ell it is finally here--the general election campaign. Already we are hearing meaningless mealy-mouth mumbo jumbo about who is the real agent of change, who has the most experience, who is the most liberal, who is the most green, etc., etc. It is time for the candidates to step up and start addressing the serious issues and challenges facing our country. As I see it there are four primary issues that are interrelated in any potential resolutions as they all pose significant implications for the Federal Budget and the economy.
Addressing any of these challenges in a meaningful way will certainly require significant funding, policy changes and sacrifice from multiple vested interest groups. I hereby challenge both Senator John McCain and Senator Barack Obama to drop the platitudes about change and give the American electorate what they deserve--clear and unambiguous policy positions regarding these critical national issues. In this series of posts I will discuss each of the issues and the facts influencing any future policy directions of the next administration.
Any policy undertaken by the next administration to seriously address these challenges will have serious implications for all. Furthermore, their interconnectedness implies that choices made in any one area will necessarily determine to a large extent the policy choices remaining in any other--there is only so much pie. And mostly Republican happy talk about growing the economic pie through tax cuts intended to stimulate economic activity was proven over the last eight years to be so much Keynesian Kool-Aid in an environment of ever increasing public and private sector debt. We simply can no longer afford such simplistic platitudes to what are intrinsically complex problems. Let's get serious. The US Current Account Deficit (determined primarily by the differences between inbound and outbound trade and investment) has hovered around 5% of GDP for some time now. [1] This has always proven unsustainable throughout history. A super cycle is beginning to unwind whereby interest rates that have been kept artificially low (actually they have been negative after subtracting inflation) due to irresponsible FED monitary policy and our trading partners willingness to "invest" their enormous trade surpluses buying our public and private sector debt (such as US Treasury Notes and Mortgage Backed Securities) thereby supporting the dollar. Now that this super cycle is coming to an end, the dollar will continue to fall forcing up inflation and forcing the Federal Reserve to raise interests rates further depressing an already weak economy.
1. National Security: The Iraq War and the War on Terror
Some of you may be aware that our government is currently negotiating a US-Iraq Security Agreement (the current UN Security Council mandate for the US presence in Iraq expires at the end of this year). A new agreement would essentially spell out the conditions for a long-term US military presence in Iraq. In the last week, a majority of Iraqi Shiite and Sunni lawmakers sent a letter to the US Congress stating that they intend to reject any such agreement that "is not linked to clear mechanisms" obligating U.S. troops to leave "with a declared timetable and without leaving behind any military bases, soldiers or hired fighters." [1]
Folks the war is over. There is no possibility of a long-term American military presence in Iraq regardless of what Senator McCain says. In fact the Iraqi government's own compromise agreement would require that US troops be confined to military bases after the end of the year. This is what I refer to as the "Sitting Ducks Compromise". As far as I am concerned we should declare victory right now and start bringing the troops home with a declared timetable that allows Iraqi politicians to continue their process of reconciliation and securing their own country. And protests from the loony war mongers on the right about ceding progress on the ground are largely irrelevant. It is not the responsibility of the US to settle all of the centuries old grudges between Kurds, Sunni and Shiites there. In fact, I think we have done more than enough already frankly. It is too bad that this Administration saw fit to oust an unreligious tyrant (Saddam Hussein) and replace him with al-Qaeda and the Iranians.
A US withdrawal will also end the war-related hemorrhaging in the US Federal Budget. The Iraq war is costing US tax payers over $720M per day consisting of $280 million in Iraq war supplementary funding bills passed by Congress and another $440M in unpaid costs such as veterans long-term health care and assistance. This is enough money to buy health care for 423,529 American children or outfit 1.27 American million homes with renewable electricity. We also need to redirect some of these funds to beef up US military operations in Pakistan and Afghanistan. The next administration will not have any funds to address any national challenges without a quick cessation of military activity and expense in Iraq.
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