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Strategies & Market Trends : World Outlook -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (1337)	2/15/2003 6:38:03 PM
From: Les H	Read Replies (1) \| Respond to of 48715

ANDREW SULLIVAN: America has an empire to win, a fortune to lose The Sunday Times ^ \| February 16, 2003 \| Andrew Sullivan Posted on 02/15/2003 3:35 PM PST by MadIvan Remember all that fuss a few years back about imperial overstretch in the US? Paul Kennedy’s book The Rise and Fall of the Great Powers posited that the huge deficits of the 1980s were a sign of imminent American collapse. He was wrong. All that defence spending, helping to bring the Soviet Union to its knees and opening up a quarter of the planet to the global market, turned out to be a bargain. The 1990s — those golden, reckless, Clintonian years — were the peace dividend. If America had an empire in the 20th century it was on the cheap — an ad hoc series of arrangements designed to maintain the global trading system from which America benefited so much. But maybe Kennedy was merely ahead of his time. Washington is now contemplating something far more like an empire than it has since the reconstruction of western Europe and Japan in the 1940s and 1950s. The war to depose Saddam is not some fitful venture. It’s a direct product of a line of thinking, two decades in the making, that secured a decisive intellectual victory in the wake of September 11. The view is that the West will for ever be plagued by terrorism, disruption, even nuclear, biological or chemical catastrophe if we do not find a way to bring stability and some level of democracy to the Middle East. The Iraqi protectorate that will emerge after a successful war is the first attempt to show the way forward. Iran and Saudi Arabia will follow. This isn’t empire in a strict 19th-century sense. But it is in one obvious way: if it works or if it fails, it’s going to cost a small fortune. The real effect of the current diplomatic train wreck preceding the war against Saddam is not to derail America from meeting its responsibilities in enforcing vital United Nations resolutions; it is to isolate America in the post-Saddam settlement. It means that not only will the war be paid for almost entirely by Americans, but reconstruction too will come out of the pay packets of average Americans. Nobody believes the cost will be much short of crippling. Any attempt to use Iraqi oil revenues to defray the cost will not only be politically difficult but also depends on Saddam not doing all he can to sabotage the oilfields. Besides, the kind of commitment we’re talking about might only last a few years in Iraq but it will engage America in that part of the world for at least a generation. Now take a look at the budget just presented to Congress by the Bush administration. The first thing you’ll notice is that there is no accounting for the cost of the coming war. None. Nor is there any accounting for the huge sums that will be needed for the reconstruction of Iraq. Where are these calculations? The administration says it could not account for them because there was no inevitability of war. But not even a contingency fund? Nor an appendix? Nope. The only description for this kind of fiscal insouciance is irresponsible. Then take a look back at the first three years of Bush budgeting. You’d think a hyper-liberal had been elected to the presidency. In those three years, non-defence discretionary government spending will have gone up an inflation-adjusted 18%. That doesn’t include the expensive entitlement programmes for the sick and elderly that will balloon in the next couple of decades, the money spent on the military or the war on terror. It’s the kind of pure spending congressmen and senators like so much — good old pork-barrel projects that help them win re- election. And it’s also full of perfectly admirable things — like spending on education or the $15 billion of spending to combat Aids in Africa. To give you an idea of Bush’s domestic profligacy, consider that in Clinton’s first three years such spending actually fell. Even Reagan reduced this type of spending by 13% in his first three years. Yes, in 2000 and after, a deflationary period probably merited some spending increases. Inflation had disappeared; the economy was in a post-bubble slump; deflation stalked the Earth. But 18%? If a Democrat had done that, the Republicans would have been all over him. And rightly so. Last year Bush said that budget deficits would be temporary. This year even the administration concedes they stretch into the foreseeable future — and that’s without the expense of an unpredictable war and open-ended occupation. Some of this is the result of tax cuts, the centrepiece of Bush’s economic plan. But much of it is also due to out-of-control spending. Neither looks likely to change in the future. This is not, I hasten to add, a crisis. The deficit is still, in GDP terms, a third of its heights under Ronald Reagan. The US economy is still healthier than that of almost every other developed country. But all this changes when you consider what lies ahead: the most ambitious foreign policy project since the Marshall Plan, achieved in the teeth of European opposition and, unlike the first Gulf war, unsubsidised by Japan. It’s also inevitable that this war will result in attacks on American cities that will again cost vast sums to repair. All this is a huge fiscal challenge as well as a moral and psychological one. I think Americans will willingly support this struggle. Unlike the French and Germans, they are interested in changing the world for the better, not finding excuses for doing nothing while lethal threats mount. But the critical middle ground of American politics will not want to drive itself into mounting debt to do so. The administration will soon have to adjust its fiscal policy with its foreign policy — rescinding a few future tax cuts, trimming some domestic spending or a healthy combination of the two. Overstretch isn’t here yet. But if Washington doesn’t get its fiscal act together soon, it may come sooner than we think. >>>the only mistake I can see in this article is that the >>>budget for the first year of each president is actually >>>the budget created under the previous president. >>>half of the domestic spending increase attributed to >>>bush was actually appropriated by clinton and the >>>republican congress in 2000 to be spent from October >>>2000 to september 2001. similarly, the first couple >>>of budgets under clinton benefited from the end of the >>>savings and loan bailout, which in some years had cost >>>75 billion dollars.