Has the US time for a Maastricht?

I've spent a pleasant part of Sunday morning on the internet, looking at the report published last week by the General Accounting Office of the United States on the mid-to-long term fiscal outlook for that country.

Don't click off. I know that must be one of the least enticing 'chat-up' lines in blog history, but the position of US tax and spending affects us all. The present global problems are in part due to a serious imbalance between an overvalued dollar--because of its use in third-party, non-American transactions, which means that non-American countries demand it and keep its value up--and the budget and trade deficits that America runs.

Serious instablity in America is manifesting itself in below-the-radar unemployment, as part-time people and those crunched by the withdrawal of credit realise that they will never earn enough to repay debts or to gain the things that their society tells them are important. Western banks lose out, as they find that the credit that fuelled their irresponsible use of derivatives dries up, and hedge traders profit from the crazy swings of shares and differences between interest rates as money becomes volatile all over the west and Japan.

So, what do the figures tell us? To quote;

Our long term simulations show that absent policy actions the federal government faces unsustainable growth in debt.

The report lays out some five events (amongst others) that have happened or that are happening that seriously hobble the United States in the near future. The baby boom generation is becoming eligible for social security; medical insurance outlay is now above cash income; the baby boomers are becoming eligible for medicare; by 2017, medicare will not be able to pay out on 81% of claims; by 2020, debt will overtake the world war two record.

The survey by the GAO confines itself (mostly) to Federal debt. The United States has fifty states and 850,000 elected authorities, however, and the situation in most of these is dire. Some thirty eight states are suffering because of balanced budget amendments enacted in the nineteen nineties, which the federal government narrowly avoided, that preclude the states from running deficits. This means that states have to fire people, and slash expenditure, and borrow at high rates--all at once. Though not all are affected (Texas notably isn't), most are in dire trouble.

The Chinese government is this weekend giving further signals that it will soon withdraw from funding American debt. Currently, it holds around a trillion of America's twelve-and-one-half trillion debt, with Korea, Japan, and the EU holding more. The Americans may soon be reduced to blackmailing the world that they will let the dollar fall if people don't lend.

Neither the GAO nor other measures take into account the cost of war, open and covert across the world, nor of a broken healthcare system.

The blogosphere and print media have for some time resounded with comparisons of America to Rome. History never really repeats, and all that I would point out is that Rome nearly fell in the third century, before a golden age, as well as in the west in the sixth century. Gallienus, the intellectual, 'cool' Emperor was faced by many of the same problems as Obama, Bush and Clinton were, and he left an Empire that sparked the Aurelian Restitution--the restoration of the world and a golden age of Emperors.

We are in collapse territory now, though. The remarkable resilience of the American people is being tested to its limits. I find myself wondering if, rather than silly balanced budget amendments or a government fitted only for tax cuts and war, which the republicans seem to want, and to which Democrats contrast Keynesian overspending, America's governments need a Maastricht. By that, I mean a fiscal authority in each state, or an agreement, that debt will be held down within flexible limits, that government will shrink with taxes in the long run, and that a firm schedule for repayment will be published and clarified.

The policy changes in the next few years are going to be some of the most wrenching in American history, and they will also involve a retreat from global power. How America handles this, given the infiltration of its government by highly organised lobby groups and the sundry banking coups of the last few years, will be one of the most interesting (and traumatic) challenges any state can face.

For ordinary Americans, the question may be quite simple; are you facing deflation, and unemployment, and debt in the future--in which case you should pay down your debts--or inflation from the entry of dollars onto the market in great number, in which case your debt may decline in value, alongside your ability to purchase food and energy?

It's all very well dwelling on the grotesque selfishness of the baby boomers that brought you to this point, and to the singular guilt of the Bush Administration, which began by stealing an election and proceeded through war, crime, and dissipation to this point. But that is not going to solve the problem. What, short of war, I wonder, is?

And Britain? Well, that's simple. It's f*cked, and very few here have any clue what is going to hit them in the next few years.


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