MIR HOME World Politics Honours Thesis Current Issue Archive Jan 2007 Vol.1 Issue 1 MSS HISTORY The Affordable Alternative Giving up the empire for a truly humble foreign policy By Kelvin Tong, January 2008             Back in 2000, George W. Bush said, “If we're an arrogant nation, they'll resent us; if we're a humble nation, but strong, they'll welcome us.”  Of course, things did not go according to plans, and instead, the foreign policy he pursued was the complete opposite of the one he promised.  Eight years later, nine trillion dollars in debt, resented by much of the world, and Americans not any safer, the United States find itself in need of a truly humble foreign policy. The Rise of Perpetual Debt During the 1720s, the English Prime Minister Sir Robert Walpole developed a revolutionary system to finance the government.  Under this system, Britain could maintain a huge peacetime naval and military establishment.  Under this system, the royal navy could sail to and conquer nations in every corner of the globe, to amass an empire on which the sun never sets.  This system was perpetual debt.  Before, governments viewed debt the same way ordinary people viewed debt, that it must be repaid.  Now, under Walpole’s new system, governments no longer needed to pay down its debt.  They only needed to pay down the annual interests. The successes of the British Empire under this system did not go unnoticed.  Many attempted to emulate these successes and created large national debts in their own countries.  Among them was Alexander Hamilton, the Secretary of the Treasury of the young American republic.  He argued for the development of a national debt as a form of providing a strong central government, which he believed was the pillar of British success.[i]  Although many presidents throughout America’s history, among them Jefferson, Adams, and Jackson, preached for fiscal discipline, it is the system of perpetual debt advocated by Hamilton that dominates the political scene today.             Today, the United States is borrowing nearly half a trillion dollars a year to finance their government spending.  The national debt is now greater than $9 trillion,[ii] and many estimate that it will exceed $10 trillion this year.  Even President Bush, with his optimistic forecasts, estimates that the United States will spend more than they receive in taxes, therefore increasing their debt, until at least 2012.  This is assuming that the economy remains strong all the way to 2012.  If a recession were to happen, balancing the budget would no longer be a top priority.             The United States government, like the government of any other country, is obligated to spending money to fix potholes, provide education to children, social services to seniors, etc.  But these types of spending are not the reason why America needs to borrow half a trillion a year.  Much like Sir Robert Walpole’s Great Britain and Alexander Hamilton’s aspirations for the young American Republic, today’s American leaders are building up the national debt to run an overseas empire. Expensive Police Work             The Pentagon owns or rents over 700 overseas bases in about 130 countries in which some 253,288 uniformed personnel serve in these bases.  Most of these countries were cold war allies, allowing the United States to use their territory for strategic purposes.  Others are more recently “converted” allies, like Iraq and Afghanistan.  Whether or not one chooses to define America’s global network of military installations as an empire, is simply a matter of semantics and can be debatable.  What cannot be disputed, however, is the fact that the United States can no longer afford running this global military focused foreign policy.             The War in Iraq is the best example of how costly the current American foreign policy is.  According to the non-partisan congressional budget office, “The war in Iraq could ultimately cost well over a trillion dollars,” and, “American taxpayers will feel the financial consequences of the war for at least a decade.”[iii]  Nobel laureate Joseph Stiglitz puts the number even higher at over $2 trillion.             Perhaps what is most infuriating to Americans about this war is the fact that there are many domestic issues that is in desperate need of funding.  Even if the United States Government was not in deficit and can actually finance the war without going further into debt, the money would be much better spent domestically.  America’s infrastructure is crumbling; the American Society of Civil Engineers estimates that $1.6 trillion is needed over a five-year period to bring the nation's infrastructure to a good condition.[iv]  Some of the major social programs are short of cash.  Trustees of Social Security and Medicare, are now worried about how the government which is currently running massive deficits, will be able to support these programs when the baby boomers retire.[v]  By ignoring these problems and spending trillions overseas, America will face a tough financial situation in the future when it discovers all its bridges are collapsing and there is not money left in Social Security.             With the Iraq War already costing so much, the prospect of a war with Iran should be absolutely frightening for the American taxpayer.  The problem in Iran cannot be dealt with the same way as Iraq.  Even Mike Huckabee, not exactly an anti-war candidate, notices the flaws of the Bush administration’s approach, “The Bush administration has properly said that it will not take the military option for dealing with Iran off the table. Neither will I. But if we do not put other options on the table, eventually a military strike will become the only viable one.”[vi] Soaring Defense Budgets             The current level of U.S. military spending is a good indication of how expensive pursuing this current foreign policy is.  The Department of Defense budget in 2000 was $272 billion. [vii]  That figure had increased every year and in 2006, it was $499 billion, becoming the largest expenditure within the 2006 budget not including Social Security. [viii]  Adjusted for inflation, it is much higher than the annual average of $366 billion during the Cold War[ix], a time when the United States was in an arms race with another superpower that had 175 army divisions and 40 000 nuclear weapons.[x]             The large recent increases came as a result of the attacks on September 11, 2001.  Within two years, the United States were in both Iraq and Afghanistan.  The majority of the American people were behind the war effort and were willing to see increases in military expenditures to address the new threat of Islamic terrorism.  There were also many Americans who believe spending at current levels is excessive.  Professor William Nordhaus of Yale University, in his paper prepared for an American Economic Association session titled The Costs of War, noted that: One way to consider the size of our military expenditures is by comparison with other countries. Other countries face security threats, and they respond by allocating funds to security. Is it plausible that the United States faces a variety and severity of objective security threats that are equal to the rest of the world put together?[xi]             Whether or not the current levels of defense spending can be considered excessive depends on what one believes the United States’ foreign policy should be.  If one believes that the United States should focus on defending the homeland, not try to impose its values on people halfway around world, and deal with global security issues multilaterally with its allies, then the $500 billion in the pipeline is more than enough to defend the country, take care of the military personnel and equipment, and probably have enough left over to deal with domestic issues.  On the other hand, if one believes that the United States should have military installations all over the world to conduct tactical strikes anywhere on the planet on hours notice, unilaterally force regime changes and spend years fighting the insurgency, then even half a trillion dollars would not be enough to achieve those objectives.  The Bush Administration’s ambitious foreign policy is why the Department of Defense budget has been going up every year and is causing large federal deficits.  Only recently, President Bush announced plans for significant growth in the U.S. Army and the Marine Corps.[xii]             At this point, the United States can not afford to increase their military expenditures any further.  With many predicting a recession, it could become very difficult to pay for the military expenditures even at the currents levels.   Also, running up the national debt any further by this administration would be horribly unjust as future Americans will have to be taxed by the spending of this current administration. Decline in Soft Power             With the federal government running large deficits to finance its foreign policy, the United States is becoming heavily reliant on foreign capital.  Foreigners already own much of the U.S. treasury securities, which are essentially what is known as the public or federal debt.  Countries with lots of excess capital, like China, have acquired a lot of U.S. treasury securities over the years as the United States had and are still borrowing a lot of money from them.  This economic relationship with China is costing Washington a lot of diplomatic power.  Holding such large amounts of U.S. treasury securities, a sell-off could start a run on the U.S. dollar and do a lot of damage to the American economy.  As Brad Setser, the former director of the US Treasury’s Office of International Monetary and Financial Policy, and Nouriel Roubini, Professor of Economics at New York University, point out, “The ability to send a "sell" order that roils markets may not give China a veto over U.S. foreign policy, but it surely does increase the cost of any U.S. policy that China opposes.”[xiii]  Even the Chinese knows how much power they wield.  Xia Bin, finance chief at the Development Research Centre, recently said that Beijing’s large holdings of U.S. treasury securities should be used as a “bargaining chip” against the United States.[xiv] Setser and Roubini also point out that economic power usually flows to creditor nations, not debtors.  The United States are where they are today because in the early days of the cold war, “it used its surplus savings to finance the reconstruction of its allies, cementing political alliances with strong economic ties.”[xv]  Today, it no longer has this instrument of soft power, as its national debt is over $9 trillion and growing.  Instead, it is China that is investing its surplus savings in countries like Sudan and Iran, further becoming a thorn in the side of American foreign policy.             The Americans must realize that running a foreign policy that is more expensive than they can afford only accelerates their relative decline.  It is impossible to militarily and economically outrun a country with double digit economic growth.  Pursuing their current foreign policy makes no sense financially and also leads to the loss of soft power.  To paraphrase the Republican budget hawk and presidential hopeful, Congressman Ron Paul, the Chinese are financing the Iraq War because there is nothing they would like to see more, than America falling deeper into debt while at the same time losing face and influence. The Promise of Security             This foreign policy of deploying troops all over the world is, of course, done in the name of national, or even global, security.  Unfortunately, in the case of Iraq, many experts have concluded that the American destabilization of Iraq is detrimental to global security.  Daniel Byman, director of the Center for Peace and Security Studies at Georgetown, says “the invasion of Iraq breathed new life” into an al Qaeda organization that was on the ropes.[xvi]  This is not the first time the United States have aided enemies through unintended consequences.  Currently, one of the greatest threats to global security is Iran.  However, what many Americans do not realize is that it was their past involvement in Iran that has led to its current theocratic government coming to power.  In 1953, the CIA overthrew the Iranian government and installed the Shah of Iran into power.[xvii]  It was this betrayal to the Iranian people that lead to the revolution in 1978, which, or course, put Iran on the path to the “Axis of Evil”. Five years ago, the greatest threat to global security was Iraq, and their evil, dangerous, nuclear proliferating, dictator Saddam Hussein.  Saddam is also a creation of the flawed and short-sighted American foreign policy.  With a hostile regime in Iran, the United States supported and armed Saddam in the Iran-Iraq War.  Years later, those weapons supplied by the United States were used in the Iraqi invasion of Kuwait, which the U.S. had to stop.  The Gulf War also had some other unintended consequences.  In 1998, Osama bin Laden issued a fatwa, stating: For over seven years the United States has been occupying the lands of Islam in the holiest of places, the Arabian Peninsula, plundering its riches, dictating to its rulers, humiliating its people, terrorizing its neighbors, and turning its bases in the Peninsula into a spearhead through which to fight the neighboring Muslim peoples.[xviii] He would then go on to organize a number of terrorist attacks on American targets, the most notable being the attacks on September 11, 2001.             Having such a terrible track record in trying to influence Middle Eastern politics, one must pose the question, “Why are the Americans still trying?”  Much of the “threats” in the Middle East were created by the United States.  The American military presence in the Middle East is detrimental to global security, as shown by the history of American blunders in the region. Real CHANGE™ The Obama campaign recently won the Iowa Caucus with the message of change.  Since then, just about every other candidate, Democrats and Republicans alike, hopped on the bandwagon and tried to become the candidate for change.  With regards to foreign policy, however, the changes proposed are all simply minor adjustments to the policies of George W. Bush.  While the Democrats would probably have a timeline for withdrawal from Iraq, possibly pulling out a year or two sooner, the end result will be the same.  American residual “non-combat” forces sitting in huge military fortresses scattered across Iraq, similar to those in Korea, Japan and Germany. The United States requires major fundamental changes to its foreign policy because it is on the verge of going bankrupt, its soft power is being drained, and it is detrimental to national security.  The United States must withdraw all troops in the Middle East, leaving no residual forces behind.   It must also cease to prop up any puppet regimes, as it breeds anti-American sentiments.             The American people need to understand that their prosperity is in jeopardy, and they must focus their priorities if they want to protect it.  It is time they decide whether they would prefer to continue to run their empire overseas, or collect their Social Security cheques when they are 62.             The American people must also understand that every time they deploy their military, there will be blowback and other unintended consequences.  Therefore it is best that force is only used when it is absolutely necessary.  Diplomacy is often the more effective way of dealing with problems.  The current standoff with the Iranians is nothing compared to the Cuban Missile Crisis, when the Soviets had nuclear weapons 90 miles of the coast of America. It is important to note that the Republican hero Ronald Reagan, the man who single-handedly took down the Berlin wall and killed the Soviet Union, “cut and ran” from Lebanon.  Doing so is not an act of cowardice.  Sending soldiers to die in senseless and endless conflicts takes no more courage.  And given the state of America’s finances, it is simply not the smart thing to do.               NOTES [i] Scott Trask, Perpetual Debt: From the British Empire to the American Hegemon, http://www.mises.org/article.aspx?Id=1419 ( Jan. 2004). [ii] Per Gunnar Berglund, The Means to Prosperity - Fiscal Policy Reconsidered. (London: Routledge International Studies, 2006). [iii] Jamie Wilson, Iraq War Could Cost US over $2 Trillion, Says Nobel Prize-winning Economist, http://www.guardian.co.uk/Iraq/Story/0,2763,1681119,00.html (Jan. 2006). [iv] American Society of Civil Engineers, Report Card for America's Infrastructure, http://www.asce.org/reportcard/2005/index.cfm (Jan 2009). [v] Social Security Online, The Future of Social Security, http://www.ssa.gov/pubs/10055.html#security (May 2007). [vi] Michael D. Huckabee, "America's Priorities in the War on Terror." Foreign Affairs 87.1 (2008). [vii] Eric Rosenberg, Bush Pushes to Increase Defense Spending, http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/12/MNG41H78RK1.DTL (Feb. 2006). [viii] Eric Rosenberg, Bush Pushes to Increase Defense Spending, http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/12/MNG41H78RK1.DTL (Feb. 2006). [ix] Eric Rosenberg, Bush Pushes to Increase Defense Spending, http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/12/MNG41H78RK1.DTL (Feb. 2006). [x] Richard K Betts, "A Disciplined Defense," Foreign Affairs 86.6 (2007).   [xi] William Nordhaus, The Problem of Excessive Military Spending in Th United States, http://www.aeaweb.org/annual_mtg_papers/2006/0108_0800_0302.pdf  (Jan. 2005). [xii] Richard K Betts, "A Disciplined Defense," Foreign Affairs 86.6 (2007). [xiii] Brad Setser and Nouriel Roubini, "How Scary Is the Deficit?" Foreign Affairs 84.7 (2005). [xiv] Ambrose Evans-Pritchard, China Threatens 'nuclear Option' of Dollar Sales, http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml (Oct. 2007). [xv] Brad Setser and Nouriel Roubini, "How Scary Is the Deficit?" Foreign Affairs 84.7 (2005). [xvi] http://www.foreignpolicy.com/story/cms.php?story_id=3707 [xvii] http://www.counterbias.com/632.html [xviii] http://www.fas.org/irp/world/para/docs/980223-fatwa.htm Works Cited American Society of Civil Engineers. Report Card for America's Infrastructure. 5 Jan. 2008. 7 Jan. 2008 <http://www.asce.org/reportcard/2005/index.cfm>. Berglund, Per Gunnar. The Means to Prosperity - Fiscal Policy Reconsidered. : Routledge International Studies, 2006. Betts, Richard K. "A Disciplined Defense." Foreign Affairs 86.6 (2007).   Bonner, William, and Addison Wiggin. Empire of Debt - the Rise of an Epic Financial Crisis. Hoboken, NJ: John Wiley & Sons, 2006.   Executive Office of the President of the United States. Budget of the United States Government, FY 2008. 9 Feb. 2007. 18 Sep. 2007 <http://www.whitehouse.gov/omb/budget/fy2008/budget.html>.   Heller, Peter S. Who Will Pay? : International Monetary Fund, 2003.   Higgs, Robert. The Trillion-Dollar Defense Budget Is Already Here. 15 Mar. 2007. 3 Oct. 2007 <http://www.independent.org/newsroom/article.asp?id=1941>.   Huckabee, Michael D. "America's Priorities in the War on Terror." Foreign Affairs 87.1 (2008).   Nordhaus, William. The Problem of Excessive Military Spending in Th United States. Jan. 2005. 23 Nov. 2007 <http://www.aeaweb.org/annual_mtg_papers/2006/0108_0800_0302.pdf>.   Peterson, Peter G. "Riding for a Fall." Foreign Affairs 83.5 (2004): 111-125.   Rosenberg, Eric. Bush Pushes to Increase Defense Spending. 12 Feb. 2006. 25 Oct. 2007 <http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/02/12/MNG41H78RK1.DTL>.   Setser, Brad, and Nouriel Roubini. "How Scary Is the Deficit?" Foreign Affairs 84.7 (2005).   Social Security and Medicare Boards of Trustees. Status of the Social Security and Medicare Programs. 23 Nov. 2007 <http://www.ssa.gov/OACT/TRSUM/trsummary.html>.   Trask, Scott. Perpetual Debt: From the British Empire to the American Hegemon. 27 Jan. 2004. 23 Nov. 2007 <http://www.mises.org/article.aspx?Id=1419>.