There are some positive consequences to the US having record federal deficit, and record levels of nationa debt (both in terms of % to GDP and total value). The US will finally have to face up to some major realities. What will that “face up” mean?
There has been a roaring debate between the two sides of America’s political elite whether or not there should be major reform of America’s crippling health care system; and overreaching defense spending (among other things). I mention these two issues primarily because they are the two largest sectors of Federal Government spending budget. Healthcare is now close to 50% of the Federal Budget, and defense is still very large almost 33%. The republican strategy (whether under Reagan or George Bush Sr or Jr) resolved this debate by simply making reform financially unacceptable. For those that don’t remember Ronald Reagan increased the defense budget to over a trillion dollars a year, and increased federal debt to a point where no incoming democratic party administration could imagine an expansion of government (such as taking on increased welfare programs – like national health system). The Democrats were boxed in by the time Clinton came to power. The Democrats had limited room for maneuver because of the dire budget situation they find themselves in. The Reagan Revolution, was precisely that. Reagan also knew that the Russians would match US defence program expenditures – and in turn bankrupted the Russians (who were also tangled in Afghanistan …whose revolutionary (insurgent fighters – the Taliban) were being armed by the US.
Gearge W. Bush basically followed the same line of thinking. The problem is, not suprsinigly, ‘W’ did not think it through. What actually happened is ‘W’ overspent… Reagan was not really fighting a war, he could (and did) throttle back on the defense budget overtime, Reagan’s money men, kept the US government deficit and debt within manageable levels. They did not tank the U.S. – they metered out the money very carefully. ‘W’ on the other hand, got bogged down. Insurgents in both Iraq and Afghanistan bogged him down. With Iran’s mullahs fearing an attack (being next) they shrewdly bogged American troops down by financing and training the insurgents. The US has now spent far more than it ever anticipated. America’s defense budget sky rocketed from 300 Bn under Clinton, to 900 billion by 2002. 7 Trillion extra (borrowed) dollars later in defense expenditure, the US finds itself near bankruptcy, and to make things even worse the U.S. economy over heated and tanked in 2008 …leading to a near economic collapse….despite all this War spending.
So in comes Obama in 2009. What should you do? What can you do? Well he did try to stimulate the economy back by borrowing even more. But, there are limits to what the US federal government can ultimately do. They can only print so much money before the dollar collapses. in the end the US government will have to find a way to spend less. There is no other choice. They will have to spend a lot less. Significantly less.
This means – without doubt that BOTH health care and defense spending will be reformed. Its an absolute must. They can not solve the problem without cutting both. If they do face up to this, then it will mean no more wars….no Iran invasion, slow but definite retreat form Afghanistan and Iraq. It will also mean they will definitely have to reform health care costs. The US will have to find someway to provide large scale health care at lower costs. This means a great influx of foreign doctors and nurses to treat 50 Million more patients- and a net systematic reduction of costs for treating patients. Yes – Universal Health Care. Ironically, “W’s ” overspending will force the precise reforms he was trying to avoid…by spending on these wars to begin with.
If they (the US) does NOT reduce the federal budget (i.e. face up to the facts) then the economy could collapse, in which case it could have a really nasty effect….they might have to do a “hitler” and start a war …with Iran…to get themselves out of the mess.Print a ton of paper (money) and create a crisis…force up rapid inflation during a war time situation, and then use inflation to make the national debt essentially disappear. This is a tried, tested and proven government strategy when all else fails.
So will the government in Iran change? No, the US can’t pick a fight if they want to solve their economic problems peacefully. The Mullahs have won the battle, they did bankrupt the US (via the insurgents) and can hold on for another political cycle. If however, the US federal government can not come to terms with Congress and face up to all this, then Yes, the Mullahs will see their final days in power …and there will be war! They have now become nominally America’s next military target (if they need one).