Goin' Broke The Cost of War
 Goin' Broke Essay Winners
 Volunteer Speaking Our Peace "Remembering"
Merle Hansen
By Paul Olson, NFP President Global Warming Troubling Questions about ‘Cap and Trade’
By Professor Bruce E. Johansen Nebraska Peace Stratcom
The Most Dangerous Place on the Face of the Earth Whiteclay
Updates on Nebraska's tiny reservation border town. StratCom Conference Space Conference
 Visions for Peace Visions for Peace
 Checks On Power Use these online tools as resources for holding Obama to his campaign promises:

STATE OF CHANGE
CONGRESS MATTERS
FOCUS THE NATION
350
THE WHITE HOUSE
 NFP Sticker Get Your FREE
NFP Bumper Sticker!
Just send us an Email.

War and Debt:
The Don Reeves Alternative to a Draft

Paul Olson
UNL Professor Emeritus

I want to follow-up on my discussion of the draft in last month’s column. First some personal anecdotes.

Last month I did my usual Christmas financing ritual. I calculated how much I was going to spend on charities and Christmas gifts. I then googled my checking account to see if it was sufficient to cover my calculations. It wasn’t. So I went to my savings and took a bit of money there. Thus I avoided a lockup for writing ‘insufficient funds’ checks. I’m still a free man.

I don’t believe in debt. I don’t borrow. My medievalist anti-usury beliefs run deep. The only debt I ever incurred was the cost of buying the ‘A’ Street house, and that was when the house payments there were less than standard rent. I buy junkers to avoid car payments, and I don’t buy much of anything else save for food. It shows in my lifestyle. My parents never borrowed, even for their house. They rebuilt an old one. Grandpa Olson never had any debt after he came from Sweden. We are a stingy lot — as I suspect are most Nebraskans. Personal debt is forbidden save for farm debt, and that can’t be helped.

Which brings me to my topic. Why are we in conservative Nebraska so eager to support debt-making militaristic regimes? I said ‘militaristic.’

We, Nebraskans, have voted for all of the militaristic administrations from the 1960s on — Lyndon Johnson’s, Nixon’s, Reagan’s, George H.W. Bush’s and George W. Bush’s. Nebraskans call them ‘conservative,’ but they are anything but. Conservatism means the rule of law, personal integrity, individual freedom, frugality, avoidance of violent ruptures, and the eschewal of overseas ventures. American ‘conservatism’ has none of these. It no longer includes respect for the central values of great conservative thinkers such as Edmund Burke, Samuel Johnson, and the conservatives among the founding fathers. They sought slow but real change to conserve the significant valid institutions, distrusted abstract ideology, concerned themselves with the ravages that poverty inflicts, and distributed power among the various classes and estates. Eisenhower was the last conservative president. One may disagree with the old conservative positions, but those who advocated them were not generally the pimps of privilege alone.

When contemporary Nebraska votes for ‘conservatism,’ it votes for soaking the poor, endless militarism, violent nationbuilding and radical interventionism in the affairs of other nations. It votes for centralized profligacy and power, and mountains of debt.

We are really, really, really in debt — as little kids would say. The national debt approaches 9 trillion dollars or nearly $30,000 per person. The national debt when Reagan took office was less than one trillion. The debt was run up tremendously under Reagan and George W. Bush, then the rate of increase diminished under Clinton. Under George W. Bush, the national debt has in six years increased by nearly three trillion dollars. About one-half trillion, including supplemental appropriations, has gone to the War in Iraq. According to the staid Council of Foreign Relations,

[S]ome economists predict the entire war, based on projections U.S. forces will remain in Iraq until after 2010, may cost over $1 trillion. The price tag has drawn criticism not only because prewar projections by the White House were closer to $50 billion, but because of the manner in which the bill was budgeted: through supplemental requests, often with little time for congressional oversight or full disclosure of how the money is allocated. ‘It’s a question of budgetary integrity and the degree to which you are doing this outside the normal budgetary process in a way that lacks sufficient oversight,’ says CFR Chair in International Economics Douglas Holtz-Eakin, former director of the Congressional Budget Office.

What are the effects of all this? When I am in danger of overspending, I either have to cut the grocery bill or earn a little extra money somehow. I certainly have to exercise oversight over my spending. When the government spends more than it takes in, you would think that it would tax more and look at how it spends. But this administration has decided that it is indelicate to tax really rich people and unfair to look at how money is spent in Iraq. Thus, the same people who profiteer from the war that spares their children also get the new top one-percent income tax breaks. We tax the poor, kill the rural and poor, and bankrupt the nation to pay for our war games for the really rich.

But what of the argument that Dick Cheney has made that “Reagan proved that deficits don’t matter?” As Linda Bilmes, who teaches budget and financial management at Harvard’s Kennedy School of Government, argues in the Washington Post, the Reagan prosperity years were the product of temporary unique circumstances. The Reagan debt remains and the Bush-Bush debt remains. Peter R. Orszag, Joseph A. Pechman Senior Fellow and Deputy Director, Economic Studies at the Brookings Institute, has analyzed in depth the effects of our continuing massive debt:

[According to conventional analyses, deficits] decrease national saving, reduce domestic investment and increase borrowing from abroad… The reduction in national saving raises domestic interest rates, which dampens investment and attracts capital from abroad… The reduction in domestic investment (which lowers productivity growth) and the increase in the current account deficit (which requires that more of the returns from the domestic capital stock accrue to foreigners) both reduce future national income, with the loss in income steadily growing over time. Under the conventional view, the costs imposed by sustained deficits tend to build gradually over time, rather than occurring suddenly.

But Orszag argues that the conventional view is too benign. Debt on our scale may lead to rather sudden and drastic effects: the national debt creates fear of high inflation to reduce the debts, a loss of confidence in foreign exchange markets, subsequent loss of American investor and creditor confidence and reinvestment in non-U.S. markets. It leads to internal increases in interest rates, depreciation of exchange rates and reduced confidence in stocks and personal wealth. It also creates an increase in interest rates and a further depreciation of exchange rates, a follow-on increase in longterm interest on credit, and, finally, a mutually reinforcing cycle undermining confidence in the economy leading to a depression in economic activity. Some of the effects that Orszag predicted are already happening: for example, the dollar has gone into the pit against more stable foreign currencies like the Euro. Massive debt eventually creates massive inflation, so cheap money can pay it off, or depression, because our credit is overextended.

In the context of this war and the Bush/ Cheney Administration’s ‘super-capitalistic’ destruction of the conditions that might make capitalism work long term, Don Reeves, the first president of NFP, has made the following proposal, as an alternative to Rep. Rangel’s draft proposal discussed last time. This kind of tax would put the silent majority into the streets and might delay, if not prevent, the Orszag crisis. It’s worth a try. Let the debate on this proposal begin and let it begin in Nebraska.