Harvard Professor Niall Ferguson Warns Of Fall Of The US Empire
Writing on the growing U.S. trade deficit, I remarked yesterday, Increasing trade balance is followed by shrinkage of economy and the prospect of decreasing worth of the nation’s currency . President Barack Obama’s national debt commission painted an even gloomier picture as the country is under pressure to get control over its uncontrolled spending.
The bi-partisan commission is headed by Alan Simpson, a former Republican Senator from Wyoming, and Erskine Bowles, a former White House chief of staff under Democratic President Bill Clinton. The task of the 18-member commission is to devise a plan by Dec. 1, to reduce the government’s annual deficits to 3 percent of the national economy within five years.
Attending a meeting of the National Governors Association, both Simpson and Bowles came with similar messages that the runaway fiscal train must be brought to a halt. All considerations shall be on the table—including ending tax breaks, home mortgage deductions, and redefining Medicare coverage.
Simpson pointed to the spending on Medicare, Medicaid and Social Security programs that add to the growing deficit, and added, “The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans, the whole rest of the discretionary budget, is being financed by China and other countries.”
Simpson and Bowles have impressive records in reining in deficits in the past; nonetheless, both agreed that they were not confident of success in the current perspective. They have company in Harvard Professor Niall Ferguson.
While opening the 2010 Aspen Ideas Festival on Monday, Ferguson warned that if the rising U.S. debt level is not brought under control, the American “empire” may collapse.
Ferguson cited examples of the former Soviet Union and the Roman Empire and said the tipping point is reached when the cost of servicing an empire’s debt becomes larger than the cost of its defense budget. He said, “That has not been the case I think at any point in U.S. history. It will be the case in the next five years.”
This indeed is a grave warning. Ferguson was completely in tune with Simpson and Bowles with his analysis and blamed the present condition on the combined factors, such as the Great Recession, federal stimulus, two ongoing wars, the Bush tax cuts, and a growth in social entitlement programs.
Obviously, the solution to the current problem will require a drastic reduction in defense spending, which is not foreseeable given Obama’s desire to be a war President.
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