Page 2 of 2 Washington's killer touch
By Julian Delasantellis
How this happened back in 2001 speaks volumes about American society then and
now. In 1990, with Democrats in control of the senate, Robert Byrd of West
Virginia sponsored a senate rule called PAYGO - or pay as you go. This
necessitated that both tax cuts and/or government expenditures be paid for with
corresponding offsets somewhere else in the budget. As applied to the estate
tax, letting it return to 55% in 2011, after being 45% for the oughts and 0%
for this year, would supposedly make up for the revenue just previously lost.
But it's more than that. When the solons played around with rates that weren't
to be effective for almost a decade, they perfectly illustrated another key
current component of the American
character - the desire to keep putting off problems for as long as possible.
In 2001, the congress, specifically, the unified bloc of 269 US House and
Senate Republicans who voted for the Bush tax cuts looked out and saw two
presidential and four national congressional elections between then and 2010,
an absolute eternity in politics. Like a student who has a math test on a
Monday but still goofs off all weekend, Monday will, and eventually, did,
But never let it be said that Americans have slumbered at the switch of
national crisis. Congress is trying to find a solution to all this; why
shouldn't it? With their advanced age and fabulous wealth, the politicians know
very well that any one of them might be the next unfortunate to wake up in a
hospital bed just in time to see the bony hand of the Angel of Death moving to
flip the switch on the life support machine to off.
In early December, the US House of Representatives voted to raise the 2010
estate tax from 0%, to which it was just falling, back to the 2009 rate of 45%,
then keeping it at that level for the foreseeable future.
But here, as in so many other recent controversies, the problem is with the
senate. There, the effort to save grandma from the ultimate Sarah Palin "Death
Panel", aka her own heirs, may founder on the emergent, virulent new politics
of the tea-party movement. Conservatives most trying to ride the tea partiers
to greater power, most notably Senator Jim DeMint of South Carolina, do not
want to sanctify the recent past's 45% rate into the future. What they want to
do is make today's 0% rate permanent.
The budget implications of these polemical gyrations could not be more serious.
The Center for Budget and Policy Priorities estimates that permanent repeal of
the estate tax would cost $56 billion in fiscal year 2013, $740 billion from
2013 to 2022. This would be added to the roughly $750 billion in yearly
deficits the Congressional Budget Office expects for most of the upcoming
decade. Indeed, virtually any change in the estate tax laws could act to bust
the budget further because of the way in which the Bush administration
structured the timetable of the estate tax changes.
Thus are the sad depths that the "roll-up your sleeves and let's all get the
job done together" nation have fallen to - an endless effort to forever defer
the costs of today's pleasure onto someone else's shoulder in the future.
In Stephen Vincent Benet's 1937 version of the Faust legend, The Devil and
Daniel Webster, New Hampshire farmer Jabez Stone sells his soul to the
Devil for 10 good years living high off the fat of the land, but when the loan
comes due, 'ol Scratch is adamant about denying him any more refinancings.
So far America has been luckier than Jabez Stone in maintaining access to the
credit markets to which it has sold its soul, but if the recent 50-point rise
in the interest rates for US government 10-year notes is any indication, this
charmed situation may be approaching its finale.
It is important to note that the problem here is not America running a budget
deficit; with an ongoing economic contraction this severe, any advocacy of a
current budget surplus would be nothing but national macro-economic
malpractice. The problem is that the tax situation and rate structure are being
set up in such a way as to ensure deficits well into the future, when the
expected return of economic growth should be producing surpluses sufficient to
pay off the deficits.
But, just as things are looking bleakest for poor America's Katzenjammer kids,
a hero arises who is seemingly offering the country a reprieve from having to
account for its profligate ways - Russia.
In a December 29 article in the Moscow Times headlined "Moscow Will Save the
West", Sergei Karaganov, dean of the School of International Economics and
Foreign Affairs of the Russian Research University - Higher School of
Economics, offers the US and West a deal. In exchange for halting all further
expansion by the North Atlantic Treaty Organization (NATO) into the former
socialist republics of the old USSR, Russia will, in essence, lock China into a
great bear hug of friendship and comradeship so tight that it essentially
immobilizes the threats posed by the developing Asian superpower. As Karaganov
It is becoming obvious that the Euro-Atlantic world, whose
economic and political model seemed so triumphant 20 years ago, is now lagging
somewhat behind China and other Asian countries. So is Russia, where, despite
encouraging talk about innovation-based development, the economy continues to
demodernize as corruption has been allowed to metastasize and the country
relies increasingly on its natural resource wealth.
Indeed, it is Asia that has turned out to be the true winner of the Cold War
... While Russia's elite never considered itself defeated in the Cold War, the
West essentially treated Russia as a defeated country - an attitude symbolized
by NATO's eastward expansion, which laid a deep foundation for ongoing tension.
It was only after the West encountered an armed rebuff in South Ossetia that
NATO expansion was stopped in its tracks. Yet NATO has not given up on further
enlargement. NATO expansion is nothing more than the extension of its zone of
influence - and in the most sensitive military and political spheres. And yet
the West's unwillingness to abandon that effort is coupled with a repeated
refusal to recognize Russia's right to have its own zone of interest.
So NATO expansion has left the Cold War unfinished. The ideological and
military confrontation that underlay it is gone, but the geopolitical rivalry
that it entailed has returned to the fore. Thus, the old mentality survived on
both sides ... Faced with the impossibility of advantageous accession to
Euro-Atlantic institutions, Russia is drifting fast toward alignment with China
- a "younger brother", though a respected one. Russia's "Asian choice" of today
is not the same as the Slavophile or Eurasian choice of the past.
On the surface, it looks like a choice in favor of a rapidly rising
civilization. But the current estrangement from Europe - the cradle of Russian
civilization and modernization - threatens Russia's identity and will increase
its geostrategic risks in the future. Europe does not benefit from this
estrangement either. It will continue to move toward beautiful decay - Venice
writ large. The United States also loses. The current Euro-Atlantic security
architecture seems to suit the majority of Americans and Europeans, though it
is becoming increasingly fragile and counterproductive.
So Russia will struggle to create a new architecture largely on its own. The
idea of a "Union of Europe" between Russia and the European Union should be put
on the long-term agenda. ... The combination of a new security arrangement for
the Euro-Atlantic community and the establishment of the Union of Europe could
curb the decline of the West.
Karaganov seems to be offering
the US and Europe a choice. Continue to ignore Russia, or even antagonize it
further with more NATO expansion, and drive Russia right into the arms of
China, the nightmare that had American schoolchildrern ducking and covering
under their desks in the 1950s.
On the other hand, respect Russia, and the West, including the US, can continue
what he calls the West's "beautiful decay", thus curbing or cushioning "the
decline of the West".
I was impressed by Karaganov's reasoned, analytical exposition of a long-term
national security strategy for Russia, so different to the usual
meat-cleaver-hurling, lacerating polemic that masquerades as public policy
debate in the US.
But will America accede to living in what would amount to being a shadow, a
museum of its former glory, a Venice, just to keep enjoying its bloated
lifestyle of the present?
I don't know about you, but when the deal is announced to turn the nation into
Venice, I want to be the guy owning the dealership that is selling the biggest
luxury yachts in town.
Julian Delasantellis is a management consultant, private investor and
educator in international business in the US state of Washington. He can be
reached at firstname.lastname@example.org.