Is Americas financial collapse inevitable?
Breaking News January 14, 2010
By Patrick J Buchanan
http://www.wnd.com/index.php?fa=PAGE.view&pageId=122030
Is America's financial
collapse inevitable?
Posted: January 14, 2010
8:10 pm Eastern
© 2010
We were blindsided. We never saw it
coming.
So said Goldman Sachs CEO Lloyd
Blankfein of the financial crisis of 2008. He likened its probability to four
hurricanes hitting the East Coast in a single season.
Blankfein was reminded by the
chairman of the Financial Crisis Inquiry Committee, Phil Angelides, that
hurricanes are "acts of God." Financial crises are manmade. Yet
Blankfein was backed up by Jamie Dimon of JPMorgan, who said, "Somehow, we
just missed ... that home prices don't go up forever."
The Wall Street titans thus conceded
they did not foresee the housing bubble ever bursting and they did not consider
the possibility of a collapse in value of the sub-prime mortgage securities
piled up on their books.
Backing up Blankfein's plea of
ignorance and incomprehension is this: The crisis killed Lehman Brothers and
would have killed every one of them had not the Treasury and Fed, neither of
which saw it coming, either, intervened with hundreds of billions in bailout
cash.
Yet there were those who warned a
housing bubble was being created like the dot-com bubble; others who predicted
the Empire of Debt was coming down – as, today, there are those warning that
the United States, with consecutive deficits running 10 percent of gross
domestic product, is risking an eventual default on its national debt.
The warnings come from the Committee
on the Fiscal Future of the United States, chaired by Rudolph Penner, former
head of the Congressional Budget Office, and David Walker, former head of the
Government Accountability Office and author of "Comeback America: Turning
the Country Around and Restoring Fiscal Responsibility."
With that share of the U.S. national
debt held by individuals, corporations, pension funds and foreign governments
having risen in 2009 from 41 percent to 53 percent of GDP, Penner and Walker
believe it imperative to get the deficit under control. Unfortunately, it is
not possible to see how, politically, this can be done.
Consider. The five largest elements
in the budget are Social Security, Medicare, Medicaid, defense and interest on
the debt.
With interest rates near record
lows, and certain to rise, and back-to-back $1.4 trillion deficits, this budget
item has to grow and has to be paid if the U.S. government is to continue to
borrow.
Second, with seniors on fire against
Medicare cuts in health-care reform, it would be fatal for the Obama Democrats
to curtail Social Security or Medicare benefits any further this year. Next
year, they will not only lack the congressional strength but any desire to do
so, after their anticipated shellacking this fall.
The same holds true for Medicaid.
The Party of Government is not going to cut health benefits for its most loyal
supporters. Indeed, federal costs may rise as state governments,
constitutionally required to balance their budgets, cut social benefits and beg
the feds to pick up the slack.
This leaves defense. But the
president is deepening the U.S. involvement in Afghanistan to 100,000 troops,
and the military needs to replace weaponry and machines depreciated in a decade
of war.
Where, then, are the spending cuts
to come from?
Can the administration cut Homeland
Security, the FBI or CIA after the near disaster in Detroit? Will Obama cut the
spending for education he promised to increase? Will he cut funding for food
stamps, unemployment insurance or the Earned Income Tax Credit in a recession?
For the near term, the entitlements are untouchables.
Is this Democratic Congress, which
increased the budgets of all the departments by an average of 10 percent, going
to take a knife to federal agencies or federal salaries, when federal
bureaucrats and beneficiaries of federal programs are the most reliable voting
blocs in their coalition?
What about tax hikes?
Obama has promised to let the Bush
tax cuts lapse for those earning $250,000 but has pledged not to raise taxes on
the middle class. Any broad-based tax would be politically suicidal for him and
his increasingly unpopular party.
But if taxes are off the table,
Afghan war costs are inexorably rising and cuts in Social Security, Medicare,
Medicaid and entitlement programs are politically impossible, as pressure
builds for a second stimulus, how does one reduce a deficit of $1.4 trillion?
How does one stop the exploding
national debt from surging above 100 percent of GDP?
America is the oldest and greatest
constitutional republic, the model for all the others. But if our elected
politicians are incapable of imposing the sacrifices needed to pull the nation
back from the brink of a devaluation or default, is democratic capitalism
truly, as Francis Fukuyama told us just two decades ago, the future of mankind?
What the looming fiscal crisis of
this country portends is nothing less than a test of whether this democratic
republic is sustainable.
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