Time to upset some stereotypes. Let me quote extensively from a recent interview, given at the recent FiRe FiVe Conference (Future In REview) where I am a yearly guest speaker. These words are from Robert Hormats, of Goldman Sachs International, discussing his new book The Price of Liberty - Paying For America’s Wars...
HORMATS: The title comes from Alexander Hamilton. After the American Revolution, the government – the Continental Congress – had accumulated a lot of debt. The states had accumulated debt. Some of that debt was to foreigners, and Hamilton concluded, with some degree of opposition from others [who believed] that perhaps we shouldn’t pay that debt, Hamilton said we should definitely pay the debt because we need to establish the credit-worthiness of the new country, and because critically important to the success of the U.S. during the Revolution was the ability to borrow from abroad, particularly from France and the Netherlands.
If there were to be another war – which was widely anticipated at the time – the view was that we’d have to borrow again and we would have to go to those same creditors to get the money, and therefore we needed to repay the first war debt in order to borrow again, were there to be another war. And that tradition of borrowing during wars and paying down wartime debt very quickly afterwards really was a key element of American financial policy up until the 1960s. So that was really one point: you had to borrow during a war, but pay it down as quickly as you can. Fiscal responsibility. Because it was seen as not just important for financial stability, but for national security as well.
And the second point that comes through this book, throughout, is that war financing is not just about raising money, it’s about engaging Americans in the war effort. When American troops are fighting abroad, Americans should be making sacrifices at home to support them. In World War I, the treasury secretary, whose name was McAdoo, called it “capitalizing patriotism.”
During World War II, Roosevelt explains to Americans, several days after Pearl Harbor, that war costs money – that means taxes and bonds, bonds and taxes; it means sacrifices from all Americans. And I think that engagement of Americans behind their troops in the war effort has been very important in mobilizing support within the country for what’s going on abroad, so that you don’t have the soldiers fighting on one side and Americans going about their ordinary business and not paying taxes, not making any sacrifices back home.
The great leaders have been very upfront and candid about what war costs, even though the amounts are very high and people don’t particularly want to pay higher taxes – many of them don’t want to buy war bonds, many of them didn’t like the sacrifice of World War II, where they had wage and price controls, and rationing. People didn’t like that. But when their leaders told them it was important for the interests of the country, they went along. If you don’t lead by bold presentation….
(Hormats goes on to describe the myriad ways in which the GW Bush administration has broken with this tradition of frankness and persuaded sacrifice. Concentrating on the fical end - the right wing mania to avoid taxes even while they declare our nation in danger - he does not mention another aspect. The fact that other wars beconed millions of young men to their local recruiting stations. But few are swallowing the “emergency” bait for this one. Despite lowering recruit standards and offering $20,000 signup bonuses, the Army cannot meet its goals.)
And the tragedy is, who sacrifices? The troops. The troops don’t get proper body armor. They don’t get proper armaments for their Humvees. Their families back home, many of them have to go on welfare. And as we’ve seen, they don’t get, in some cases, proper care after the war if they’re wounded. And a lot of the Homeland Security things that we should have done – increase public health services, police, firemen – that’s just not done. So, we didn’t establish the correct priorities, we didn’t have a national dialogue, and we’ve sidestepped tough issues. You can’t do that forever in a democracy; you need people who are educated about the issues. You need the American people to have a dialogue with them, and in past wars they’ve done this, but in this one they have not.
If there were to be a tragedy, if there were to be a terrorist attack… In 9/11 we had a budget surplus; we were not nearly as dependent on foreign capital. Today, we have budget deficit. The next decade we’re going to have big budget deficits as a result of entitlements, and we’re going to be far more dependent on foreign capital because our savings rate is so low. And that might not be there, or if it’s there it might require very high-risk premiums. So, our lack of sound fiscal policy, which is going to be a big problem in the next decade, is going to constitute both a financial vulnerability and perhaps a national security vulnerability. I think that’s the short story of a long pitch for the book.
You need intelligence. You need to have a better education system so people abroad understand what we’re trying to do, and basically you need to have alliances. I mean, the interesting juxtaposition here is the alliance Bush put together for the first Gulf War – the first Bush and the first Gulf War – it had Muslim countries in it, it had other countries contributing, because there was a genuine feeling of working together for a common good. This war... There is really, it’s really a phony alliance. No one’s given us any money. There are no Muslim countries.
Wow. May I remind folks that all of this is coming from a paramount capitalist? In the ultra meaning of that word, a man who lives and breathes what Karl Marx called the process of capital formation through a combination of asset allocation, financial deal-making and entrepeneurialism?
One more piece of evidence that this present crisis has nothing at all to do with the hoary and outmoded and silly so-called “left-right political axis.” Nearly all of the smartest and best capitalists hate the Bush Administration (I know one or two exceptions, Texans all)... as do nearly all of the smartest generals and admirals.... and FBI guys and members of the Intelligence community. A horde of people in crewcuts who were lifelong Republicans, are hearing the whirring, spinning sound of Barry Goldwater, spinning in his grave. Many ostriches are lifting their heads.
Will the democrats... ANY democrats... lift THEIR heads enough to realize the opportunity that this offers? To not only defeat the neocons, but repudiate them, forever? So that they cannot retrench and come roaring back with fresh doses of “culture war”?
This is vital especially to candidates like Hillary and Barak. If they want the presidency to be worth more than a bucket of spit, when they hold it, they must deal with culture war NOW. The only way to do that is to make the issue NOT Iraq, or any liberal agenda item.
The issue has to be America.