Part 2, in a never-ending nightmare.
President Obama is leading a worldwide retreat for America on foreign policy, and slashing our nation’s defenses, including adoption of policies for nuclear disarmament, as we discussed last week. That is being done to deliberately reduce America to the status of “just another country,” because President Obama and his ultraliberals think it is immoral for any one nation to be elevated above the others. That discussion last week was based on Charles Krauthammer’s Wriston Lecture given at the Manhattan Institute in New York City, “Decline Is a Choice: The New Liberalism and the End of American Ascendancy.”
American Economic Decline
President Obama and his fellow ultraliberal Democrats now in complete control in Washington are choosing decline for America on domestic policy and the economy as well. The recession has dragged on into its 23rd month now under the leadership of Obamanomics, and its wooden, ideological devotion to old-fashioned, long discredited, Keynesian doctrine. The longest previous recession since World War II, 65 years ago, was 16 months, with the average at 10 months. Another 3 million jobs have been lost since President Obama took office, with unemployment now at almost 10%.
Even the Chairman of President Obama’s own Council of Economic Advisors testified before Congress last week that the outlook for unemployment remains grim. Christina Romer admitted that “the unemployment rate is predicted to continue rising” to over 10%. She added,
[T]he unemployment rate typically falls when GDP growth exceeds its normal rate of roughly two and a half percent per year and rises when GDP growth falls short of this pace. With predicted growth right around two and a half percent for most of the next year and a half, movements in the unemployment rate either up or down are likely to be small. As a result, unemployment is likely to remain at its severely elevated level….Thus, while job losses will likely end early next year, robust job gains may still be several quarters away.
Moreover, Romer admitted that the vaunted Obama stimulus, which was sold on the claim that it would prevent unemployment from rising above 8%, will not change this grim scenario. She testified:
Fiscal stimulus has its greatest impact on growth around the quarters when it is increasing most strongly. When spending and tax cuts reach their maximum and level off, the contribution to growth returns to roughly zero….Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009. By mid-2010, fiscal stimulus will likely be contributing little to growth.
Note that the third quarter of 2009 ended a month ago.
Almost one trillion to be spent on the Obama stimulus, all to little or no good, with unemployment stuck at 10%. That has to be one of the greatest wastes of taxpayer funds in world history, brought to you by the Messiah and his ultraliberal Congressional majorities. Yet, with his ideological blinders on, President Obama rigidly refuses to change course. Instead of considering the cuts in marginal tax rates, spending cuts, strong dollar policies, and deregulation that worked so spectacularly under President Reagan, we now hear talk of another stimulus package, which would be the third Keynesian failure supported by Obama in less than two years. Moreover, Obama still insists on raising marginal tax rates in 14 months, if not sooner, still more federal regulation, and continued weak dollar policies.
The Decline of the Dollar
Yet the trillion dollar deficits brought to us by the Obama stimulus and budget are now threatening the world currency status of the dollar. As Krauthammer said at the Manhattan Institute’s Wriston Lecture:
The effect on the dollar [of Obama’s policies] is already being felt and could ultimately lead to a catastrophic collapse and/or hyperinflation. Having control of the world’s reserve currency is an irreplaceable national asset. Yet with every new and growing estimate of the explosion of the national debt, there are more voices calling for the replacement of the dollar as the world currency — not just adversaries like Russia and China, Iran and Venezuela, which one would expect, but just last month the head of the world bank.
If the dollar is replaced as the world currency, then when we want to buy oil or anything else from the rest of the world, we will have to buy some other currency to do so. Any weakness in the dollar will then immediately impose a higher cost on us at the time.
Yet, raising income and capital gains tax rates as President Obama still plans will cause the dollar to decline still more, as it will discourage overseas investment in the U.S., which requires purchase of dollars by foreigners. The continued weak dollar policies Obama demands from the Fed will also cause further dollar declines. So will Obama’s deliberate high deficit (Keynesian economics), runaway national debt policies. As Judy Shelton wrote in The Wall Street Journal on October 14:
By the end of 2019, according to the administration’s budget numbers, our federal debt will reach $23.3 trillion — as compared to $11.9 trillion today. To put it in perspective: U.S. federal debt was equal to 61.4% of GDP in 1999,…70.2%…in 2008 (under the Bush administration),…an estimated 90.4% this year and…[will] touch the 100% mark in 2011, after which the projected federal debt will continue to equal or exceed our nation’s entire annual economic output through 2019. The U.S. is thus slated to enter the ranks of those countries — Zimbabwe, Japan, Lebanon, Singapore, Jamaica, Italy — with the highest government debt-to-GDP ratio (which measures the debt burden against a nation’s capacity to generate sufficient wealth to repay its creditors). In 2008, the U.S. ranked 23rd on the list — crossing the 100% threshold vaults our nation into seventh place.