Looking into the Economic Abyss
The U.S., up against the debt ceiling


Conrad Black

Any such thing as this would be a start, only a start, and far from a jolting catapult out of the blocks; it could begin the process of sorting out the public accounts after several years of chaos, delusion, and indiscipline.While it would remove the current Damoclean overhanging threat, and the sensation of cold sharp steel on the scrawny and severable neck of public finance, it would be far from a solution. In fact, as only a Yeatsian eyeballing of economic oblivion seems to produce any useful movement in Washington, it could reduce the likelihood of a solution. Let no one doubt that the United States possesses the ability to solve the debt problem by relatively conventional means. It is a rich country with a coherent political system and an unprecedentedly and incomparably talented and motivated workforce, and is not under demographic threat. There is an increasing Latin American composition of the population, but the great majority of them are Christians eager to learn English and to get on in their new country as ardently as did the great waves of European immigration from 1825 to 1925.

All that is needed are deficit reductions composed of four parts spending reduction for one part revenue increase, and policies of economic growth. This essentially means cutting income taxes, raising discretionary consumption taxes, and modifying entitlements to reduce them to those people not in need of them, and to adjust them to actuarial facts that have changed in the last 65 years, especially enhanced life expectancies since the establishment of Social Security in 1935. Approximately a third of the presidents in the history of the United States would almost certainly have tackled such a problem. The last three have not, which should mean that next year the country should elect someone who will.

America has chosen a good time for its first serious decline since the descent to civil war in the 1850s. Europe, Russia, and Japan are in shambles, and India and China, though progressing admirably, are largely rudimentary and dysfunctional peasant nations. The problems of the Eurozone are much more serious than those of the U.S.: It is divided between over 15 language groups and many more distinct cultures; it has ramshackle institutions that have not faced a serious test; its population is declining, with no assimilable immigration to hand; and only about 36 percent of the entire population works and the rest is taking government benefits. Not only will the center not hold, the flanks won’t either. All the United States needs is another Truman or Wilson or even Polk. (With Washington, Lincoln, or either Roosevelt, it would receive requests from dozens of countries for colonial overlordship, as Germany almost is from formerly unhappily occupied countries now.)

Europe will have to accept structured default refinancing for countries that entered the Eurozone while overvaluing their currencies, cushion the impact of these events on the private-sector financial system, and, in the longer term, get a larger proportion of its population into the productive side of the economy, and — by some combination of cultural, psychological, spiritual, and incentivized renovation — get the birthrate at least back to zero population growth. This will require strong leaders in most of the big European countries at once, a much rarer occurrence than the emergence of an unusually talented U.S. president. But since it must happen, it probably will, eventually.

— Conrad Black is the author of Franklin Delano Roosevelt: Champion of Freedom and Richard M. Nixon: A Life in Full. He can be reached at [email protected].