National Security And The Financial Crisis
(Or, how the Bush administration sold the nation to the Saudis and Chinese.)
An op-ed by James M. Ludes and Bernard I. Finel at the American Security Project makes the point that, no matter how we might ignore it, the current financial meltdown leaves foreign nations with a massive amount of leverage over the U.S. (h/t MyDD)All told, this crisis may cost the United States more than $1.5 trillion - a staggering, if necessary, sum. And with the federal budget already in deficit, every single penny of this will be financed by adding to the national debt.The concrete example the authors use is the way in which Eisenhower called in America's financial markers with Britain and France to get them to back off during the 1956 Suez Crisis.
Yet too little attention has been paid to who is financing that debt and what it means for the national security of our country.
... The debt we owe to countries that do not share our interests or whose interests may run at odds with our own has grown ... In 2001, we owed oil-exporting nations $48.5 billion - we now owe them $173.9 billion. In 2001, China held $61.5 billion in U.S. debt; it now holds $518.7. In 2001, Russia held less than $10 billion; it now holds $74.1 billion.
The new debt we are assuming in this crisis needs to be understood as a potential strategic vulnerability. Clearly, those governments buying our debt are investing in America, but they are also gaining leverage that we might wish they did not have.The United States had a stake in Britain's economic stability. But Eisenhower concluded that in this crisis, America had an even larger stake in forcing the British to back down. The Chinese, or others, may make a similar calculation about the United States in the future.It's a theme that Francis Fukuyama also visited recently. Someone has to pay actual money for the $700 bn bailout, the Pentagon's bailout-a-year budget and all the deficit spending the Bush administration has sunk into its misadventures in Afghanistan and Iraq. The U.S. isn't - as my colleague Fester puts it, the US is, as Fester puts it the U.S. is "broke and overpromised" - the Bush administration has been borrowing the money from China, the Saudis and so on. And the chances of their never, ever being strings attached to those billions in credit are absolutely nil.
... Debt-financed tax cuts and overly zealous deregulation have proven to be a failed social experiment with potentially dire national security consequences. We have long recognized that cuts to defense spending can sometimes hurt national security; so too must we acknowledge, once and for all, that tax cuts and runaway spending can do the same.
It's another fine mess the Stan and Ollie of the Republican Party have gotten America into in the last eight years, and perhaps the biggest one of all.