Monday, October 22, 2007

The Drury Sequence: Fiscal Conservatism

Republican affinity #2: Fiscal conservatism

It is much more difficult to call fiscal conservatism a "Republican affinity" now than in 2004. Back then, there was unwarranted hope that Republican control of the Senate would rein in the profligacy of George W. Bush's first term. Not only was that a pipe dream, but the leading Democratic presidential candidates are falling over each other to be known as balanced-budget advocates. They're all trying to play catch-up to Hillary Clinton, who can point to her husband's attainment of a fiscal surplus during his presidency.

China and Japan hold most of our $9 trillion ($9,000,000,000,000, or about $30,000 per American) dollar-denominated debt. Right now, neither country could demand or expect to receive payment, except for a barely plausible diplomatic stunt. However, China accumulates its credit in the form of 30-year Treasury bonds. By 2040, China will be much less dependent on the United States as an export market; already, it is cultivating closer trading relationships with Russia, the European Union, and its East Asian neighbors. China won't call our bluff this year, or even in the next decade, but I suspect it will do so sometime in my working lifetime.

If we conduct an immediate, orderly withdrawal from Iraq, as we should, the budget would soon return to the small surpluses of the later Clinton years. If we can't repay our debt as it stands, it would be amazingly foolish to accumulate more debt when our bankbook is already stretched thin. I stand with the Democrats, and I suspect Drury would now agree with me.

1 comment:

Sally said...

Hey, what happened to your regular posts? You were doing so well, and I was really looking forward to the rest of the Drury Sequence!

Your most devoted reader (oh, and your girlfriend),