Friday, February 5, 2010
On the decline
Posted on 8:34 PM by Latest News
The numbers are eye-popping: a $3.8tr budget; a deficit equal to 11 per cent of GDP in the next year alone; $8.5tr added to national debt over the next decade — the state of America’s finances is so parlous that it is raising questions about the future of that country’s great power status.
The New York Times saw fit to remind its readers of the words of Lawrence Summers, President Obama’s chief economic adviser and a former Treasury secretary: “How long can the world’s biggest borrower remain the world’s biggest power?” Of course, any obituary of the US as the world’s only true superpower is decidedly premature. Economists such as Nobel-prize winning Paul Krugman have argued for the necessity of deficit spending to prevent the Great Recession from becoming another Great Depression. But there is a nagging sense that America’s political culture will not allow the American state to make vital adjustments needed in the years ahead: between those seeking to expand entitlements (mostly Democrats) and those seeking to cut taxes (mostly Republicans) there does not appear to be a middle ground that could balance spending and revenues in the long term.
The effect of this economic malaise on America’s military might will not be immediate, though. President Obama has suggested increasing the Pentagon’s base budget by 3.4 per cent and allocated $159bn to fund the missions in Iraq, Afghanistan and Pakistan. With the terrorism threat still looming, there is little chance of any cutbacks soon. From Pakistan’s perspective, the $3.2bn of development funds that President Obama has proposed for next year, for example, is a drop in the vast American financial ocean. But the effects of the financial crunch will nevertheless be real. As also pointed out by The New York Times, the American president had to qualify his commitment to the ‘war of necessity’ in Afghanistan, where spending concerns appear to trump war fatigue as the reason for the ‘exit’ part of President Obama’s surge-and-exit strategy. While few things are certain at the moment, it seems clear that economic concerns will at least constrain America’s military and security choices going forward.
The New York Times saw fit to remind its readers of the words of Lawrence Summers, President Obama’s chief economic adviser and a former Treasury secretary: “How long can the world’s biggest borrower remain the world’s biggest power?” Of course, any obituary of the US as the world’s only true superpower is decidedly premature. Economists such as Nobel-prize winning Paul Krugman have argued for the necessity of deficit spending to prevent the Great Recession from becoming another Great Depression. But there is a nagging sense that America’s political culture will not allow the American state to make vital adjustments needed in the years ahead: between those seeking to expand entitlements (mostly Democrats) and those seeking to cut taxes (mostly Republicans) there does not appear to be a middle ground that could balance spending and revenues in the long term.
The effect of this economic malaise on America’s military might will not be immediate, though. President Obama has suggested increasing the Pentagon’s base budget by 3.4 per cent and allocated $159bn to fund the missions in Iraq, Afghanistan and Pakistan. With the terrorism threat still looming, there is little chance of any cutbacks soon. From Pakistan’s perspective, the $3.2bn of development funds that President Obama has proposed for next year, for example, is a drop in the vast American financial ocean. But the effects of the financial crunch will nevertheless be real. As also pointed out by The New York Times, the American president had to qualify his commitment to the ‘war of necessity’ in Afghanistan, where spending concerns appear to trump war fatigue as the reason for the ‘exit’ part of President Obama’s surge-and-exit strategy. While few things are certain at the moment, it seems clear that economic concerns will at least constrain America’s military and security choices going forward.
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