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With the hour of reckoning on Health Care at last behind us, it’s time to start shifting focus to the other great issue of the next election cycle: America’s credit rating. I’ve never been a big watcher of economic issues: the Clinton years hardly warranted it, and it was just one more tick on the list of things to hate about Bush. But now the combination of a liked (no longer loved) president and a still crappy economy begs a closer look at what exactly the analysts are talking about when they’re not watching the vicious cabaret of David Paterson’s self-destruction. And so I give you an initial, clumsy attempt to analyze what ails the national treasury.

The Reckoning aside, the cause of our fundamental economic problem, namely the Debt of Debts, remains twofold: we want things without paying for them, and our political leadership is only too happy to do so in exchange for votes. And while public consciousness of the problem has increased dramatically in the wake of the crisis, a solution remains politically impossible: the democrats are content to largely pretend the problem doesn’t exist while the GOP is willing to acknowledge it only so far as it benefits them politically. This is hardly the proper atmosphere for the development of a solution, as the shrieking din debate over healthcare amply demonstrates. The citizenry and the politicians have led one another into divorcing benefit from cost, and now attempts at a fix are viewed as unlikely at best, suicidal at worst. A number of proposals are actively being aired by the analytical class, ranging from the inestimable Fareed Zakaria‘s call for a value added tax and an end to homeowner subsidies, while on the other side of the political spectrum Republican congressman Paul Ryan has put forth a plan that basically advocates burning the welfare state to the ground and beginning anew.

So while it’s clear we have no shortage of ideas (not all of them bad) as to what to do about the problem, taking action is, as always, the source of the rub. Now, although this applies equally to both parties I’m going to use the GOP for this illustration as Ryan has more power with them than Zakaria does with the democrats. The GOP, despite having taken it upon itself to both uphold their declared principles of small government and responsible financing and thwart the democrats at every turn, seems bound and determined to ignore Ryan’s ideas almost entirely and continue riling the tea party by calling Obama and anyone who happens to agree with him a socialist (just as democrats accused anyone in the same room as bush a tyrannical lunatic) . Putting aside the many factual errors present in such an argument, it’s indicative of the extent to which the GOP has abandoned policy making in favor of gaining tea party votes by badmouthing the democrats. Given that the democrats did basically the same thing in 2006 with the set, this is certainly a valid electoral strategy. As far as actually governing the country though it continues the trend of hyperpartisanship eroding the functioning of the government: nothing important can be accomplished if the minority party does nothing but firebombs the majority with the promise of being swept into power with the next election and their counterparts continue the cycle. A very excellent (and I will warn you now, somewhat lengthy, but I link to the most relevant portion) article from the Atlantic monthly describes the problem thusly: while American society, despite all appearances on cable news, is perfectly fine, the government is growing increasingly incapable of dealing with the problems it faces, especially ones that involve the nigh-inconceivable sums of money it now deals with. The reasons go back to the beginning of this passage: the GOP knows it can’t adopt anything ryan says despite how well it meshes with their stated platform because the political reality is that any party that messes with entitlements would be drawn and quartered. Even the Tea Party is enraged not by the existence of medicare but by the perceived attempt to reduce funding to it. Which is one of the truisms of voter behavior: people hate government bureaucracies, except the ones that benefit them.

So what solution can possibly emerge from all this? Like so many other things, it all depends on time and the ever shifting winds of politics. Unlike healthcare, there’s far more broad based support behind Wall Street regulation in the wake of the Reckoning, and following healthcare momentum is on the democrats’ side. For their own survival the GOP may decide to call of their hissy fit and actually work to give some input into legislation if only to be able to say they actually accomplished something resembling governance in November. As so often happens in American politics, we may yet do the right thing, if only for the wrong reasons.


I’ve used this blog before to cast doubts on the widespread (and frustratingly popular) conclusion that inevitably we’ve at most 10-15 years left before we have to bow to our new glorious Chinese masters, and now the mass media appears to be slowly considering the possibility that the yellow peril may have been overblown.  Both the New Ledger and Newsweek have run articles declaring ambivalence on the idea of China’s inevitable hegemony over pretty much anything. The case runs thus:

Economy: While every economy on the planet has been firebombed by the Reckoning to varying degrees, China has emerged the least scathed of all by an almost horrifically aggressive stimulus program. While it has done its job of keeping the Chinese economy spectacularly afloat in the short term, no one has yet considered the long term costs. First, keeping banks loaning no matter what was how this entire debacle began in the first place, and Chinese leaders appear skittish to turn it off lest the economy subsequently tumble. Second, keeping factories producing is good for keeping people in their jobs, but is inevitably suicidal given that the markets for these goods have evaporated overseas as western consumers are in no mood for major purchases that don’t involve discounts on the scale of the last two Black Fridays. This is on top of the fact that the markets for these goods largely don’t even exist within China. Third, all of this is being pursued in the quest to keep the Chinese economy growing at jaw-dropping rates, which everyone knows isn’t sustainable and should now be able to recognize as the textbook definition of a bubble. This is in addition to the fact that historically as wealth among the population has risen so too has agitation for political rights, the Chinese are attempting to run a very careful tightrope of keeping their citizens wealthy enough to be content but poor enough to keep them from demanding more say over their personal economics.

Politics: While everyone has spent the last few years lauding chinese economic growth and stressing the growing importance of learning Mandarin, China has yet to actually translate any of these perceptions into actual soft power. As the Newsweek article points out, despite being in attendance at every international economic and political conference of import, they have yet to take any leading roles on major issues, preferring to react to the continued leadership of the US and Europe. Their focus on domestic harmony leads to extreme measures and crackdowns (RE: Tibet and Xinjiang) that both paper over the underlying problems at home and drive the perception abroad that the Chinese government is a thuggish dictatorship. Tales of local corruption, most spectacularly in the case of the tragic collapses of numerous schools following the great Sichuan Earthquake last year, remind the rest of the world that outside of it’s glittering cities China’s standard of living is still very firmly stuck in the third world. Finally, the government is prone to spasms of aggression, and though a significant thaw is in progress over Taiwan the mainland remains wary of the island so much as breathing in the direction of any solution that isn’t reunification under the CCP, and continues to rattle the saber at India and Japan  (notably over Tamil Nadu and continuing grievances over WWII, respectively) despite the benefits and necessity of economic ties to both. This has all led to the Chinese government being deeply unpopular among western publics and thus attempts by Chinese businesses to gain stakes in natural resources from Australia to the US have collapsed into political festivals of xenophobia and mutual recrimination.

Population: The New Ledger article also points out a fact that everyone seems to have been content to ignore: China is a demographic ticking time bomb. The One-Child policy has cleansed a generation of women, slowing population growth at the cost of creating a generation of single men that will be hard pressed to support the retirement of a baby boom that makes the US’s look like a mere hiccup. Given another generation or two Chinese leaders will have fulfilled their dream of finally controlling it’s admittedly insanely huge population at the cost of becoming the new Europe, which considering that continent is slowly dying is not a favorable comparison. Even less favorable is what the Chinese political landscape will look like as the Han die off and paranoia of the other ethnicities, already high, increases in direct proportion. In either case the picture isn’t pretty.

Now this isn’t to paint a picture of continuing American, or even Western, dominance should forecasts of Chinese hegemony fail to materialize. The fact that the West has a practically colonial relationship with China, wherein we use them as our collective manufacturing base and capital reserve, has created a situation where it’s stumble, if not Fall,  will create at best a second Reckoning, at worst the next true Depression. While I wouldn’t start waving red banners around anytime soon, we’re better off working with them than against them. The alternative is economic Mutually Assured Destruction.

-We’re All In This Together

May 2018
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