A Warning

A little over a year ago I read the book Power, Faith, and Fantasy: America in the Middle East 1776 to Present by Michael B. Oren. My review of this book is available at http://bill.baldwincs.com/writings/review/PowerFaithFantasy.html. There is one particular event recorded in this book that is somewhat ominous given todays insistence on a huge budget deficit.

In the 1860, the United States was embroiled in the Civil war (also called, more properly, the War Between the States). Before this war, the United States (more particularly, the southern United States) was England's primary source of cotton for their textile industry. During the war, the northern States erected a very effective blockade of southern ports, cutting off England's supply of cotton.

This had an effect almost half a world away. Since England still needed the cotton, they convinced Egypt to grow the cotton, so Egypt's economy soared. The result is that the government of Egypt increased in size, and the powers that be liked the extra revenue.

Wars end, and so did that war. Egypt thought of itself as being rich (or, at least the aristocracy did). Therefore, they continued the lavish expenses after the war ended, and England returned to using the cheaper cotton from the United States. They just ran up a huge budget debt.

In the 1880, England decided they owed enough money to England, so the English just decided to take over. Without warning, they made Egypt part of the English empire, and continued to occupy Egypt until the United States insisted they get out after World War II. (This is what the book says.)

Consider how this parallels the United States. After the World War II, the United States was the only major industrial power not devastated by the war (and that is true, even if the Soviet Union were considered a major industrial power, which is doubtful). This gave the United States a leg up in the business arena, and the United States prospered.

By the 1960's, Europe was beginning to rebuild their industrial base. But, the United States, just like the Egyptians, liked the idea of being a "superpower." The United States could no longer support the extravagances it gotten used to, so the United States started using deficit spending, just like the Egyptians. Reagan, of course, managed to make this into an art form, and convinced people it didn't really make any difference.

Clinton, and the elder Bush, both fought this idea, and tried to bring a balance between revenue and spending. And they did, but people had become drunk with the idea of low taxes, and high dependence on government services - that is, a huge deficit. In the 2000 election, the catch phrase was, "How will we spend the surplus?" (whether it was Democrats or Republicans). The problem was that there was no surplus.

Bush, Jr. returned us to the drunkenness that Reagan espoused (It is quite possible that Gore would have done the same thing, but spent the money differently). Now we have a curious situation, where both candidates assume that Reagan's drunkenness is the truth, and we have to get drunk one more time to "fix" the economy.

I remember hearing an economist a few weeks ago who made the comment, "when you're in a hole, the first thing you need to do is quit digging!" This means no more deficit spending to "stimulate the economy" (which it doesn't do anyway, I learn from experience, not questionable experts), or to "bail out Wall Street."

From what I've heard, a drunk doesn't dry out by cutting back. A drunk dries out by realizing he/she has a problem, then cutting it out.

Getting back to the subject, how long is it going to be before China insists that the United States is now a part of "Greater China" either by word or deeds. Think about it.