live in Eisenhower or Reagan's America. Even the post-Cold War world of George H. W. Bush, where America was a global hegemon, is history. In both relative and real terms, the U.S.A. is a diminished power.
Where Ike spent 9 percent of GDP on defense, Reagan 6 percent, we spend 4 percent. Yet we have two wars bleeding us and many more nations to defend, with commitments in the Baltic, Eastern Europe, and the Balkans we did not have in the Cold War. As U.S. weapons systems are many times more expensive today, we have fewer strategic aircraft and Navy ships than Ike or Reagan commanded. Our active-duty Army and Marine Corps consist of 700,000 troops, 15 percent women, and a far higher percentage of them support rather than combat troops.
With so few legions, we cannot police the world, and we cannot afford more. Yet, we have a host of newly hostile nations we did not have in 1989.
U.S. interests in Latin America are being challenged not only by Cuba, but Venezuela, Bolivia, Ecuador, Nicaragua and Honduras. Brazil, Argentina and Chile go their own way. Russia is reasserting hegemony in the Caucasus, testing new ICBMs, running bomber probes up to U.S. air space. China, growing at 10 percent as we head into recession, is bristling over U.S. military sales to Taiwan. Iran remains defiant. Pakistan is rife with anti-Americanism and al-Qaida sentiment.
The American Empire has become a vast extravagance.
With U.S. markets crashing and wealth vanishing, what are we doing with 750 bases and troops in over 100 countries?
With a recession of unknown depth and duration looming, why keep borrowing billions from rich Arabs to defend rich Europeans, or billions from China and Japan to hand out in Millennium Challenge Grants to Tanzania and Burkina Faso?
America needs a bottom-up review of all strategic commitments dating to a Cold War now over for 20 years.
Is it essential to keep 30,000 troops in a South Korea with twice the population and 40 times the wealth of the North? Why are McCain and Obama offering NATO memberships, i.e., war guarantees against Russia, to a Georgia run by a hothead like Mikheil Saakashvili, and a Ukraine, millions of whose people prefer their kinship to Russia to an alliance with us?
We must put "country first," says John McCain.
Right you are, Senator. Time to look out for America first.
The entitlement programs comprise almost half of our annual $3 trillion budget and represent an unfunded liabillity of about $60 trillion. That percentage will grow as our population ages. By 2030 the number of retirees will double from today's 34 million to around 70 million. At the end of 2007, almost 50 million people were receiving SS benefits: 34 million retired workers and their dependents, 6 million survivors of deceased workers, and 9 million disabled workers and their dependents. Total benefits paid in 2007 were $585 billion. Income was $785 billion, and assets held in special issue U.S. Treasury securities grew to $2.2 trillion [read SSTF, which is part of the $10 trillion national debt.] SS, a pay as you go system, will go into a hole in 2017. Medicare/Medicaid is in even worse shape by a magnitude of three and will become unsustainable by 2013.
The current $850 billion bailout will make matters worse. 17 cents of every federal dollar is spent on servicing the debt. Couple that with about 50% for the entitlement programs, leaves you very little for so called discretionary programs like Defense. If nothing is done to reform the entitlement programs, they will consume 71% of the federal budget by 2060.
This nation has lived beyond its means for some time. We have the lowest savings rate of any developed nation. We are heading towards a fiscal train wreck within a decade. Some very hard choices must be made, including our global role. The Brits drew the line East of Suez.
pat buchanan is a moron
Our foreign aid is less than half of a percent of our annual budget. It is miniscule and even more so compared to our GDP.
Just the opposite. It is a long term view based on facts and history. The US is heading towards a fiscal train wreck within a decade. We are living beyond our means and will have to make some hard choices about our global role. We can't afford to do many things and will have to set some priorities. The choices will be very painful, including between guns and butter.
Pat was spot on about immigration and its impact on this nation for more than a decade. He has sounded the alarm time and again. Hear him now, believe him later.
Tell it to Mr. Chamberlain ... and Pat's hero Mr. Lindbergh.
Pat has got his history wrong. Andrew Mellon might have suggested liquidation, but Hoover railed against the 'bitter-end liquidationists'.
Hoover tried to intervene to keep things afloat, and FDR did the same things Hoover did, FDR just went further down the interventionist path and for 12 years, not 3.
You assume that entitlement programs are going to remain as they are. Don’t. We can (and dare I say will) do with a lot less of them in the future.
Yes, actually, I am. Pat's "answer" is the same as it's been for years: simply to leave, pretty much everywhere, because America shouldn't have an "empire."
Can we re-evaluate our committments? Sure. But there's a rather large body of lamentable history to demonstrate the stupidity of Pat's position.
It takes political will to change those programs. Politicians want to stay in office. In 1983 when SS went into the red, Tip O'Neill and Reagan struck a Faustian bargain and agreed to kick the can down the road by raising taxes and reducing benefits, including raising the retirement age for full benefits from 65 to 67. That fix was supposed to kick the can down the road for 75 years. It didn't as we will be in the same position [only much worse] in 2017, just 34 years later. In 1950 there were 16 workers for every retiree, today there are 3.3, and in 2030 it will be 2. There is no way that benefits are going to be cut for current retirees or those about to retire.
The most recent report from the program's board of trustees, issued in late March, only adds to the sense of hopelessness. Medicare's liabilities are expected to exceed revenue dedicated to paying for the program by $36 trillion over the next 75 years, and the trust fund that pays for hospital services is expected to go bankrupt in 2019. Total Medicare spending is projected to more than triple as a share of the national economy, rising from 3.2 percent of GDP in 2007 to 6.3 percent in 2030, 8.4 percent in 2050, and 10.7 percent in 2080. Federal individual income tax collections amount to only about 8.5 percent of GDP. Covering just the increase in Medicare spending expected by 2030 would require a 36 percent across-the-board individual income tax hike.
Most Americans don't have a clue about how desparate our financial situation really is. The politicians have papered over and delayed the final reckoning thereby making the problem larger and more difficult to solve. I think your faith in the ruling class is misplaced. Their sole concern is being reelected and enriching themselves. No action is ever taken unless it is a crisis. Well, the crises are coming hot and heavy as the chickens come home to roost.
You just spout generalities without addressing the root problem, i.e, the financial challenges that will force us to make some very difficult decisions about our global role and domestic priorities. That is a reality we must deal with and I don’t care who the messenger is.
Says kabar, hypocritically spouting generalities.
When the consequences will affect our own national interests, yes: it's our responsibility. And I would also argue that it is our responsibility (alone or in conjunction with others) to prevent things like genocide.
It would seem that you don’t just disagree with Buchanan, you actually take the stance opposite of his, which is that the World is our responsibility, and we are its policemen.
That would be incorrect. Where I part ways with Pat Buchanan is that he seems to think that we have no foreign interests at all. While we should not intervene everywhere, we have the ability to intervene effectively in some cases. Our national interests can often be well-served by intervention, and I would argue that we may also have a moral obligation to do so.
If that isn’t what you’re advocating please explain how one ‘prevents lamentable history’ without ‘proactive’ police work.
I am not opposed to 'proactive' police work, nor should you be. I will give you three examples of lamentable history that could have been addressed in just that way.
The first is American isolationism as it existed between the World Wars -- Pat's heroes of the America First movement were at the forefront. The reality of the world outside American borders demanded an early and aggressive American (and British and French) response. What we got instead was inaction by the "good guys," which led to the most expensive, destructive, and widespread war in history.
The second example is Vietnam. We can argue the rationale by which the US got there in the first place, and how we expanded our presence -- there were valid geopolitical reasons both for going or not going. The example I will use, however, is the manner of our leaving Vietnam. The Congress actually did what Pat Buchanan suggests here: pull out, and save our money for different uses. The results were ghastly (and utterly predictable).
The third example is Rwanda. Bill Clinton actually did what Buchanan suggests, and remained aloof. The results were, again, ghastly, whereas a timely intervention could have prevented genocide. We should have done so, and could have done so at modest cost.
Again, that is not to say that we are obligated to intervene everywhere. But it is demonstrably foolish to pretend that we have no business intervening anywhere.
I'm reasonably up to speed on our fiscal situation. It doesn't alter the fact that Mr. Buchanan's latest is more of his typical foolishness.
If that is indeed the case, then what Buchanan is saying is not foolishness.
Then where are you planning on funds for Afghanistan. We just spent twice that on the banks and it looks like we are trying to fill in a black hole.
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