Unqualified Offerings

Another in a long line of contrarian posts I don’t get around to writing until they’re overtaken by events that prove out the conventional wisdom: Condi Rice as much more successful Secretary of State than we give her credit for. The general thesis being, You know, she and Gates really do seem to have headed off a war with Iran, and gotten Musharraf out of office and by golly there was more I can’t remember now, and "look vhat she had to vhork vhith Mister Napier." I would’ve had links and everything.

But, the Secretary defies the contrarian wisdom by picking today of all days to pick a public fight with Russia.

She warned that Moscow’s international standing following the Georgia conflict is at a post-Cold War low.

"Russia’s invasion of Georgia has achieved — and will achieve — no strategic objective," Rice said. "Russia’s leaders will not accomplish their primary war aim of removing Georgia’s government. And our strategic goal now is to make it clear to Russia’s leaders that their choices are putting Russia on a one-way path to self-imposed isolation and international irrelevance."

The United States and Europe will stand up to Russia and not allow it to bully or threaten its neighbors, she said.

Does Secretary Rice not get the papers? Reading casually into the ongoing financial meltdown this week, I keep coming across the bottom-line explanation that the world’s, and particularly America’s, financial institutions just don’t have enough assets to cover their obligations. The dollar seems to be Wile E. Coyote now, or a less sagacious mark than Dummy 2 in the flashlight joke – tiptoeing in midair with nothing under it while gravity clears its throat and prepares. The various central banks are trying to keep it going because the various central banks have a whole freaking lot of them. But the translation of the bottom-line explanation is that the world, and particularly America, are not nearly as rich as most of us thought. Sorry! And I’m not just saying that! I can’t see how that doesn’t mean pretty much all the central banks are going to want to sneak their way out of dollars if they can. I think it’s one of those prisoner’s dilemma things.

Meanwhile, as part of Uncle Sam’s attempt to keep the whole contraption going, the Federal Government has taken on massive, massive liabilities from Fanny and Freddy and AIG and who knows what else is coming. Meanwhile, a picture courtesy of People Who Actually Know Stuff About the Federal Budget Dot Org:

Social Security and Medicare have – nominally – their own funding mechanism. The US is probably not going to default on the debt. Nobody in power is going to want to compound possible Depression-level demand shocks by cutting entitlements or even safety-net spending. That big red wedge is where the savings are to be had. Because so much of war funding has been tucked into "emergency" appropriations, the big red wedge is probably even bigger. Sorry, American Enterprise Institute, it’s over. (NB: In this case, I am just saying that – the "sorry" part.) We are about to become, fiscally, Britain after Suez and the USSR after 1989. We don’t have the money ourselves, and foreign capital will be looking for the exits. In particular, the Chinese have no long-term incentive to pay us to maintain a military that threatens China. (Short-term incentive? Sure. In the short term, complications arise.)

This may sound like a variant on the Pundit’s Fallacy: Jim always wants to cut the defense budget! Now Jim is saying that the financial crisis means we must support his politics! And not only is there a lot of ruin in a nation, but there’s a lot of stupid and stubborn in America’s ruling class, and a lot of pugnaciousness in Gen Pop. I could just about see some demagogue promising to fix this pesky financial crisis with the military. Just take it! (It being whatever we happen to fancy.) Foreign nations that want to be, you know, paid back for their loans are just rogue states, dammit. They flood us with immigrants and send terrorists after us and steal our jobs. Say hello to Mister JDAM, foreign Finance Minister!

But, you know, unless we find some moron who will actually push things to nuclear war, that’s not going to work. Because wars cost real money.

So, we can do this the hard way, or – at this point, the not quite as hard way. In five years US military spending is going to be half what it is now, one way or the other. We could have planned a graceful disengagement even a few years ago, but nobody with the power to make it happen was in the mood. Now? I suspect it’s going to be hard no matter what. I have bottomless faith in our ability to make it harder, but why go to all that trouble?

All of which is to say, it would be humorous to hear an American government official chiding another country for "aggressive behavior" any time, but it’s a bitterly hilarious week for one to declare another country risks "irrelevance."

(NB: Cost of this post cheerfully refunded if the whole mess blows over.)