Friday, July 29, 2011

Some Advice for the U.S. President and Congress

Now, be it said that I wouldn't mind if the U.S. Federal Government defaults (as it may well in a few days), since the greenback, if the threatened catastrophe occur and persist, could drop as much as 25% in value, and the Australian dollar – already worth US$1.10 – could rise and rise to US$1.40 even.  I wouldn't mind this, because then I could buy more books.  (Of course, I don't wish economic turmoil and misery on anyone, let alone North Americans, I merely comment on an advantage to me of such a turn of events.)

That said, it is evident that neither side in the debate in the U.S.A. about their vast and burgeoning government deficit are tackling the underlying issues: it is obviously unsustainable for the government to spend more than it raises through taxation, especially as, by nonetheless persisting in doing so, it builds up debt whose servicing becomes itself a greater and greater burden, to the extent that it eats up revenue.  Look at Greece, to see where this leads.  Look at the U.K., to see how swingeing cuts – yes, and tax increases – are needed in order to balance the books and repay the debt.  I believe Canada, too, had to scale back its government spending some years ago, in order to help balance its books.

But far be it from me, a foreigner, to tell American citizens what their first President, the immortal Washington, advised them so wisely for all time to come in the stately rolling periods of his Farewell Address:

As a very important source of strength and security, cherish public credit. One method of preserving it, is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering, also, that timely disbursements to prepare for danger, frequently prevent much greater disbursements to repel it; avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts which unavoidable wars have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear. The execution of these maxims belongs to your representatives; but it is necessary that public opinion should co-operate. To facilitate to them the performance of their duty, it is essential that you should particularly bear in mind, that towards the payment of debts there must be revenue; that to have revenue there must be taxes; that no taxes can be devised which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects, (which is always a choice of difficulties,) ought to be a decisive motive for a candid construction of the conduct of the government in making it, and for a spirit of acquiescence in the measures for obtaining revenue which the public exigencies may at any time dictate.

Taxes must be paid, though of course no one wants to pay them; so, therefore, great prudence is required in choosing the ends on which they are spent, so that only for weighty reasons are both taxes levied and revenues disbursed, by the considered vote of those in Congress assembled, in line with public opinion, itself reasoned and prudent.  Likewise, if, in opposition to the warnings of Washington, government debt accumulate, great efforts must be made to repay it, lest, as he so rightly says, "posterity [bear] the burden which we ourselves ought to bear".

The good President also warned his fellow citizens against the evils and dangers of political parties and factions, and pointed out how religion underpins morality and thus, the virtues necessary to the citizenry of a free republic.

Would that such advice had been better heeded, and would that it be heeded now.

At least I may see the Aussie dollar go sky-high, the better for me to shop online, if default eventuates – assuming that the Chinese economy, on which Australia's present unequalled prosperity depends, doesn't itself undergo an alarming plunge.  It is a particularly Australian vice to live in a fool's paradise, prating about this being the "Lucky Country" without realizing how extremely lucky we are, how through sheer dumb luck we live happy lives and free.  

How lucky we were back in 1942, when our new North American friends came to our aid, when we were in a panic over Japanese invasion; if that had eventuated, without assistance, our own Federal Government's plan had been to abandon most of the continent, and attempt to defend only the south-eastern corner between Melbourne and Sydney.  How lucky we've been to avoid suffering a recession during the Global Financial Crisis these last three years, thanks to our selling iron ore and so forth to China.  (How ironic, given that similar sales to Japan were a controversial issue in the 1930's.)

A future predicated upon a greater dependence on a rising China, and less security provided gratis by a declining America, is not at all a happy vision.  Isn't there a poem about someone going for a ride on a tiger?

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