SeriousBull

Did President Bush say the US is Broke?

Tags: Bali + Economy + Green + Kyota + Markets + Politcs + Treasury

The Bush Administration angered members of the European Union by its demand to exclude any specific greenhouse gas emission cuts in the final climate agreement due in 2009.  The US insists that the developing nations, particularly China and India, must also make similar cuts to those demanded of the US. The

developing nations argue that they have largely not been responsible for the pollution levels present and that therefore they should not have to bear an equal burden. The negotiations have not reached dead-end though; delegates are continuing to negotiate under the assumption that new US leadership in 2009 will actually lead and not inhibit progress toward this most important global issue.

President Bush recently stated that he takes the issue seriously. But he also made ‘freudian slip’ that may be the key to understanding his administration’s seemingly neanderthal stance on an issue all his allies agree on. In his words:

“And so, absolutely I take the issue seriously. But I want to make sure that we’re effective in what we do, and secondly, do not wreck our economy in whatever we do. See, it is hard to develop the technologies necessary to be able to make sure our standard of living remains strong and deal with greenhouse gases if you’re broke. If you don’t have any money, it is really hard to develop new technologies. And so we need to be prosperous for a lot of reasons, primarily so our citizens can have a good life; but also so that we’re wealthy enough to make the investments necessary to deal with greenhouse gases.”

The President inadvertently acknowledged the seriousness of the US deficit that now rapidly approaches $10 trillion. He said he the US can’t afford to dump old technologies and increase our cost of doing business. He actually said he was making sure not to ‘wreck our economy‘ and used the word ‘broke‘ in describing the situation confronting the US today:  “See, it is hard to develop the technologies necessary to be able to make sure our standard of living remains strong and deal with greenhouse gases if you’re broke. If you don’t have any money, it is really hard to develop new technologies.”  The president went on advocate Nuclear power as the preferred solution to the greenhouse gas problem.

Did the rest of the Press not hear his words?  Can any Republican now bash a Democrat for saying the US needs to raise taxes? Clearly the US middle-class and poor can not pay more, so there seems to be two choices: cut spending or raise taxes–if indeed the US is broke.

David Walker, Comptroller General of the US (GAO) has said the US is.  He detailed the dire straits of the US in a powerpoint presentation entitled: “Saving our Future Requires Tough Choices.” In it he says that doing nothing is not a choice. He highlights a looming insolvency, a point of departure  President Bush was obviously referencing:

         How Big is Our Growing Fiscal Burden?

      Total -major fiscal exposures                $50.5 trillion

      Total household net worth                      $53.3 trillion

              Burden/Net worth ration                   95 percent

      Burden

              Per person                                         $170,000

              Per full-time worker                          $400,000

              Per household                                  $440,000

      Income

              Median household income                      $46,326

              Disposable personal income per cap   $31,519

Source: GAO-07-1275CG

So we are down to proverbial “Guns or Butter” choice. President Bush has chosen ‘Guns.’ Unfortunately, guns are a zero sum gain in the sense that they are either stockpiled or destroyed in battle and contribute nothing to a productive life. Like digging a ditch and filling it back up over and over, you accomplish little or no gain. Indeed the calculus is that a nation that spends an excessive amount on defense stockpiling weapons of mass destruction it forfeits that expenditure for otherwise commercially productive goods to benefit its citizens.

If you think about the US’s financial problem. The solution set to the financial calamity has only four (4) possible solutions:

• Default
• Raging Inflation
• War
• Growth

SB does not believe the US can consider defaulting on its debt and we have commented previously about US Foreign Policy initiatives versus implications for US debt  Service.  SB likewise does not think the US can choose Inflation, except as a last resort as it would damage an already frail economy–SB has commented about prospects of US inflation as well.  And true, the US is in a regional war, but not a War resulting from default.  Besides, a nation can continue to borrow so long as borrowers will lend, and we do not seem to be near a juncture where Treasuries are not wanted. But of course a war would not likely be fought as a result of default in any case. Instead it would more likely result from escalated trade tensions and perhaps economic sanctions related to deviant behavior–the typical mask to disguise intent and perhaps a play to gain spoils. But again, SB argues War is not a viable US solution as the cost/benefit does not resolve the US financial problem.  SB argues that Growth is the only viable solution. Not Growth of Defense technologies, but growth of technologies people need to improve their circumstance. For example, bio-tech investment on stem cell research, cancer, aging, and auto-immune diseases all are desirable growth aims. As are investment and subsidy on alternative energy (Solar, Hydrogen), green house emission control devices, and clean water technologies.  The point is the whole world wants and needs better solutions,  in President Bush’s words, so that ‘their citizens can have a good life. 

The US is an innovation leader, but has taken the wrong course because it lacks farsighted leadership. President Bush operates from a false point of departure rooted in his religious upbringing that has spilled over into his leadership style. His religion advocates an exclusionary elitism advocating that “unless you believe as I do you can not ….” which sends men on crusades to convert the non-believers, an politic at once offensive spiritually, culturally and politically. Likewise the US Congress made up almost entirely of lawyers pander to win elections rather than passing legislation for the good of the nation. For them party politics is a brotherhood that trumps all other reason and economic reality. The result is abandonment of fiscal responsibility, breach of fiduciary duty, and management by crisis. 

Unfortunately President Bush’s ‘freudian slip,’ may become the tale-tell of an US undoing. It has a slim 5% operational (equity) margin, before the final tab is tallied:  for Mr. Bush’s Iraq War, for the losses resulting from the US Housing debacle, and for the unfunded State, Local, and Federal Pension liabilities.  Indeed the US is moving toward an inevitable financial showdown and time is a waisting to take corrective action. Their is an economic war being fought, and no consensus in the US Government appears to even be aware of it. Will crisis have to come to the world for the US to respond?

SB believes that the US must refocus its energies on domestic Growth and become a partner with its businesses. Instead of fear and divisiveness, opportunity and inclusiveness must direct policy. For America to hold its ground it needs a new Lincoln, a new Kennedy, or even a benevolent dictator is preferable. The US must stop fighting itself, regain its focus (on itself) and begin to compete with commercial invention if it is to salvage its standing in the world.  SB disagrees with President Bush. The US does have money to develop the needed technologies. It simply has made poor choices.

December 21, 2007 - Politics