Foreign Reliance

The head of the Government Accounting Office, David Walker, has severe criticism for the Congress due to its fiscal irresponsibility. He has said in Business Week Magazine that the current course is liable to lead to the economic destruction of this nation just as fiscal irresponsibility destroyed the Roman Empire.

This is not the first time the United States has engaged in fiscal irresponsibility to the point of possibly bankrupting the nation; however, it is the first time our government has acted with reckless malice while the nation has been the economic powerhouse of the world. The Guilded Age and the 1920s were both decades with the government and the people spending out of control. During neither of those decades was the United States looked upon as the most important world market, which is why those times are different from the times we are currently in. If the United State’s cannot reign in its current spending, then its entire economy could collapse and with it could go the entire world.

The world market is financing the reckless spending. China is one of the nation’s biggest creditors. It is constantly purchasing US bonds which are then used to pay the interest and payments on the deficit. It is dangerous to have China and other nations continue to finance this nation’s economy mainly because at any time China could decide to no longer purchase the US bonds and economic ruin would result.

If China invaded Taiwan, the United States would be politically obligated to intervene militarily. Or if North Korea announced that it was going to return to its prior policy of building nuclear weapons and the United States determined that it was in the nation and world’s best interest to militarily intervene in the nuclear weapons proliferation, China could decide that it will retaliate by stopping its constant purchases of US bonds. The United States would be in desperate need of money to finance the new wars, yet its largest financier would have disappeared.
Without China continuing to purchase the bonds, economic ruin could result. The United States could face the same scenario as Argentina just a few years ago when all of its debt was called in and Argentina could not pay it. The nation spiraled into depression and unemployment spiked. Argentina’s currency became worthless almost overnight.

Many economist say this could never happen to the US, but such rosy eyed views of the future are misplaced. There is no reason to think that the US will continue to be the world’s dominant economy. In years past the Netherlands dominated the world economy and then it was Great Britain. When they were the economic heavy weights they believed that the good times would never end, but they did. While it may now be the US which is the economic gorilla, it will not always be that way. Since China holds a significant amount of the US debt, if China wanted to become the next dominant economy it could send the US into ruin for the sole purpose of allowing China to become the principal economy.

The GOP has taken away protections for Americans who have over extended themselves financially, such as the bankruptcy protections. The GOP did this while saying that the people have to be responsible for their own actions. Yet, the GOP refuses to be responsible for its own actions. It refuses to stop the frenzied spending and reckless tax cuts. This course will result in a continued dependence on other nations and one day bankruptcy of the entire nation could result. The only question is, who will be there to pick up the pieces when it does occur.