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2011 March 02 Wednesday
Build A Navy Or Face Our Budget Deficits?

Writing in the Wall Street Journal Mark Helprin argues that the American people should support spending to expand the US Navy to prevent it from yielding control of the seas to China.

The United Sates Navy need not follow the Royal Navy into near oblivion. We have five times the population and almost six times the GDP of the U.K., and unlike Britain we were not exhausted by the great wars and their debt, and we neither depended upon an empire for our sway nor did we lose one.

Despite its necessity, deficit reduction is not the only or even the most important thing.

What caught me: Deficit reduction is not the most important thing? Running a deficit equal to 10% of GDP and the thing to do is run up that deficit even faster because we need more ships? Record debt at all levels of government is not a reason to admit we are living beyond our limits? This is an irresponsible argument.

The current massive deficits are an attempt to live beyond our means and pretend that the era of continually rising living standards hasn't come to an end. Totally ignoring fundamental limitations to growth, people like Helprin want America to act like it is still a rising power with the wind at its back. If only.

Gonzalo Lira, ranting about the $1.6+ trillion US government deficit, says the most noteworthy thing about the massive US fiscal disaster is how little people care.

Yet for all these terribly depressing facts, here’s the rub: 

No one seems particularly concerned. 

It’s as if it were happening to someone else—it’s as if it were happening to the Canadians, not to America. The American people are taking the whole budget deficit thing so la-di-da that you would think that the entire country had dropped extacy in one giant, collective, “Don’t give a fuck about nuthin’ ‘cept dancing!” moment. 

Lira thinks people see the approaching disaster and have given up and just do not care. In response to Lira, Dennis Mangan sees apathy and stupidity as more likely causes of our profligacy.

But why aren't they paying attention? At least a couple of reasons come to mind: they've got their own lives to lead, or they don't think much could be done about it anyway, or at least some of them are too dumb to understand. Some may also believe that our elected leaders will solve these problems; that's why we elected them, right? That leads us to the agency problem: the interests of our elected government agents are not necessarily the same as our own.

Yes to all the above. But also, there's also a strong element of "You pay", "No, you pay". Like Mark Helprin, everyone has their favorite cause or benefit that they want to protect. Cut waste but do not cut Social Security, Medicare, government employee pensions, foreign aid to a favorite country, and dozens of other programs and causes.

I have been puzzled over the last 5 years or so whether our economic problems will lead to high inflation. I am reaching a conclusion: Yes. Politicians can portray inflation as a force outside of their control that has the effect of reducing the value of many government benefits. Inflation is a way to cut government spending programs while pretending to be opposed. Our leaders and populace have such poor moral character (and not a few are too dumb and interested) to prevent the inflationary route. So I think high inflation is a likely consequence of how governments will respond to massive underfunded entitlements and declining tax revenues.

Share |      By Randall Parker at 2011 March 02 10:11 PM  Civilizations Decay


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Comments
Mthson said at March 2, 2011 11:31 PM:

Is there supposed to be some advantage from maintaining an astronomically expensive global navy, or is it just 'nice to have'?

It seems no supposed advantages could possibly outweigh the massive costs incurred each year.

fred-m said at March 3, 2011 3:48 AM:

Re: "an astronomically expensive global navy"

Since WWII the US has been the world's policeman. We inherited this role from the Brits after we helped them stifle Germany in WWI and then the Brits subsequently stood down. There is logic and precedent to suggest that as we stand down from the task, times will become very interesting as they did in the 1930s.

Keeping the world from being consumed in flames is a "supposed advantage". Personally, I would rather that we had not intervened in WWI and shouldered the burden, but we did and must live with the consequences. Certainly there is no guarantee that wars will ensue if we stand down, but it is not reasonable to deny the risk.

On balance, I do not find that an irradiated, fallout contaminated, South Asia and/or Middle East outweigh the "massive costs", but I think it is silly to think "we" will allow that to happen without involving ourselves [I would, but that's just me, though there are many corrolaries and knock-on effects to allow]. As Robinson Jeffers put it, there are "so many blood lakes: and we always fall in".

We do live in interesting times.

Sgt. Joe Friday said at March 3, 2011 7:47 AM:

We don't need to go back to the days of a 600 ship navy. China may challenge us militarily one day, but until then the thought of a larger navy (and military in general) reminds me of the old joke about how when you carry a hammer around everything looks like a nail.

That said, another really good reason to trim our role as the world's policeman is a really simple one, the old concept of "you break it, you bought it." God help us if we get entangled in all the chaos in the Middle East - we will end up being forced by our ruling elites to take in millions of Islamic refugees from Libya, Egypt, and who-knows-where-else. The thing with the Mexicans ain't working out so good, why pretend the Muslims would not be a problem?

jerry said at March 3, 2011 9:35 AM:

I'll repeat what I said at Mangan's:

"The American people have indeed thrown in the towel. In the past they might have been concerned for the future of their country but the reality is they have no country anymore. "Our future" is less important because there is no "our" anymore. The country has no future except as a squabbling, divided, third-world hellhole and everybody knows it. Throw in the fact that the real government resides in undemocratic institutions like the media and that ever since the "Civil Rights" movement of the 1960s the nominal government has pretty much done what it wants regardless of votes or what the public thinks and the ennui is understandable. We're a conquered people living in an occupied land and even self-interest is no longer enough to rouse the subjects to care about the bloated, evil, unloved Empire."

African-American lawmakers blast budget plan as step back for civil rights

http://tinyurl.com/4aca3sh

With multiculturalism there has been a massive withdrawal from civic life. People have withdrawn into their homes and into a small circle of friends and family, whom they meet on occasion in public as if rendezvousing in a foreign country while on vacation. The entire sense of belonging to a place and culture has been shattered. Multiculturalism requires political centralization, further reducing peoples ability to influence the system.

Mercer said at March 3, 2011 10:11 AM:

It does not surprise me that people do not take our debt seriously. I think the reason is because interest rates are low. When the rest of the world balks at getting so little return on our debt and interest rates will rise and people will care about our debt.

People like Helprin baffle me more. If he knows anything about the world economy he should know that China's GDP will likely be equal to the US in the next decade. The idea that the US navy should dominate the waters close to China when their GDP is equal to ours is nuts.

Anonymous said at March 3, 2011 11:00 AM:

Inflation won't help our structural entitlement problem. Social Security benefits are pegged to inflation. Medicare costs will rise with healthcare inflation. The Fed, in it's infinite wisdom, has reduced the average duration of the US debt, i.e. moved our debt from long-term bonds to short-term bonds. This makes the country's debt vulnerable to rate increases. We can't inflate ourselves out of the problem.

The bond market isn't stupid. If inflation starts to rise, interest rates go up.

While we very likely will get inflation, it won't help much or at all with the debt problem. Nope, one way or another, that gets solved by a lower standard of living for the country - though individuals may be able to avoid that fate.

bbartlog said at March 3, 2011 1:57 PM:

'Social Security benefits are pegged to inflation.'
In this case a more precise and yet functionally quite different statement is to say that social security benefits are pegged to the government's CPI numbers. If they can understate real inflation by a few percentage points a year, the problem still gets solved. Another solution (not a likely one here) is hyperbolic inflation a la Zimbabwe, where inflation accelerates so fast that annual adjustments don't help because they aren't frequent enough. Note that various CPI adjustments (substitution effects, hedonic adjustments and whatever else they can think of) have already been applied in order to massage the COLA numbers lower. Greenspan masterminded one of the earlier efforts in the 1980s, but further revisions to the methodology were applied under Clinton. Always in the same direction, of course.

'The bond market isn't stupid. If inflation starts to rise, interest rates go up.'

The Fed has been buying literally trillions of dollars in bonds via intermediates. At the beginning of 2010, I saw an estimate that government borrowing for the coming year would amount to $4-5 trillion, while worldwide net saving would only be about $1 trillion. I anticipated that either the bond market would crash hard, or that the Fed would intervene and sacrifice the dollar. The Fed has propped up the bond market (presumably this is why they loaned BoA $1 trillion; BoA does not really *need* a trillion dollar loan, but they can buy bonds for the Fed using that money, and make a few tens of billions in profits short term). In short, you can no longer use the bond market as a reasonable barometer of inflation expectations.
One other solution of sorts to the savings deficit (other than a staggering rise in interest rates) would have been a surge of money from the stock market into bonds. But that didn't happen either. So if you don't like my explanation, you need to either quibble with the totals, or else explain where the extra $3-4 trillion came from, if not from the world's central banks.

Dragon Horse said at March 3, 2011 2:31 PM:

Yeah I saw the writing on the wall about a lot of things a few years ago. I've relocated to Switzerland. When the $#1t hits the fan I will listen to some British guy tell me about the riots in America on CNN International. Tschüs!

Jerry Martinson said at March 4, 2011 9:29 AM:

At this point the biggest reason for a Navy is to stop rogue states and idiot bandits. China has similar strategic interests on this as well so it's not such a big deal if they have a Navy that reaches parity with ours. If we don't like the fact that China's becoming more powerful the right way to deal with it is to improve our economy not by building more aircraft carriers but rather by trying to brain drain other countries so as to increase our GDP.

gcochran said at March 4, 2011 12:11 PM:

Helprin is utterly full of shit.

bbartlog said at March 4, 2011 3:42 PM:

'the biggest reason for a Navy is to stop rogue states and idiot bandits.'

Stop 'rogue states' from doing what, exactly? Terrorizing the high seas with their aircraft carriers? As for idiot bandits, methinks a slightly lighter weight Navy would serve the purpose; to say nothing of the fact that spreading the responsibility to other reasonable nations would also reduce our costs.

California kid said at March 4, 2011 3:59 PM:

That's my opinion too. Whenever I read articles like this I always say "Build a navy for what? Latinos ? H1B's ? Gays ? Somalians ?". To care about having a navy, you actually have to have a country. You have to have a future.

A.Prole said at March 5, 2011 12:58 AM:

Anyway, aircraft carriers (even the great big nuclear ones) are rendered obsolete - they are the equivalent of the Royal Navy Dreadnoughts of the 1900s, which were blown out of the water by Jerry mines and U-Boats.
Basically, there are no more than multi-billion dollar easy targets packed with thousands of sailors that are easy meat for the new generation of Chinese anti-carrier missile, to which aircraft carriers have no defence.

WJ said at March 5, 2011 6:27 PM:

We have a substantial Navy already, yet it's still not been able to solve the piracy problem in the Gulf of Aden - not because it's too small, but because we're unwilling to use the violence necessary to solve it.

Hard power is worth nothing if you're not willing to use it. It's worth less than nothing if your country goes bankrupt trying to pay for it.

WJ said at March 5, 2011 6:31 PM:

I wonder if a guy named Mark Helprin would support reducing our current $3 billion annual subsidy to Israel in order to increase the size of our Navy. Because the money has to come from somewhere.

Just a question.

Randall Parker said at March 5, 2011 7:26 PM:

WJ,

Yes, short of a dust-up with China our real naval security needs are modest and solvable with will power and fairly small amounts of money. Want to stop the pirates? Just put some special forces guys on every ship in the area. Let them shoot up the pirates. Then let choppers swoop in whenever an attack is reported to finish off any pirates that get away.

Cutting foreign aid to fund the Navy: Good idea. We could cut aid to Egypt too, especially since they can become a democracy now and will therefor have enlightened and wise government which will usher in a golden age without any help from us.

A.Prole,

Agreed about those big vulnerable targets. The underwater navy and unmanned small ships have much bigger futures.

Greg,

Love your pithy responses.

Demolition Man said at March 5, 2011 11:32 PM:

Since the end of WW II, the main function of the gigantic US Navy, the main function of the US Navy has been to maintain the security of oil fields that happen to be mostly in the Middle East. But since the 1970s, the US became a net importer of oil also, and this made the Navy even more indispensable.

But if the US government invests only $100 billion per year on new energy sources and battery technology for electric cars, as well as improved nuclear energy, then by 2020 we will be able to afford a much smaller navy.

WJ said at March 6, 2011 11:03 AM:

Well for the record, I am not against the survival of Israel nor am I an anti-Semite. But the continued defense of the Israel subsidy just might make me one, in the same way that the bailout and illegal immigration have soured me on certain aspects of capitalism. And yes, cutting aid to Egypt, PEPFAR, the UN, and anyone else is also an acceptable way of paying for the military. Apparently our Congress will let this country go broke before putting aid to Israel on the table. You'll know they're serious about the deficit when it is.

As for Mark Helprin and the US Navy? Helprin is American-born and Harvard-educated and was of age for service in Vietnam (b. 1947). So which military did he serve in? According to Wikipedia, that would be "the Israeli infantry, and the Israeli Air Force."

I will not be taking advice about my country from someone who does not put its interests first.

Randall Parker said at March 6, 2011 12:04 PM:

Demolition Man,

Instead of spending trillions of dollars on military adventures (and decades of caring for crippled and brain-damaged soldiers) we could spend the same money on electrifying railroads, replacing oil heaters with ground sink heat pumps, and other measures to cut our need for oil. I mean, if we have a vulnerability eliminate the vulnerability.

WJ,

Why try to buy loyalty from various nations around the world when we can instead spend to reduce our need for whatever we get from them? (which is in some cases worse than nothing)

Demolition Man said at March 6, 2011 9:37 PM:

Randall Parker wrote:
>Instead of spending trillions of dollars on military adventures
>(and decades of caring for crippled and brain-damaged soldiers)
>we could spend the same money on electrifying railroads,
>replacing oil heaters with ground sink heat pumps, and other
> measures to cut our need for oil. I mean,
>if we have a vulnerability eliminate the vulnerability.

But for every loser there is a winner in a zero sum game: A significant portion of the trillion dollars we have spent on military adventures during the last 10 years, actually became net profits for the lucky defense hardware and software manufacturers. In addition, our dependence on oil is necessary for the continued existence of the oil industry, and also, for the continued existence of the defense establishment, our dependence on foreign oil is also quite valuable. This is a lose-win situation.


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