I don’t suppose too many people here read the Moscow Times, Russia’s only English language newspaper. Well, then, let me tell you that it reported recently that there are people in Russia indulging in a spot of schadenfreude, taking pleasure from the misfortune of others. The recent secession petitions following Obama’s re-election in November have led predictions that the USA is about to collapse in just the same way that the USSR collapsed.
There is really nothing new in this wishful thinking; for that is exactly what it is. A few years ago Igor Panarin, a former KGB analyst, published a book called The Crash of the Dollar and the Disintegration of the USA, in which he predicted that the U.S. would collapse into six parts by summer 2010. He went on to say that after the projected fragmentation Russia would be able to retake Alaska as the country regains its status as a superpower.
The Moscow Times is much more sober in its analysis, focusing on America’s financial woes. You see, if America goes Russia and the world economy goes with it. The Russian central bank holds as much as 45 percent of its currency reserves, that’s more than $225billion, in US dollars. So never mind Alaska; it’s way down upon the Swanee River!
Forget about the secession petitions. Just keep your eye on the dollar, on the US economy, on that fiscal cliff you keep hearing about. I expect most people’s eyes cloud over and their minds shut down when it comes to this. Hey, who wants to hear about a financial apocalypse in this year of the apocalypse? If you have the patience I would like to simplify matters, to explain a few uncomfortable truths.
Everyone knows about the American Dream, a dream in a land of dreamers. Perhaps that expression never had greater resonance than in last month’s election. In re-electing Obama America wanted to keep dreaming. “Wake up”, Mitt Romney, said, “it’s time to face reality.” “Stay asleep”, Obama retorted, singing a lullaby like the Sandman.
People dreamed that they were saving entitlement programmes like Medicare, Medicaid and Social Security from Republican cuts. This is possible the cruellest part of Obama’s song. As Prospect Magazine reported recently, last year America’s unfunded liabilities, including these programmes, rose by $11trillion to a total of $222trillion.
OK, I know, these are big numbers, vast numbers, figures which don't really mean that much to ordinary people. Let me put it in context. The entire US economy has an annual turnover of $15trillion, of which $3trillion is paid in tax. Do not delude yourself, as many Democrats do, that soaking the rich offers a solution here. As John Pehlan says in Prospect, if all the wealth of the richest 400 Americans was expropriated it would amount to a mere $1.7trillion. As a rope to climb the fiscal cliff it falls miles short.
The various social programmes will not be saved by Obama’s endless waffle. The simple truth is that there is no money to pay for them. Economics may very well be the dismal science but it deals in truths that cannot be evaded, however much the Sandman croons.