Previously on Apocalypse Soon . . .
It was the worst of times, it was the not quite so worst of times. The predecessor to this book was called America Alone: The End of the World as We Know It, and, given the title, you may be tempted to respond, “C’mon, man. You told us last time it was the end of the world. Well, where the hell is it? I want my money back. Instead, you come breezing in with this season’s Armageddonouttahere routine. It’s like Barbra Streisand farewell tours—there’ll be another along next summer.”
Well, now: America Alone: The End of the World as We Know It was about the impending collapse of all of the Western world except America.
The good news is that the end of the rest of the West is still on schedule. The bad news is that America shows alarming signs of embracing the same fate, and then some.
Nobody writes a doomsday tome because they want it to come true. From an author’s point of view, the apocalypse is not helpful: the bookstores get looted and the collapse of the banking system makes it harder to cash the royalty cheque. But Cassandra’s warnings were cursed to go unheeded, and so it seems are mine. Last time ’round, I wrote that Europe was facing a largely self-inflicted perfect storm that threatened the very existence of some of the oldest nation-states in the world. My warning proved so influential that America decided to sign up for the same program, but supersized. Heigh-ho.
It starts with the money. In “The Run Upon the Bankers” (1720), Jonathan Swift wrote:
A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
’Tis like the writing on the wall.
A lot of writing on the wall these days. Who has the bonds of a “developed world” developed to the point that it’s institutionally conditioned to living beyond its means? Foreigners with money. So who’s available and flush enough? The Chinese Politburo; Saudi sheikhs lubricated with oil but with lavish worldwide ideological proselytizing to fund; Russian “businessmen.” These are not the fellows one might choose to have one’s bonds, never mind one’s soul, but there aren’t a lot of other options.
So it starts with the money—dry stuff about numbers and percentage of GDP. As Sen. Michael Bennet of Colorado fumed to a room of voters in 2010, “We have managed to acquire $13 trillion of debt on our balance sheet. In my view, we have nothing to show for it.”
He’s right—and $13 trillion is the lowest of lowball estimates. But why then did Sen. Bennet vote for the “stimulus” and ObamaCare and all the other trillion-dollar binges his party blew through? Why did Sen. Bennet string along and let the 111th Congress (2009-2011) run up more debt than the first one hundred Congresses (1789-1989) combined? Panicked by pre-election polls into repudiating everything he’d been doing for the previous two years, the senator left it mighty late to rediscover his virtue. You would think that Colorado voters might have remembered that, like Groucho Marx apropos Doris Day, they knew Michael Bennet before he was a virgin. Alas, an indulgent electorate permitted the suddenly abstemious spendaholic to squeak back into office.
And, contra Sen. Bennet, eventually you do have something to show for it. It starts with the money, but it doesn’t stop there. It ends with a ruined and reprimitivized planet, in fewer easy stages than you might expect. Let’s take a thought by the economist Herbert Stein:
“If something cannot go on forever, it will stop.”
This is a simple but profound observation. Dr. Stein first used it in the context of the long-ago debts and deficits of the Reagan era. “The Federal debt cannot rise forever relative to the GNP. Our foreign debt cannot rise forever relative to the GNP,” he said. “But, of course, if they can’t, they will stop.” It was, as he later wrote, “a response to those who think that if something cannot go on forever, steps must be taken to stop it—even to stop it at once.” And he has a point: if something can’t go on, you don’t have to figure out a way to stop it, because it’s going to stop anyway.
As you might have noticed, since he first made the observation, the debt has gone on rising, very dramatically. But the truth is unarguable. If you’re careening along a road toward a collapsed bridge, you’ll certainly stop, one way or the other. But it makes a difference, at least to you, whether you skid to a halt four yards before the cliff edge or whether you come to rest at the bottom of the ravine.
In 2010, Douglas Elmendorf, director of the Congressional Budget Office (CBO), described current U.S. deficits as “unsustainable.” On that everyone’s agreed. So let’s make them even more so! On assuming office, President Obama assured us, with a straight face, that his grossly irresponsible wastrel of a predecessor had taken the federal budget on an eight-year joyride. So the only way his sober, fiscally prudent successor could get things under control was to grab the throttle and crank it up to what Mel Brooks in Spaceballs (which seems the appropriate comparison) called “Ludicrous Speed.” Let’s head for the washed-out bridge, but at Obamacrous Speed!
The Spendballs plans of the Obama administration took the average Bush deficit for the years 2001-2008 and doubled it, all the way to 2020. “We’ve got a big hole that we’re digging ourselves out of,” the President declared in 2011. Usually, when you’re in a hole, it’s a good idea to stop digging. But, seemingly, to get out of the Bush hole, we needed to dig a hole twice as deep for one-and-a-half times as long. And that’s according to the official projections of the President’s economics czar, Ms. Rose Coloured-Glasses.
By 2020, the actual hole will be so deep that even if you toss every Obama speech down it on double-spaced paper you still won’t be able to fill it up. In the spendthrift Bush days, federal spending as a proportion of GDP averaged 19.6 per cent. That’s crazy. Obama’s solution was to attempt to crank it up to 25 to 30 per cent as a permanent feature of life. That’s load up the suicide-bomber underpants and pass me the matches.
The CBO doesn’t put it quite like that. Musing on the likelihood of a sudden fiscal crisis, it murmurs blandly, “The exact point at which such a crisis might occur for the United States is unknown, in part because the ratio of federal debt to GDP is climbing into unfamiliar territory.”
But it’ll get real familiar real soon. A lot of the debate about America’s date with destiny has an airy-fairy beyond-the-blue-horizon mid-century quality, all to do with long-term trends and other remote indicators. In fact, we’ll be lucky to make it through the short-term in sufficient shape to get finished off by the long-term. According to CBO projections, by 2055, interest payments on the debt will exceed federal revenues. But I don’t think we’ll need to worry about a “Government of the United States” at that stage. By 1788, Louis XVI’s government in France was spending a mere 60 per cent of revenues on debt service, and we know how that worked out for the House of Bourbon shortly thereafter.
So take your eye off the far prospect, and instead look about 14 inches in front of your toecap. Within a decade, the United States will be spending more of the federal budget on its interest payments than on its military. You read that right: more on debt service than on the armed services. According to the CBO’s 2010 long-term budget outlook, by 2020 the government will be paying between 15 and 20 per cent of its revenues in debt interest. Whereas defence spending will be down to between 14 and 16 per cent.
Just to clarify: we’re not talking about paying down the federal debt, just keeping up with the annual interest charges on it. Yet within a decade the United States will be paying more in interest payments than it pays for the military—and that’s not because the Pentagon is such a great bargain. In 2009, the United States accounted for over 43 per cent of the world’s military expenditures. So America will be spending more on debt interest than China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel spend on their militaries combined. The superpower will have evolved from a nation of aircraft carriers to a nation of debt carriers. The CBO numbers foresee net interest payments rising from nine per cent of revenue to 36 per cent in 2030, then to 58 per cent in 2040, and up to 85 per cent in 2050. If that trajectory holds, we’ll be spending more than the planet’s entire military budget on debt interest.
But forget mid-century—because, unless something changes, whatever goes by the name of “America” under those conditions isn’t worth talking about.
By 2010, about half our debt was owned by foreigners, and somewhere over a quarter of that was held by the Chinese (officially).
What does that mean? In 2010, the U.S. spent about $663 billion on its military, China about $78 billion. If the People’s Republic carries on buying American debt at the rate it has in recent times, then within a few years U.S. interest payments on that debt will be covering the entire cost of the Chinese armed forces. In 2010, the Pentagon issued an alarming report to Congress on Beijing’s massive military buildup, including new missiles, upgraded bombers, and an aircraft carrier research and development program intended to challenge U.S. dominance in the Pacific. What the report didn’t mention is who’s paying for it.
Answer: Mr. and Mrs. America.
To return to the President’s declared strategy: “We’ve got a big hole that we’re digging ourselves out of.” Every politician’s First Rule of Holes used to be: when you’re in one, stop digging. If you don’t, as every child knows, eventually you dig so deep you come out on the other side of the world—someplace like, oh, China. By 2015 or so, the People’s Liberation Army, which is the largest employer on the planet, bigger even than the U.S. Department of Community-Organizer Grant Applications, will be entirely funded by U.S. taxpayers. As Bugs Bunny is wont to say when his tunnel comes out somewhere unexpected: “I musta took a wrong turn at Albuquerque.” Indeed. When the Commies take Taiwan, suburban families in Albuquerque and small businesses in Pocatello will have paid for it.
And even that startling scenario is premised on the most optimistic assumptions—of resumed economic growth but continued low interest rates. If interest rates were to return to, say, 5.7 per cent (the average for the period 1990-2010), the debt service projections for 2015 would increase from $290 billion to $847 billion. China would be in a position to quadruple its military budget and stick U.S. taxpayers with the bill.
The existential questions for America loom not decades hence, but right now. It is not that we are on a luge ride to oblivion but that the prevailing political realities of the United States do not allow for any meaningful course correction. And, without meaningful course correction, America is doomed.
Jonathan Swift’s “writing on the wall” comes from Belshazzar’s feast:
Babylon’s king is whooping it up when, in the midst of his revelries, disembodied fingers spell out the words “mene mene, tekel, upharsin.” They’re currency units: half-dollar, half-dollar, penny and two bits. Only Daniel the Jew understands what it means:
Mene: “God hath numbered thy kingdom, and finished it.”
Tekel: “Thou art weighed in the balances, and art found wanting.”
Upharsin: “Thy kingdom is divided, and given to the Medes and Persians.”
Today, the units are larger than in Babylon: “Mene mene, tekel, upharsin” is now trillion trillion, billion, half-trillion. But the upshot’s the same. We’ve spent too much of tomorrow today—to the point where we’ve run out of tomorrow: fiscally, our days are numbered; structurally, we’ve been weighed in the balances and found wanting; and geopolitically, the Medes are thin on the ground but the Persians have gone nuclear.