Saturday, January 26, 2013

Ron Smith:Little hope and no prospect of change

Just after the US election last November I wrote a blog speculating about how Congress and the newly re-elected President would face the looming fiscal crisis.  I hoped that the Republicans would see the need to accept tax increases on the ‘rich’ as part of a broader deal to address ballooning deficits, notwithstanding widely-held convictions that raising taxes in a time of economic stagnation was not a good idea.  With many misgivings, they did.  On the other side, I hoped that President Obama would accept the need to seriously address the ‘entitlements’ problem.   I even used his own infamous aside to (then) President Medvedev to argue that since he (Obama) would personally require no further electoral support, he could defy his own left to achieve, in the national interest, a grand bargain with the Republicans.  Boy, was I wrong!

It now seems clear that the President will resist any serious limitations on government spending because he believes in the welfare-state and in the central importance of government for determining the well-being of a people.  He may well be successful in this.  He has a pliant media and continuing sentimental support.  Through these, he thinks he can win the public relations’ battle and demonise the Republican Party and the Republican-dominated House of Representatives to the extent that they become politically impotent.  In consequence, he will be able to defend his health and other social programmes, as well as inflicting significant electoral defeat on that party in the 2014 mid-term elections.  It will be interesting to see how successful he is.

But it will be a pyrrhic victory.  The present path of mounting deficits cannot but lead to financial disaster.  This has been widely observed; examples of developed states that have failed to control their expenditures have been much discussed in recent times.  As if this were not enough,  the US Government’s own official audit agency (the Government Accountability Office) has recently (17 January) made the point plain: “…. absent policy changes, the Federal Government continues to face an unsustainable fiscal path.”  Broadly the same point was made a few days later (24 January) by the Managing Director of the International Monetary Fund, Christine Lagarde.  If nothing substantial happens, America (and the rest of  us) face another period of financial crisis.

In the face of all this, the Republican opposition plan seems to turn on tactical use of the House’s power to withhold legislative approval for an increase in the Government debt ceiling.  I say ‘tactical’ because the House has already approved an extension for three months.  The real negotiations are scheduled for the run up to this next occasion (when other matters, like the ‘sequester’, have been tidied away).  The question then is, how successful can the Republican opposition be in forcing the President to address the problem of Federal debt?  Of course, this remains to be seen but given that he has already indicated that he will not, on principle, entertain such discussions, the omens do not look good.  The ‘principle’, in this case is that Congress should take responsibility for financing the expenditures it has already approved (for which the money was borrowed).

Whatever we may think of this argument, it provides an interesting contrast with Mr Obama’s attitude to raising the debt ceiling when it came before him as a Senator.  Then, he thought it certainly was a matter for the government of the day to address:
“The fact that we are here today to debate raising America’s debt limit is sign of leadership failure.  It is a sign that the US government can’t pay its bills.  It is a sign that we now depend on on-going financial assistance from foreign countries to finance our Government’s reckless fiscal policies.  Leadership means that the buck stops here!  Instead, Washington is shifting the burden of bad choices today to the backs of our children and grandchildren.  I therefore intend to oppose the effort to increase America’s debt limit.”

That was 16 March, 2006.  The US national debt has doubled since then (from $8 trillion to $16 trillion).  Senator Obama also referred to the issue in his 2008 campaign. “(R)aising the debt ceiling is irresponsible and unpatriotic.”

He was right, wasn’t he?  So what is different now?  What, indeed, is so different now that it would be inappropriate for the President to even discuss it?  Perhaps I am wrong (again) but there seems little hope that he will seriously address the looming problem of national debt and no realistic prospect of change.

On 1 November, 2009 I posted a blog entitled, “The Chamberlain of the Twenty-first Century?”  It was the seventh in the series (this present piece is the 83rd ).  In it, I reviewed President Obama’s foreign and diplomatic policy performance since he had taken office in the January of that year and I detected a tendency to appeasement.  I noted that “the crucial mistake that Prime Minister Chamberlain made was to ignore the fact that there are times when vital interests cannot be defended without fighting for them, however we might wish that things were otherwise”, and that sometimes talking might not be enough.  This point found a curious echo in last week’s inaugural address, which included a (perhaps unwitting) use of Chamberlain’s memorable, but infamous phrase, “peace in our time”, which seemed also to come in the ‘Munich’ context of trading future security for more immediate political satisfactions.  I still think that the answer to my 2009 question is, ‘yes’.  Obama still looks a lot like the Chamberlain of the 21st Century!


Stuart L said...

Hi Ron,

I remember reading "Restoring the American Dream" (1979) by the American libertarian Robert Ringer. The book was forwarded by William E. Simon, an Ex Secretary of the Treasury. (Simon wrote "A Time for Truth" an eye-popping book on his experiences in government circles).

Even back then, both men highlighted the dangers of U.S deficit spending, a figure that seems paltry in comparison to 2013.

The spending just seems to go on and on and on...

But the music must stop sometime, somehow.

Stuart L.

Brian said...

Peace in our Time....Chamberlain.....and Politicians repeating the Past.
Like Dr. Smith I too, envisaged that President Obama in his last term would take the opportunity of addressing the United States debt problem by becoming a true colonial American in facing up to the fact that one can never borrow one’s way out of debt. Taking the hard decision which always separates the men from the boys.!
I do however; see a slight difference in the comparison between Neville Chamberlain in 1939 and President Obama in 2013. Yes, Chamberlain’s Munich was a betrayal. However in the period after the “Peace in our Time” Chamberlain very quietly took the opportunity to rectify Britain’s debased armed forces by allowing re-armament, all be it on a small scale. Thus avoiding any political embarrassment to himself and the Conservative’s, but mainly any vocal dissension from the peace loving Labour benches.
“Too late regretfully, in respect of the military in avoiding the Blitzkrieg of Panzer warfare in France during May 1940.”
It has be very obvious for some time that President Obama is a left wing President, bound by ideology and popularity, suitably equipped with a gift for oratory...a sort of modern day Tom Paine with cleaner edges!
We here in New Zealand should not be so critical of people in political glasshouses such as our Government and opposition. When they continue to borrow vast amounts of money to keep us in a standard of living (and themselves in power) which we and they have failed to earn, or may it be said even to deserve? (Maoris excluded)
The fairy tale of the Long White Cloud has storm clouds gathering on the horizon; and Utopia is, and always will be, a distant dream. Perhaps our leaders expect we will become a sort of socialistic Camelot with King Arthur riding to the rescue on a welfare debt ridden horse, carrying of course an appropriate flag.
What a nightmare!

Ray S said...

Too true Brian, but I fear it will be a maori sovereignty flag with a big red border. More like king hori rather than king arthur and it wont be any sort of rescue.