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Today's Commentary: 03.21.05
I am

I am - Alan Greenspan. In spite of a career that will ultimately be judged through the long lens of history, this Federal Reserve Board Chairman, who is currently serving his last year may come to be known for three things: Outward signs that he really and truly is a "political hack", endorsing the tax cuts when there were surpluses believing that the President and Congress would show fiscal responsibility and monetary jurisprudence when it came to cutting taxes while reining in spending, and for suggesting that more than he alone should be held accountable by suggesting the "we were all wrong".

In a testimony before the Senate Select Committee on Aging last Tuesday, he tried to quantify his position on private accounts. Even though these accounts will not do a thing for Social Security without benefit cuts and another nudge further into the future to qualify for those diminished entitlements, he believes that these accounts will be needed to offset future problems. Never mind that this country would need to borrow to save it under the proposed plan, and it has been noted by a wide range of actuaries, that the program could be fixed for the long term with some patchwork remedies that would cost the taxpayer trillions of dollars less. Once again, he offers guidance to lawmakers that will be edited for political advantage.

I am - Paul Wolfowitz. Few Americans pay much if any attention to the World Bank, let alone show any awareness of what it does. It is, after all an invention of prosperous nations designed to raise the quality of life in third world countries and ultimately mitigate poverty around the globe. The position of head banker is appointed by the United States, something that has been questioned by other nations of growing prosperity and opinion. The International Monetary Fund chief is appointed by the Europeans which explains why the IMF is much more vocal in its concerns - criticisms - about the growing American deficit.

Mr. Wolfowitz will be best remembered as the man who, while in charge of the Iraqi reconstruction, suggested that Iraqi oil would foot the bill for the project. An understatement that not only missed the mark or was grounded in the reality of the situation but has yet to be realized - and may not for many years to come.

He does however represent an international slap to the face delivered by a President who feels the Iraqi election is justification for his overthrow of Saddam in the name of Middle East democracy, an experiment whose success has yet to be measured.

I am - the 2006 Budget. The first round of tax cuts has not done what the President claimed it would do. Business has not jumped at the millions of unemployed here in this country because many of them are under trained to do a job that pays so much less on foreign soil. So a second round of tax cuts, proposed in the 2006 budget should do the trick. Right?

Capital gains and dividend tax reduction do little to help the average investor who has not participated in these over extended markets. With the net worth of homes showing signs of stagnation and the markets reaching the top of their range - the truest measure of American wealth - investors who have entrenched themselves in stocks that have made money or paid dividends may well see the exit sign on the door even more clearly.

The budget however does not stop there. Permission to drill in the Arctic National Wildlife Reserve was also voted on, passed by a narrow margin and included as well. This is not a conservation effort and does little to quench our appetite for fossil fuels.

This is also not an undertaking that will increase the overall supply of oil in this country or lower our dependence on outside sources.

Environmental issues aside, the oil that will be drilled in Alaska will not reach American markets. It is a geographic hurdle that drillers refuse to make. That oil is destined for Asia in an effort to try and stem their growing consumption. That growth has put a strain on global supply and, according to the argument, increased the price of the commodity. Most of the oil in this country is refined in the Gulf Coast states. This makes it easier to import by ship from Venezuela or some Middle Eastern port.

Would the money have been better spent on trying to develop alternatives? Probably. And to put it into perspective, with each $1 a barrel increase in the price of oil, countries like Abu Dhabi can add another $90 billion to their surplus. That is just one country benefiting from our consumption.

I am - the deficit. By last count, 2004 was year of record deficits reaching of over $665 billion. What did we spend it on? More importantly, what do we have to show for it?

The borrowing done by this country is funded by foreign investors. Those same investors will be asked to lend us even more for additional tax cuts, for Social Security reform whose pirce tag will run well north of $1.6 trillion, and to ensure that American consumption replaces American savings.

To listen to deficit supporters, it may very well be China's fault. By pegging their currency to ours, which has been slipping almost steadily for the last four years, China has become a shark of sorts, willing to loan us what we need to by their goods. We should be thankful that the goods we do buy are inexpensive instead of pointing out the subsidy aspects of their policy of enabling the American consumer.

On borrowed funds, our economy is growing. While a good deal of talk has surfaced recently about the chance these foreign investors might diversify their currency holdings - which is quickly discounted - inflows were dramatically down in January according to the Treasury Department. Had it not been for a speculative jump in hedge fund investing offshore and a dramatic pull back in American investing abroad, the inflows may have set off more than one warning light of a possible waning of the international appetite for our debt.

Perhaps that should not be the biggest worry. Those same investors seem cold towards American equities as well. The reasons why are still hazy but it may have something to do with the growing disparity gap between American wage earners and, of course, the deficit.

I am - the World Bank. Look for an ATM machine to be installed in the White House soon. Congress failed to pass a pay-as-you-go provision in the budget which would have prevented the White House from spending more that it proposes and Congress approves. With a friend working a financial institution that helps third world countries, the banana republic that US is becoming may find the World Bank led by the Bush friendly Wolfowitz a very tempting source for help.

The Blue Money Report
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