The welfare-warfare state

The title isn't an original idea. Near as I can tell, it was coined by Christopher A. Preble, a Cato Institute scholar on foreign policy. It's part of an article I just finished on why conservative republicans cannot retain the level of power and direction they've enjoyed since the '02 elections when they sealed the deal on the senate majority. But as usual, I gleaned a more all-inclusive, global, and impractical message from something. As Americans we are addicted to spending. Our economy depends on comsumer demand outpacing even the wages intended to support that demand. Our household savings rate is now in the red, our fiscal policy looks like Ivana Trump when she receives her alimony check. We are living and growing at the mercy of Chase Manahttan's and the People's Republic of China's willingness to lend to us.

These matters of economic policy are gaining attention among pointy-headed intellectuals, but there is no way such an abstract, worry-mongering issue such as this could ever gain political traction on its own. Spending is not attached to personal or political consequences because it is in no one's short- or medium-term interest to do so. No person or politician will go on living as he does if this were to be addressed. At the same time, China is more than happy to own US Treasury bills, and Chase Manahattan lives to lend, both so long as their positions are secured as creditors, and we remain the debtor. The supply and demand sides of the debt equation will not change until one side flinches.

Rewind to Latin America, Africa, and much of Asia, circa Thirty Years Ago. Lenders were more than happy to oblige to their development needs, as long as the conditions of "tied aid" were met. Developing nations would purchase American and European farming supplies, industrial infrastructure and expertise in exchange for capital. In the economists' perfect world, this injection of cash would one day lead to a world of self-sufficient, developed nations with a heavy stake in retaining a trade relationship with their former benefactors. It was overlooked that this was the same policy of mercantilism that led to the Boston Tea Party, the Stamp Act and you know what else here in the USA. In the twentieth century, after rich nations gave up on colonies, revolution was no longer an option. We saw nations default on their debts instead.

America is no more self-sufficient today than Argentina was in 1985. Our economy is supported by borrowing, and that borrowing will continue as long as we purchase finished goods from the lending country's own factories. Wheras thirty years ago, we were an net producer of finished exports, today, we send raw materials abroad as if we were exporting bananas and coffee. This is one of the many ways that America is the richest Third World country on the planet. In a sense we are like the airlines or oil companies: too big to fail. What comes of that is unclear to me.

What is clear are the eerie words of Dwight D. Eisenhower during his farewell speech to the nation:

"This conjunction of an immense military establishment and a large arms industry is new in the American experience ... In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic process."

More of our tax dollars go to military spending than any group of nations in the world combined. More of our foreign debt goes to servicing these needs. While state spending on welfare continues to grow, it is nothing compared to the pace of growth and the scope of America's military budget. It is for ideological reasons alone, and not macroeconomic ones, that certain groups attempt to draw the nation's attention to bloated welfare roles, moms with twelve kids and a check from the state and other freeloaders, supposedly rampant among the poor. Welfare states have bankrupted debtor nations in the past; they have secured votes for fat populist politicians at the cost of needed improvements to nations, but in our case this is unlikely. The phenomenon of spending addiction may be the same, but the size and potential damage to our democracy is not.

How long until become a nation that produces things that the world needs? I have no clue, but this is as existential a threat as any terrorist attack or moral crisis could possibly be.