Saturday, 3 September 2011

U.S. Debt and the Millennials: Is Washington Creating a Lost Generation? - Cato Institute Podcast

The overthrow of the Gadaffi regime in Tripoli will go down as one of the historic events of 2011.  France and Britain were key players in this via the military support they offered the rebels.  A story is going around that at around the time the rebels reached the Libyan capital their supporters had run out of ammunition and had to borrow some from the Americans.  I don't know if this is actually true but it doesn't matter because nobody really doubts that it could be true.  We all know that the US outspends the world on military items.

The really big boost in US military spending came in the term of office of Ronald Reagan.  This had the effect of bankrupting the USSR and making the world a safer place, so it could be considered to be a really good investment. President Bush was another enthusiastic spender and it may well be that it was his generous funding that has brought about the demise of Gadaffi.  Libya wasn't the menace that the Soviet Union was, but nonetheless the removal from power of a dangerous and unpredictable tyrant does sound like something worth paying for.

The trouble is that all spending has to be paid for.  In this Cato Institute podcast the problem of the enormous American budget deficit is on the agenda.  Interestingly, cutting spending on weapons isn't.  The connection between the military budget and taxing and spending barely gets a mention.  But some very good points are made and it is fascinating listening.  One speaker makes the point that spending is the actual problem.  Any government expenditure must require taxes to pay for it.  You can tax now, or you can tax later.  You can tax in any number of ways.  But it all has to be paid for.

And ultimately, that is what history really is.  It is nothing more than the results of the decisions of what governments choose to spend money on, and how they choose to finance it.  I am not at all sure that the huge deficit the US is running will necessarily prove to be a disaster for the US in the long run as a lot of commentators seem to think.  But there is no doubt that it will affect the world we live in in lots of ways.  And to hear some very smart people discussing it with so obviously little idea of what effect it is going to have is sobering.  I wonder what future historians will make of it all.

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