Reagan, Bush, and McCain: Selling America First

This 2003 article by Warren Buffet–explaining in his usual pithy manner how we’re frittering away our future well-being by borrowing abroad and selling off our assets–got me looking once again at our country’s long-term financial position in the world.

And once again, I came across one of those profound inflection points at–you guessed it–1980. The dawn of Reaganomics.

Just one paragraph from Buffet’s article, but you should read the whole thing:

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4 percent more than we produce — that’s the trade deficit — we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

Here’s what “selling the farm” looks like (Update: added percent of private fixed assets):

owning the us

Reagan took office, and almost instantly drove us off a cliff. The rest of the world has been, literally and figuratively, buying our children’s inheritance–the fertile land that we should be preserving for them.
It would even more interesting to see net foreign ownership as a percentage of US national net worth (how much of us do they own?). But for whatever reason the BEA stopped calculating national net worth in the early 90s. (Australia and Canada, among others, continue to calculate this.)

When Cheney said, “Reagan proved that deficits don’t matter,” it was not an economic statement. (The man’s not stupid, and I’ll give you odds he wasn’t talking about Ricardian Equivalence.) It was a typically craven Republican political statement.

Ever since Reagan, with their “we’ll cut your taxes!” economic “policy,” the Republicans have been borrowing money abroad (in your name, and in your children’s and great-grandchildren’s names) to buy votes here.

To get those votes, they’re willing to turn our children and grandchildren into servants and sharecroppers.

How dare these people call themselves conservatives?

Yeah, absolutely: the Dems have been helping them. They’re no strangers to this kind of vote-buying. Bill “The Great Enabler” Clinton knows which side his skillet-bread is buttered on. You can see in the graph that he managed to pull the nose up a bit, briefly, but still: he was right in there drinking the Kool-Aid. He only choked slightly on Reagan’s seed.

It was that sticky-sweet Kool-Aid that Republicans/conservatives have been pouring down Americans’ throats for thirty years (with–it’s true–little objection from many/most Americans) that was the real culprit.

So here’s the real question: is that Kool-Aid more like the stuff you get from Ken Kesey, or from Jim Jones?

Update 2/1/2009. Despite continuing massive trade deficits, our net investment position stayed pretty flat 2000-2007, largely due to a weakening dollar. (The foreign assets we own got more valuable, and the U.S. assets they own got less so.)

Not any more. Our net investment position plunged by $2 trillion in 2008–15% of GDP. Click on the image to read the article.


One response to “Reagan, Bush, and McCain: Selling America First”

  1. joecanuck Avatar

    why is a trade deficit a bad thing?

    and what does any of this have to do with government debt?

    if government debt is a problem, the solution is to cut spending or raise taxes.

    A trade deficit just implies we’re consuming more than we’re investing (oversimplified, but a reasonable explanation). If you think this is a problem, the savings rate needs to be raised. either give incentives for the poor to invest or tax the rich less.

    Assets, unlike ‘fertile land’ can be created. If foreigners own too many of our enterprises, we can create new ones.