China and Debt

The war that matters is the one with China. Economists are the teachers and right now the Keynesians are not doing as well as they should because their messengers are failing to deliver the message to the public and congress.

The President and Senate are the blame for this.  For four years they have repeatedly told the public what they did not want, European style austerity; however they have not succulency said  they are seeking a plan that gets our budget under control over a 15 to 20 year time period and up front deliver programs that create jobs and puts us in a position to better compete in the future.

This plan would spur growth and control our debt over a time period that does no harm to our future. Presently we are in a game of we qi with China over the future world economy and we are losing.

In his book, The Art of War, Sun TZU, the Chinese philosopher advises his commanders to induce his opponent into accomplishing the commander’s own aims or force him into a position so impossible that he opts to surrender his army or state unharmed . This is what China has done with the debt we accepted without thought over the past 25 years. If we pay down debt to quickly we fall into the trap and lose
¹ The West’s favorite board game is chess while China’s favorite game is wei qi. Chess is about total victory while wei qi is about attaining relative advantage. The wei qi player must not only assess the pieces on the board but the reinforcements the adversary can deploy.

Debt and Cutting Off Our Nose

Balancing our budget in 10 years will do irreparable harm to our economy.

The world will not stand still as we put our fiscal house in order. It is projected by the National Intelligence Agency that China will be the leading economy in the world by 2030, 17 years from now. The NIA goes on to say “”By 2030 Asia will be well on its way to returning to being the world’s powerhouse, just as it was before 1500.” I don’t know about you, but I want my sons to have a good life.

In the late 1930’s and early 1940’s we made the decision to go deeply in debt to defend this country from Germany. Today we are under attack economically by China and other countries. We should not be going deeper in debt; however, it is a strategic mistake to cut our debt so quickly that it takes us four or five years to regain our footing. Stretching the debt reduction plan out by 5 or 10 years does no harm, and in fact increases, our chances of remaining the largest economy on earth.

Sometimes I think the G.O.P. does not realize in order for this country to compete in the global economy of the mid 21st century we will need to utilize every resource available to fend off the relative economic rise of countries like China, India, Brazil, Russia and even Mexico. We are not going to win this competition by squandering resources and choking ourselves by paying down our debt too fast…

Debt Crisis Follies!

The problem is one of communication and President Obama is the one who needs to communicate. He needs to speak up. He is our leader and he should wait no longer to put his plan on the table. Waiting for Congress to speak first is not what a leader does. If he does not do this now he has failed in his job.

The plan indeed should call for more taxes on the wealthy and long term cuts in spending including defense, social security, medicare and other entitlement programs. The plan must also call for investment in education, infrastructure, research and development to create jobs and enhance our future.

I agree with his “balanced approach” concept; however no one has seen the details and it is past the time to disclose them. He has traveled the country and given the American people an overview of his vision to solve the country’s debt problem; now he must go across the lawn to the Congress, roll up his sleeves and go line by line over his plan to get our long term debt problem under control over a 15 to 20 year time period.

President’s Economic Plan

The President is doing a poor job of explaining our economic problems, and the solution, to others in Washington and the public. Those who disagree with him that we need further government stimulus now, when private spending has declined, say these are not ordinary times.

These economists and politicians say an error was made when the country continued to run up deficits in times when the private sector was doing well.  The last decade was a good example. While the boom in the housing bubble was growing the government continued to run deficits and refused to pay down any debt. Two wars were draining our treasury while our President encouraged us to continue buying ice cream at Cold Stone.

As a result, when this near depression hit we had very little to spend. The proponents of austerity point out that we have put ourselves in a corner where increasing our debt further could result in a total collapse of the economy. I am convinced we are not there yet. However, there is a large portion of politicians and the general public who need convincing.

The President needs to take on the role of explaining his position. This will not be accomplished with one grand speech. It will take an F.D.R. type campaign where the President, with assistance from professionals,  talks directly to the public about the problems and solutions.

The President needs to explain why we still have room to borrow, how government spending on infrastructure, education, research and development will not only spur the present economy but allow us to be more competitive in the future.

The President also must describe the future, stating how our debt will be paid down over time and running deficits by the government during times of growth and prosperity can no longer be allowed. The President’s economic plan has not been accepted because he has done a poor job of explaining it. He needs to use his excellent campaign staff to run this campaign to convince the public.

This will define his presidency.

Debt Ceiling And Extortion

When Republicans raise the possibility of not increasing the debt ceiling Obama needs to be consistent from day one.  Every time the threat is raised state that this is not an option and end  further discussions for the day. Immediately release a statement to the press referring to the threat and stating the discussions were halted until the Republicans agree to take extortion of the American people off the table.

The President must then do his part to educate the public about the debt problems that are looming and stress we need a plan now that will solve this problem over a 15 to 20 year time horizon. The problem is to big to solve over night. We do not have unlimited resources and we must find the right balance…