Would Amer­ica cut spending to re­main great?

The Washington Times Weekly - - Commentary - Tony Blank­ley

Reg­u­larly read­ing of the Fi­nan­cial Times (Bri­tain’s lead­ing fi­nan­cial daily) can put an Amer­i­can in a fight­ing spirit. At least it puts this Amer­i­can (trans­planted for­mer English­man, nat­u­ral­ized Amer­i­can ci­ti­zen that I am) in such a dis­po­si­tion.

I have in mind, this time, an ar­ti­cle in the Nov. 30 edi­tion by Jef­frey Garten, ti­tled, “We must get ready for a weak dol­lar world.” The ar­ti­cle makes two broad as­sess­ments:

(1) “The two most sig­nif­i­cant struc­tural con­se­quences of the re­cent fi­nan­cial de­ba­cle are the mas­sive deficits and debts of the U.S. and the shift of eco­nomic power from West to East. There is only one ef­fec­tive way for gov­ern­ments to ad­dress the com­bined im­pact of both: press for a sea change in cur­rency re­la­tion­ships, es­pe­cially a per­ma­nently and greatly weak­ened dol­lar.”

(2) “The is­sue is no longer whether the dol­lar is in longterm de­cline but which of two op­tions will be taken. Should Wash­ing­ton and other cap­i­tals calmly and de­lib­er­ately man­age the tran­si­tion to a new era, or, by de­fault, should they let the mar­ket do it, with the risk of mas­sive fi­nan­cial dis­tur­bances? To­day, gov­ern­ments have a choice. Soon they may not.”

What I don’t like about the ar­ti­cle is that it is — from an Amer­i­can point of view — de­featist and, ob­jec­tively, it may turn out to be true.

But be­fore con­test­ing the point that such de­cline is in­evitable, it is vi­tal to un­der­stand that a weak dol­lar driven by per­ma­nently ex­ces­sive pub­lic debt di­rectly threat­ens not only our pros­per­ity but also our sov­er­eign abil­ity to pro­tect our lib­erty in this heart­less world. There is no bet­ter ev­i­dence of such a pos­si­ble Amer­i­can fu­ture than the event 53 years ago this month that put paid to Bri­tish pre­ten­sions to great­ness and in­de­pen­dence — the Suez Cri­sis of 1956.

Briefly, in 1956 when Egypt’s Pres­i­dent Gamel Ab­del Nasser na­tion­al­ized the Bri­tish-and French-owned Suez Canal, Bri­tain took un­der­stand­able of­fense and organized its re­tak­ing. Al­lied with Is­rael and France, Bri­tain ar­ranged for Is­rael to in­vade the Si­nai, af­ter which Bri­tain and France mili- tar­ily in­ter­vened with the in­tent to have the world agree to let them con­tinue to man­age the canal.

Un­for­tu­nately for Bri­tain, Pres­i­dent Eisen­hower dis­ap­proved of the ef­fort (he was up for re-elec­tion, the Sovi­ets had just in­vaded Hun­gary, he didn’t like be­ing sur­prised by Amer­ica’s clos­est ally, Bri­tain, and didn’t want the Third World to see Amer­ica as com­plicit with colo­nial­ism). Also, un­for­tu­nately for Bri­tain, while she still had the army, navy and obli­ga­tions of a great power — she re­lied on Amer­ica for fi­nan­cial help.

Bri­tain could not main­tain its cur­rency, the pound ster­ling, at its needed re­serve cur­rency value of $2.80 without U.S. help. And Bri­tain needed petroleum that was be­ing cut off by the Suez cri­sis.

The “ge­nial” Eisen­hower, (who had worked side by side with Bri­tish Prime Min­is­ter An­thony Eden when Eden was top for­eign pol­icy aide to Win­ston Churchill dur­ing World War II) had had enough. He in­structed his Trea­sury sec­re­tary, Ge­orge M. Humphrey, to sell off the pound, break the Bri­tish cur­rency and econ­omy and refuse to sell Bri­tain any Amer­i­can oil (which we had in abun­dance) un­til Bri­tain gave up her mil­i­tary action.

And so, ef­fec­tively ended the Bri­tish Em­pire, not at the hands of an en­emy, but by the un­gen­tle touch of its clos­est ally, the United States — to whom its weak cur­rency and debt-rid­den econ­omy was peren­ni­ally de­pen­dent.

Eden had a ner­vous break­down and re­tired from gov­ern­ment. That De­cem­ber his re­place­ment, Harold Macmil­lan, com­mented to U.S. Sec­re­tary of State John Foster Dulles: “The Bri­tish action [at Suez] was the last gasp of de­clin­ing power [. . .] per­haps in 200 years the United States would know how we felt.”

Well, here we are, 147 years shy of that pre­dicted Amer­i­can come­up­pance date of 2156 A.D. And now the stately Bri­tish Fi­nan­cial Times sug­gests the United States may be im­mi­nently vul­ner­a­ble to a not-sofriendly China play­ing Eisen­hower’s role of spoiler of Amer­i­can sovereignty to our role as the dear old broke Bri­tain of 1956.

That is why the United States should not ac­cept the shrewd, but not yet in­evitable, prog­no­sis of the Fi­nan­cial Times. In the next few years — and start­ing im­me­di­ately while our gross do­mes­tic prod­uct is still big­ger than the com­bined economies of China, Ja­pan, Ger­many and Rus­sia — we must start rad­i­cally cut­ting our spending un­til our fis­cal con­di­tion sup­ports a strong dol­lar and low taxes.

It is an open po­lit­i­cal ques­tion whether a ma­jor­ity of Amer­i­cans love our coun­try, our chil­dren and our grand­chil­dren enough to take the painful sac­ri­fice (vast re­duc­tions in en­ti­tle­ment ben­e­fits) it will now take to guar­an­tee our sov­er­eign and pros­per­ous fu­ture.

But we are be­ing given that rare chance to glimpse into our near fu­ture and see what will be­fall our chil­dren af­ter the last 40 years of spending ex­cess com­pounded by this lat­est year of spending mad­ness. What a fine theme for the 2010 elec­tion cy­cle.

But are we Amer­i­cans still brave enough to re­main free? My guess is that nei­ther the Repub­li­can Party nor the Demo­cratic Party, nor a ma­jor­ity of the pub­lic, loves Amer­ica enough to cam­paign and vote on the hard, bit­ter truth about our con­di­tion.

Tony Blank­ley is the au­thor of “Amer­i­can Grit: What It Will Take to Sur­vive and Win in the 21st Cen­tury” (Reg­n­ery, 2009) and vice pres­i­dent of the Edel­man pub­lic-re­la­tions firm in Wash­ing­ton.

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