Gut-check time for a land of financial gloom and doom
Pending catastrophe is not an easy notion to entertain, much less sustain. Americans, moreover, have a low tolerance for doom and gloom. We are the nation of optimism, after all. We elect leaders who promise hope and change. We are the shining city on a hill.
But what happens when the lights go out?
We're America. The most powerful nation on Earth. The land of plenty and opportunity. The place all others want to live. We are the dream.
But. But. What if . . . they do?
As they say, denial ain't just a river in Egypt. Count me among those who wish not to see what is horrifyingly apparent. Having recently arrived at the conclusion that the worst-case scenarios we've been hearing about for months (and even years to those more alert) might be true, I feel my optimism flagging.
Oh, but it's not really that bad, we tell ourselves. We've hit hard times before. We'll manage. But what if the worst really is yet to come?
Alas, the facts do not give optimists much to work with. If we do not get our financial house in order, few scary scenarios recently described by doomsayers will be reviewed as hyperbolic.
For prompts to assume the fetal curl, one need read no further than the Dec. 3 issue of Foreign Affairs, where Roger Altman, former deputy Treasury secretary, and Richard Haass, president of the Council on Foreign Relations, describe a nearly apocalyptic future - just around the bend - if we do not act yesterday.
Okay, today may do, but not so much tomorrow.
Begin here: Within 10 years, the federal debt could reach 90 percent of gross domestic product. No, wait, even that is "too optimistic," given low rates of economic growth, they say. The latest report from the International Monetary Fund projects that the federal debt could equal GDP by 2015.
The consequences of this slide are profound, not just at home but also abroad as our power is eclipsed by developing nations. This is a difficult thought to grasp, not least because it happened so suddenly in historical terms. As Altman and Haass point out, the national debt was only about 35 percent of GDP just 12 years ago. Furthermore, the debt had been shrinking to the point that some thought it might even be paid off. With the 2001 and 2003 tax cuts now animating the professional bickerers in Washington, the wars in Iraq and Afghanistan, and the prescription-drug benefit for Medicare, we shifted our fiscal policy so significantly that we are faced with an era of austerity.
Other factors include a George W. Bush-era end to budget rules to balance spending and tax cuts. What has transpired was not only inevitable but predictable. To sum up:
"The eight years of the Bush administration saw the largest fiscal erosion in American history."
That's a pretty unequivocal indictment. Throw in the financial and economic crisis that hit just before the 2008 elections, and voila. Or however you say that in Chinese.
Most Americans probably figure they can muddle through a deep recession. Let's face it, we could use a little austerity around the waistline. But how do we manage a planet in which we are no longer the final arbiters of justice? Whatever one may say about our flawed history, few would argue that the world would be better off without us. When America is no longer able to rally her forces for good, the light dims for civilization. If you doubt it, we may yet get to test the thesis.
The instability inherent in the world's biggest economy being the world's biggest borrower is problematic beyond the obvious. Not only will we be limited in the extent to which we can fight necessary wars, but our financial constraints will affect homeland security, intelligence and foreign aid, according to Haass and Altman. Most important, our global clout will be increasingly diminished.
Haass and Altman offer two scenarios: One, our president and Congress get their deficit-reduction act together. (The failure Friday of the bipartisan debt commission to garner enough votes to send a plan to Congress was not a good omen.) Or, two, global capital markets will impose a solution, which would probably be "ugly and punitive."
Doubtless we would all prefer to fix things ourselves. But the fix will not be a product only of optimism. It will require sacrifice and, yes, a little suffering. The great American strength and will about which we've read so much in our history books will have to be resurrected.
The president of the United States needs to say that.