America is running out of time

Paul Craig Roberts
September 23, 2005, 9:00 am

George W. Bush will go down in
history as the president who fiddled while America lost
its superpower status.

Bush used deceit and hysteria to
lead America into a war that is bleeding the US
economically, militarily, and diplomatically. The war
is being fought with hundreds of billions of dollars
borrowed from foreigners. The war is bleeding the
military of troops and commitments. The war has ended
the US claim to moral leadership and exposed the US as a
reckless and aggressive power.

Focused on a concocted "war on
terrorism," the Bush administration

diverted money from the New Orleans levees to Iraq,
with the consequence that the US now has a $100 billion
rebuild bill on top of the war bill.

The US is so short of troops that
neoconservatives are

advocating the use of

foreign mercenaries paid with US citizenship.

US efforts to isolate Iran have
been blocked by Russia and China, nuclear powers that
Bush cannot bully.

The Iraqi war has three
beneficiaries: (1) al Qaeda, (2) Iran and (3) US war
industries and Bush-Cheney cronies who receive no-bid
contracts.

Everyone else is a loser.

The war has bestowed on al Qaeda
recruits, prestige, and a training ground.

The war has allied Iran with Iraq`s
Shi`ite majority.

The war has brought soaring profits
to the military industries and the firms with
reconstruction contracts at the expense of 20,000 US
military casualties and tens of thousands of Iraqi
civilian casualties.

The Republican Party is a loser,
because its hidebound support for the war is isolating
the party from public opinion.

The Democratic Party is a loser,
because its cowardly acquiescence in a war that is
opposed by the majority of its members is making the
party irrelevant.

The latest polls show that a
majority of Americans believe the US cannot win against
the Iraq insurgency. The majority support withdrawal and
the redirection of war spending to rebuilding New
Orleans. Despite the clarity of the public`s wishes,
the Republican Party continues to support the unpopular
war.

With the exceptions of Reps.
Cynthia McKinney and John Conyers, Democrats

fled the scene of the Sept. 24 antiwar rally in
Washington DC. The cynical Democrats are apparently
owned by the same interest groups that own the
Republicans and are refusing the mantle of majority
party that the electorate is offering to the party that
will end the war.

The Bush administration is churning
out red ink in excess of $1 trillion annually. The
federal budget deficit is approaching $500 billion. The
US trade deficit is approaching $700 billion.

The budget deficit is being
financed by foreigners, primarily Asians who now hold
enough US government debt to exercise power over US
interest rates and the value of the dollar whenever they
decide to use the power that Bush has placed in their
hands.

The trade deficit is being financed
by turning over the ownership of US assets and future
income streams to foreigners, making Americans forever
poorer from the loss of accumulated wealth.

For the time being, China is
willing to accumulate US assets as a way of taking over
our consumer markets, attracting US manufacturing
industry with cheap labor subsidized by artificial
currency values, and gaining our technology. China`s
strategy is to over-value the US dollar in order to
encourage the transfer of US economic capabilities to
China. China`s strategy gives artificial value to the
dollar and keeps US interest rates at an artificial low.

The values of US stocks, bonds, and
real estate depend on the support that Asians` economic
strategies provide the dollar and US interest rates. As
Asia achieves its goal of preeminence in manufacturing,
innovation, and product development, the strategy will
change. Once China completes its acquisition of US
capabilities, it will no longer have a reason to support
the dollar.

When the dollar goes, it will
affect costs, profits, interest rates and living
standards in dramatic ways. Costs and interest rates
will soar, and profits, living standards, equity values,
bond prices and real estate will plummet.

These unpleasant events await only
Asia`s decision to curtail its support for US red ink.
That will happen when this support no longer serves
Asia`s interest.

When Asia pulls the plug on the
dollar, the US government will find that monetary and
fiscal policy are powerless to offset the consequences.

Compared to US budget and trade
deficits, terrorists are a minor concern. The greatest
danger that the US faces is the dollar`s loss of reserve
currency role. This would be an impoverishing event,
one from which the US would not recover.

An intelligent government sincerely
concerned with homeland security would find a way to
halt the global labor arbitrage that is stripping the
American economy of high value-added jobs and
manufacturing capability, thereby causing the US trade
deficit to explode. The loss of tax base that results
when US companies outsource jobs and relocate production
abroad makes it ever more difficult to balance a budget
strained by war, natural disasters, and demographic
impact on Social Security and Medicare.

Global labor arbitrage is rapidly dismantling the

ladders of upward mobility and thereby endangering
American political stability. This threat is far
greater than any Osama bin Laden can mount.

Time is running out for Republicans
and Democrats to escape from the distraction of a
pointless war and to focus on the real threats that
endanger the United States of America.

Dr.
Roberts, [email
him] a former Associate Editor of the
Wall Street Journal and a
former Contributing Editor of National Review,
was Assistant Secretary of the Treasury during the
Reagan administration. He is
the author of

The Supply-Side Revolution
and, with Lawrence M. Stratton, of