Now the bad news

Republicans may someday look on the re-election of George Bush as one of the biggest disasters that has ever befallen their Party

Now that Bush has safely won, it is safe for me to begin bitching about him again….

Yes, of course I voted for him. I earnestly believe that his foreign policy approach is by far the nicest of all the options available to the United States. Assisting the cause of freedom around the world – and particularly in the Middle East – gives us the only chance we have of avoiding a larger and more catastrophic war. Unstable, nuclear-armed Arab countries pose a real threat to the existence of the West. Letting this threat ferment and strengthen was not much of option: It was suicide. This, admittedly, is arguable, but I think the weight of reason tips the scale in favor of intervening now rather than letting the Middle East develop newer and better-armed forms of tyranny. This is going to be messy, but it must be done.

I enthusiastically voted for Bush mainly for this reason.

Going into the booth, I was well aware of his faults – his protectionism, his indifference to an overbearingly large government, his comfort with the evangelicals, and his love of big ticket programs – but I, like most other voters, ignored them in favor of something that is vastly more important: national security.

But it was more than that: I think the Democrats have lost credibility when they talk about much of anything. They criticize Bush and the Bible thumpers, but they are in bed with forces that just as bad (and maybe worse): trial lawyers, unions and left wing academics who make careers of stoppering economic and political freedom. Their populist message can be reduced to “tax the rich to buy benefits for the middle class,” but its import is undercut by the basic unfairness of the tax code. Nearly all our federal revenue comes from the top 50% of taxpayers (the rich), but the super rich (like John Kerry and John Edwards) use clever manipulation of the code to avoid paying anywhere near their “fair share.” The Democratic Party has become increasingly protectionist (am I the only one who sees it as odd that a party so full of anti-business sentiment is eager to pass out trade perks to businesses?) and no one would ever accuse the Democrats of being the party of financial responsibility.

Yes, Clinton did balance the budget – so I’ve been told by Democrat after Democrat – but in the ‘90’s, doing that was simple: the economy was growing rapidly. With this growth, tax revenues exploded. The economy was growing because Clinton ignored his liberal impulses and practiced laissez-faire capitalism (I’m sorry to remind the Democrats who had blissfully forgotten this inconvenient fact): he decided that he wasn’t going to nationalize the doctors or destroy the health insurance industry. He signed NAFTA, and left business to do as it pleased. I salute him for it. The Democratic Party, though, has forgotten Clintonian policy while embracing him personally (watch his hands).

But back to Bush. I think there are many reasons why Republicans may someday look on the re-election of George Bush as one of the biggest disasters that has ever befallen their Party. Unfortunately for them, the Democrats may not be in much of a position to take advantage of it.

The problem is the dollar. It is not all George Bush’s fault: the Bush people are eager to blame others – they say that sluggish growth in Europe and Japan is helping to create a current account deficit (a trade deficit) that threatens the dollar’s value, and there is some truth in this. Indeed, in real terms, both Japan and Europe are poorer relative to the US than they were a decade ago. That is their problem and they seem loathe to do the things necessary to correct it (freeing up their labor markets, reducing government spending and liberalizing trade).

But the Europeans are also right to point the finger back at the Americans: the real problem is the explosion of federal spending that has occurred under Bush’s watch. This spending has cheapened the value of the dollar, and many foreigners are beginning to question why they are holding so much of a depreciating currency. The sell-off may continue.

Currency fluctuations like this tend to be self-correcting: when a currency goes down in value, that country’s exports are cheaper in foreign nations and more are purchased. Cheap currency often causes export-driven growth, which eventually drives up the value of the currency in the home nation.

Usually.

The problem is that the US is the world’s largest debtor nation, and the dollar underpins the word economy. Foreigners could always be depended on to eagerly buy dollars.

Is that about to change? No one knows the answer to that question.

But if it does, the result for the US economy will be very painful. Bush –and the Republican Party – will be blamed.

What is to be done?

The good news – for fiscal conservatives - is that Bush now MUST reduce federal spending.

The bad news – for everyone – is that he probably can’t.

The sad truth is that Washington’s spending is out of control. Literally. Only about one third of government spending is discretionary. The rest of that spending is Social Security, Medicare, debt payments and other assorted benefit programs that Bush could not cut even if he wanted to.

It is going to be difficult to cut the remaining third enough to make a big difference.

Not while fighting a necessary war. And beginning the important – and expensive - task of reforming Social Security.

To make matters worse, the new Medicare drug benefit – which the stupid chimp himself signed into law in 2003 – will start taking effect in 2006. It will mandate hundreds of billions of dollars of new spending in that year, and the price of that new program will only go up.

For fiscal conservatives, the Armageddon that we have been warning about is here.

I will take no satisfaction in having predicted it.

Bush is in for a rough four years.

Now back to your regularly-scheduled, post-election Republican euphoria.

- posted by total @ 12/05/2004 09:57:00 AM .