The Final Battle

In October 2004, Osama bin Laden issued one of his famous videotapes in which the head of al Qaeda said his group's goal is to force America into bankruptcy.

Bin Laden had not been heard from in almost three years. Posted just before election day, the video was clearly directed at an American audience that was facing a decision - continue with the status quo, or reverse course with new leadership. The CIA had just reported that Saddam Hussein did not have weapons of mass destruction, placing in doubt the credibility of President Bush's decision to invade Iraq. The number of U.S. casualties had topped 1,000, the Abu Ghraib atrocities were front-page news, and a new government in Iraq gave a glimmer of hope that American forces should and would be coming home soon.

Bin Laden's missive gave Americans even more to consider. "We are continuing this policy in bleeding America to the point of bankruptcy. Allah willing, and nothing is too great for Allah," bin Laden said. He said his fighters did the same thing to the Soviet Union in Afghanistan in the 1980s, "using guerrilla warfare and the war of attrition to fight tyrannical superpowers."

"We, alongside the mujahideen, bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat," bin Laden said.

He also said al Qaeda has found it "easy for us to provoke and bait this administration."

"All that we have to do is to send two mujahedeen to the furthest point east to raise a piece of cloth on which is written al Qaeda, in order to make generals race there to cause America to suffer human, economic and political losses without their achieving anything of note other than some benefits for their private corporations," bin Laden said.

As part of the "bleed-until-bankruptcy plan," bin Laden cited a British estimate that it cost al Qaeda about $500,000 to carry out the attacks of September 11, 2001, an amount that he said paled in comparison with the costs incurred by the United States.

"Every dollar of al Qaeda defeated a million dollars, by the permission of Allah, besides the loss of a huge number of jobs," he said. "As for the economic deficit, it has reached record astronomical numbers estimated to total more than a trillion dollars.

"It all shows that the real loser is you," bin Laden said. "It is the American people and their economy.""It all shows that the real loser is you," bin Laden said. "It is the American people and their economy."

The total U.S. national debt, now over $14 trillion, was more than $7 trillion in 2004. The U.S. federal deficit in 2010 was almost four times as much as it was in 2004. Our unemployment rate rose from 5.4% in October 2004 to 9.2% today.

Now, Osama bin Laden is gone. Good riddance. But his legacy lives on. For our national leaders are now embroiled in a battle over whether to raise the national debt limit, to accommodate the hemorrhage of red ink of the past decade, or dive into the untested waters of default.

Most economists agree that the ramifications of default are catastrophic. An unprecedented downgrade of the nation's creditworthiness could send shock waves through markets around the world, raise interest rates and fuel inflation at home, and gut the struggling economic recovery.

It is no longer a question of how the crisis will be averted. Whether spending will be cut, Social Security or Medicare are trimmed, or taxes are raised, the common denominator is that the debt limit must be raised. Everyone wants their pet preference pampered. Everyone wants to be able to crow to their constituents that they solved the problem. That's great re-election fodder. But it's selfish, and doesn't help the common good.

Those who push us to the precipice are in fact fulfilling the prophecy of Osama bin Laden. He and his minions would love nothing more than to see our economic collapse. For that, the stage has been set. While bin Laden is not entitled to all the credit - we injured ourselves by allowing the mortgage industry to run unchecked - we spent billions on an unnecessary war in Iraq and are achieving limited success in Afghanistan chasing the Taliban.

The President is ready to strike a deal to extend the debt ceiling. As he said in his press conference on July 22, he's been left at the altar more than once. However, Republican negotiators have repeatedly walked away from the table, failing to reach an accord to avert this calamity, always coming up with an excuse as to why they cannot say yes and follow through on a commitment.

Nobody ever gets everything they want in a negotiated settlement. Everyone must give in order to reach a deal. But some extremists on the right have taken rigid pledges that they'll vote for no new taxes - a pledge that sounds great, but in reality is naive. It ties their hands and prevents them from having the necessary flexibility to deal with the facts before them. There is no single solution; what's needed is a balanced approach to stem the tide, and some are too bound to dogma to be of any help. There will always be time to revisit those issues. But here and now, we need to avert this crisis and extend the debt ceiling.

By their actions, John Boehner, Eric Cantor, Paul Ryan and their Tea Party compatriots do nothing less than give aid and comfort to al-Qaeda. As each minute slips by, as the August 2 deadline draws near, al-Qaeda's remaining leaders keep their fingers crossed that their unwitting allies, the Republicans, will stand their ground and bring America to its knees.

Let's hope sanity will prevail. Heaven help us all if it does not.

Spitting in the Fiscal Wind

Responding quickly to save us from tumbling into a recession, President George Bush and House leaders have proudly unveiled an economic stimulus package worth some $150 billion. If approved, the plan will distribute checks to households across the country this summer. The resulting spending spree will spur the economy into a new era of prosperity.

Yeah, right.

The problems with the American economy run deeper than that. Huge overseas trade deficits, a shrinking dollar, federal budget deficits (except in the Clinton era) and incessant consumer borrowing are taking their toll. The chickens are coming home to roost.

We have transitioned from an agricultural economy to a manufacturing economy to a service economy while much of the world still lies in poverty. As a result, it’s cheaper to have paperclips made in China and imported to the United States than to hire American workers to do the job.

While that may keep consumer prices low, it also keeps Americans out of work, and fuels foreign economies that compete for market share. A recent U.S. Business and Industry Council report showed that only five of 114 U.S. industries gained market share against import competition between 1997 and 2006.

Foreign investors, flush with currency from selling paperclips to Americans, have been buying U.S. Treasury notes, in effect financing our budget deficits. But the same interest rate cuts approved by the Fed to stimulate the economy also make the purchase of Treasury notes less attractive to foreign buyers. At some point, those foreign investors will decide U.S. Treasury notes and assets are no longer safe havens, and will either quit buying or start selling them, investing their money elsewhere. At that point, the value of the dollar will plummet and the value of other currencies like the euro will continue to rise.

Meanwhile, we all know the government has been running record deficits, passing our responsibilities to future generations. After the Bush administration’s tax cuts for the super-wealthy, our government only collects enough non-Social Security revenue to cover two-thirds of the government’s non-Social Security expenditures, including a frivolous war that has cost $1 trillion so far. And, of course, the Republicans want to make those tax cuts permanent. That tax policy gives millions of Americans — an entire generation — the message that it’s all right to borrow from the future for instant gratification. That’s not a good message to send. Borrowing another $150 billion to spit in the wind doesn’t help.

It’s clear we need to cut our budget deficit and improve our trade imbalance. But American consumers are hobbled with stagnant income growth, rising energy prices and nagging consumer debt. They consequently shop for the best bargains available, which fuels the demand for cheap foreign goods, and the cycle continues.

The fact is that for most Americans the refund will vanish into the black hole of their everyday bills. Much of that burden consists of high interest rates on credit cards and consumer debt, and even higher rates on heavily promoted payday and signature loans. As consumers become more desperate to stay afloat, a greater percentage of their available cash goes simply to interest, which produces no goods and no real economic benefit. The consumer loan and credit card industries have mushroomed in the past decade, largely unregulated thanks to millions of dollars in lobbying spent to curry favor with Washington under the “pro-business” banner.

CNN’s Lou Dobbs, who has one more Harvard economics degree than I do, says the Fed rate cut and stimulus package are “nothing more than bandages for a hemorrhaging economy.” He’s right. The economy is hemorrhaging because people don’t have enough disposable cash to buy American, thereby putting Americans to work and fueling the nation’s economy. Sure, American goods cost more in part because American workers make more money than Chinese workers. But a Chinese worker isn’t likely to buy American, employ an American or pay U.S. taxes, and it’s that type of demand that’s needed to bolster our economy.

Instead of a token one-time drop in the bucket, consumers need long-term relief. We need to abandon the foolhardy Bush tax cuts to generate additional tax revenue and rebalance the budget. But Congress also needs to direct the Federal Trade Commission to get serious about curbing usurious interest rates and predatory lending practices. That will put real dollars into consumers’ pockets, month after month, with which they can afford to buy durable goods from American manufacturers. The dollar will consequently strengthen, the home mortgage foreclosure rate will drop, and our trade deficit will shrink without excessive inflationary pressures.

The solution therefore is not a hot check from Washington, but sound fiscal policies that help consumers revitalize the U.S. economy for the long haul.

- Edmond (OK) Sun, February 1, 2008
- AP photo