“Goodbye America” says the page-three headline in this morning’s Metro newspaper.
After 66 years, the story reports, Marvel Comics, is finally laying to rest Steve Rogers, a.k.a. Captain America. The superhero has beaten the Nazis, the commies, terrorists and mutants. But he was brought down by a sniper’s bullet as he left a courtroom.
But it was time for him to go. Captain America was invented to defend the land of the free. But now, after the War on Terror… the Patriot Act… and the Prescription Drug Bill… what freedom is left? We are free to dye our hair purple, dress up as a priest and wed a two-headed calf. But that is not the freedom we once looked for.
And so it goes. Every great empire begins in deceit, develops into farce and ends in disaster. The farce – at a high point in the Clinton and Bush administrations – has been great fun. But in order to see what lies ahead we have to be looking far behind. And if we look far enough behind, what we see is old Rome in grand decline. Mind you, it was not a bad time for a man with money and a villa on the coast of Dalmatia. But it was a very sad one for someone who had to rub against the sweating masses thronging the center, or try to hold back the barbarians crowding the periphery.
The Roman emperors spent too much money – on war, on bread, on circuses. They had to clip the coins, rob the citizens, and squeeze the whole empire for tribute to keep up with it. But it couldn’t go on forever. The barbarians grew bolder while the empire’s own forces weakened. Finally, the Vandals swept across the frontier and brushed aside the remaining defenders, and Rome itself – the capital city of the greatest empire in history – was sacked.
It is an old story. Does it tell us anything useful about the future?
“If there is one thing that can bankrupt America, its health care,” said Comptroller General David Walker.
Walker has been giving speeches lately, warning Americans that they are spending too much money. On ’60 Minutes’ recently, he explained that the Bush administration’s Medicare Prescription Drug Bill was the single most disastrous piece of legislation to come along in many decades.
At the center of America’s empire is a jolly pack of clowns, liars, and cowards. As to the prescription drug bill, the Bush administration told the nation that it would cost $400 billion in its first 10 years. Now, says Walker, the bill is sure to be closer to $1 trillion. At the present rate of growth, he explained, Medicare and Social Security alone will take up the entire federal budget by the year 2040.
That obviously wouldn’t leave much money for keeping the barbarians outside the gates. But here, too, the dissemblers rush in to back up the fools. It was foolish to waste the nation’s troops and treasure in a messy war in Mesopotamia. Rome did it… and regretted it… more than once. Now, American centurions patrol the streets of Baghdad while the Caesars on the Potomac inflate the casus belli – all the while deflating the cost estimates.
What happens? What gives? How does it end? We can tell you. Farce gives way to disaster. Sooner or later, the commitments can’t be met. The total value of all the household wealth in America is about $50 trillion – about the same amount as the total net ‘financing gap’ of the Federal government. Which means, dear folks, we are already broke.
But it is not only the feds whose spending is out of control. The U.S. trade deficit, born out of runaway consumer spending, is also careening down a winding road at top speed. Each year, the deficit effectively transfers more U.S. capital to foreign hands. According to figures we found yesterday, now more than half of new federal debt is going to foreigners.
The U.S. current account first went negative in the mid-80s… about the same time that Alan Greenspan took over at the Fed. But it took another 20 years before the total of U.S. assets in foreign hands was so great that the net income from overseas investments turned against the United States. That milestone was passed last year.
Warren Buffett described the situation in his annual report to shareholders last week:
“The ‘investment income’ account of our country – positive in every previous year since 1915 – turned negative in 2006. Foreigners now earn more on their U.S. investments than we do on our investments abroad. In effect, we’ve used up our bank account and turned to our credit card. And, like everyone who gets in hock, the [United States] will now experience ‘reverse compounding’ as we pay ever-increasing amounts of interest on interest…
“Our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position. It won’t be pleasant to work part of each day to pay for the over-consumption of your ancestors. I believe that at some point in the future, U.S. workers and voters will find this annual ‘tribute’ so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict – but to expect a ‘soft landing’ seems like wishful thinking.”
Empires do not typically land softly. They blow up… loudly.
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