It looks as if America is set to spend $30 billion on the Afghan surge. Now, some members of Congress are asking the President to show them the money. There are two choices: pay now or pay later. Neither choice is appetizing.
To pay now, Congress would be asked to enact some kind of war tax. So, let’s tax the rich, you say, they can afford it. The rich? Anyone making more than you do, of course. But conservatives will tell you taxing people who can afford to invest in the economy is a bad idea. Conservative think tanks can produce instant algorithms showing the negative impact of taxes on jobs, innovation and so on.
To pay later, the government issues bonds. Trouble is that bonds pay interest. And the U.S. government doesn’t have the money to pay the interest on the bonds already outstanding – some 12 trillion dollars, if my understanding of the situation is correct. So the government has to borrow money to pay the interest on the bonds. And naturally, there will be interest on that debt, too. You don’t have to be a mathematical genius to see how this creates a vicious cycle that could lead to economic ruin in a hurry.
My father was the kind of person who signed his name instead of reaching for his wallet. And this caused my mother intense distress. She drummed into me the folly of the practice. The formula for success is simple, she preached: Income twenty pounds, expenditure nineteen pounds, nineteen shillings and eleven pence. The formula for failure? Income twenty pounds, expenditure twenty pounds and one penny. (You probably aren’t familiar with the old British currency used in Jamaica when I was a child, so I’ll translate: income $20, expenditure $19.99 = success; income $20, expenditure $20.01 = failure.)
If I had applied this economic principle to my personal life I would be cruising the Mediterranean today. But that’s another story, as the narrator in “Irma la Douce” would say.
There is another economic principle that I haven’t mentioned. If you are smart, you can borrow money and invest it in a way that produces returns to not only pay the interest and principal but also give you a profit. But this does not apply to the Afghan adventure. The war is making, and will continue to make, a lot of people filthy rich – private contractors like Blackwater and Halliburton, for example, the defense industry, Afghan drug dealers, warlords and political wheeler dealers, and on and on… But there’s no prospect of financial return for the U.S. government.
I’m prepared to bet (although my mother sternly cautioned me against betting) that Congress will opt for more debt instead of a new tax. Once again, it looks as if future American taxpayers will be taken to the cleaners.