The American Spectator

While this has been going on, foreign nations have been shipping us container ships full of their manufactured goods while we have been figuratively shipping back container ships full of treasury bills, notes, and bonds. (I am not pounding the drum for protectionism; I am merely reporting what is happening.) Surely our colossal and seemingly intractable fiscal and current account deficits can’t be viewed as an unmitigated good over the long haul. While FDR once defended deficit spending by fatuously saying “we owe it to ourselves,” we can no longer make even that claim. We owe a very sizable amount (trillions of dollars) to foreigners who could, at their discretion, either stop buying or start aggressively selling their U.S. dollar-denominated debt instruments in the open market, immediately resulting (at the very minimum) in soaring interest rates and a dramatic reversal of all the felicitous trends Mr. Crocker cites.

I am not saying such things will happen. I am saying they could happen, and that we are now in a position where we are at the tender mercies of foreign governments who might, at a time of their choosing, exercise their right to sell, much as George Soros is doing (and give him credit, however wacky his political views, he’s a devilishly smart investor). It is astonishing to look at time-graph which depicts the percentage of our national debt now in foreign hands. I don’t have the chart handy, but I can assure you the percentage has grown quite large and is climbing rather steeply. Common sense leads one to conclude that long before foreigners own 100% of our national debt something will happen to reverse the trend. It will happen because it MUST happen: we cannot expect the rest of the world to subsidize our standard of living indefinitely, no matter how many aircraft carrier battle groups we have. Please don’t interpret these observations as xenophobic; the problem isn’t foreigners, it is the deficits we are persistently running.

Finally we are all well aware of the fact that the welfare state as we presently know it is unsustainable for demographic reasons that cannot be altered. A Treasury Department study recently concluded that we had over $40 trillion in unfunded transfer payments on the horizon — and this was before the administration’s major expansion of Medicare benefits, which pushes the number to over $50 trillion. Who honestly believes that we can continue on the present course without major reform? Yet a quick perusal of the incumbents in Congress and their chronically dilatory and self-serving habits leads an intellectually honest person to conclude that no political answer will be realistically possible until we are faced with a wrenching crisis that will require radical corrective measures in a climate of bitter political acrimony.

p>I grant that tax cuts are a step in the right direction. I certainly share his scorn for Democratic economic policies such as they exist, which offer invariably counterproductive and demagogic answers. But I honestly do not hear constructive let alone comprehensive policies being energetically advanced in our GOP-controlled Congress that might in due course bring the our macroeconomic situation back to some semblance of stability. Citing BLS numbers or the S&P Index, as Mr. Crocker does, is a very weak basis upon which to assess our deteriorating strategic position. And I fear that we are currently as complacent about our economy as we were pre-9/11 with respect to domestic security; if we do not address this issue soon, from a strategic standpoint, we may well be faced with a similarly unexpected outcome one fine morning. br> — Nelson Hernandez br> San Francisco, California /p>