Wednesday, November 08, 2006

Swapping caviar for butter..but keeping the war

Way back in the dark ages, when your author was a mere child and the Vietnam War was a Democratic initiative, President Johnson's team dusted off a well worn phrase, "guns and butter" to describe his economic policy of coincidentally funding both the wars on Communism and Poverty. In 1968, Richard Nixon won the Presidency from Democrats by promising a victorious end to the Vietnam War with honor. However, neither a victorious end nor honor (nor Nixon for that matter) were seen when the US finally left Vietnam in 1975.

Even sweeping electoral changes which would seem to argue for a change in foreign policy often take years to manifest. While dissatisfaction with the War in Iraq likely (according to exit polls) fueled the termination of Republican control of the House of Representatives, the Democrats are only talking of "phased redeployment" not complete withdrawal with the redeployment conditioned on the Iraqis' ability to stabilize the country. I assume "stability" will be assumed to occur with the permanent US bases in Iraq intact.

In other words, the War in Iraq is a long way from over. As in 1968, the new boss will prove to be quite similar to the old boss in certain respects.

However, in other respects, the focus will shift. George Bush's economic choices of guns and caviar, or so I consider the choice to fund both the war and tax breaks for the rich will shift back to guns and butter, at least until the hard choices of funding entitlement programs is faced. I won't hold my breath for that one.

The Democrats New Direction for America consists of six items, or as they call it, six for '06.

  • Real Security - at home and overseas: reclaim American leadership with a tough, smart plan to transform failed Bush administration policies in Iraq, the Middle East and around the world.
  • Prosperity - better American jobs and better pay: raise the minimum wage and end tax credits for corporate job outsourcing
  • Opportunity - College access for all: make college tuition tax deduction permanent, cut student loan interest rates, expand Pell grants
  • Energy Independence - lower gas prices: free America from dependence on foreign oil
  • Affordable health care - life saving science:
  • Retirement security and dignity: Keep social security public, enact real pension reform to protect pensions from corporate looting

As you can see there are no calls for a rollback of empire, but rather a call to find a way to win. Without the financial benefits of empire, or so policy makers see them, funding the other needs will be that much more difficult. The empire experiment will continue for at least a few more years.

The Democratic plan, it seems to me, is merely to better appease the "unwashed masses", swapping caviar for butter. I expect this shift in focus will finally unleash the inflationary forces partially held in check by the rich man's penchant for investing in paper markets. As labor's share of national income rises under the Democrats wage push inflation will come back into play. Wall Street's share of the flow of funds will decrease.

Given the raised hopes of the populace following a successful, in the sense that the vote totals matched the polls, election, faith in the painless solution will initially grow. Democratic plans to maintain the empire and, for instance, end our dependence on imported oil will require massive investment and writedowns of obsolete infrastructure. Ending the empire dreams, which I believe inevitable, will also require massive writedowns. Faith in the free lunch is alive and well.

While the election of '06 was a referendum on the Bush doctrine, now seen as a failure, it wasn't a call for a shift to a more humble foreign policy. The US has yet to experience its Eden moment (in reference to Britain's Prime Minister from 1955-1957). On his death, the Times of London wrote that Eden was the last prime minister to believe Britain was a great power and the first to confront a crisis [Suez] which proved she was not.

The real financial reckoning will not arrive until America refuses to see itself as the driving nation of the world but rather one of many. In the meantime, the slow death of the US$ will continue, albeit, I believe, at a quicker pace.

All of which is not to argue that, as an opponent to the notion that the US should be an empire, I didn't find the election results heartening. I was surprised to see the benefits of incumbency (non-euphemistically: the ability to cheat, which has always been a feature of American representative government) so easily vanquished.

I'm merely arguing that, to borrow a phrase from the film, The Matrix, residual self image as an Empire tends to linger long after it is gone in fact. I can imagine skating from end to end during one of my hockey games, scoring when needed, but I can't do it anymore.