Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. An economist with great credentials, he is against the Bush administration for economic reasons.

In his Sept. 26 article America is Running Out of Time he argues that “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.”

He is critical of the war – and of both parties – but the article’s real focus is the looming catastrophe of our debt. We’ve done more than “drown the government in a bathtub.”

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.

This will hurt all of us in ways that I don’t think can be quite imagined by the American people. It will hurt big corporations too. I have sometimes wondered why the biggest players haven’t seemed to be doing much long-range planning. Major interests seem to work a business, grab the loot, and move on. I thought it was simple greed and an increasing disregard for workers, but I think I have underestimated the deeper forces at work here. It’s not just massive personal self-interest at the expense of others, or a rise in institutional corruption across the board, or the American rise of corporate fascism. It’s actually even worse than that. Those things can be reversed.

A big rise in the slash and burn kind of crony capitalism makes even more sense if they see what’s coming. The big guys are getting whatever they can, while they can.

Next to this scenario, the threat from terrorism is negligible. We need to prioritize, focusing on these even greater threats to homeland security – before it’s too late.

See also Will Neocon Fanaticism Destroy America? .

Note: The photograph that is being shown at some websites in connection with this story shows a man holding a banner that says “I’m a Republican and ashamed of this GOP.” Tracking it back to Ang’s Weird Ideas, I found an update. The man pictured may not even be a Republican, so I decided not to post it. Too bad, it’s a great photo (AP, Noah Berger).