I saw a nice review of Thomas L. Friedman and Michael Madlebaum’s That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Come Back
Note that the first four waves were:
1. Sputnik Shock in 1957 as the United States lost the first leg of the space race
2. Vietnam quagmire and malaise
3. Jimmy Carter’s inflationary malaise
4. The rise of Nippon Inc.
Which leaves us our latest wave, the debt bubble implosion.
Josef Joffe, The American Interest, January/February 2012
Friedman and Mandelbaum underline the broader ramifications of this debt run-up. This millstone will hang on the neck of the United States for decades, unless... To drive the depressing point home, and to relate America’s astronomic debt to its shrinking power abroad, Mandelbaum and Friedman offer one of the funniest lines in the book. It comes from a member of President Obama’s Simpson-Bowles deficit commission, who quips that China had better not invade Taiwan because, if the United States rode to the rescue, “we would now have to borrow the money from China to do it.”
n the 1958 film Touch of Evil, the authors relate, the bad guy played by Orson Welles stumbles into a brothel where Marlene Dietrich works as a fortuneteller. “Read my future for me”, Welles asks. She replies: “You haven’t got any. Your future is all used up.” Shall this be the fate of Lincoln’s “last best hope on Earth?”
Per the review, the apparent proscription to this fifth wave of declinism is to address the deficit, cut entitlements, raise taxes, invest in education and infrastructure, and reduce oil addiction. All of which is to be accomplished by having a third party candidate force these issues to the forefront. Even if the candidate did not win, the two major parties would be forced to co opt at least some of the solutions to avoid losing their base.
I am dubious. Paying off the deficit (reduce present spending), raise taxes (in theory spending neutral, but shifts money away from individual voters), investing in education (spending on a notoriously low productivity portion of the economy, and spending on infrastructure (very long term payback period) will all make little immediate difference, or reduce current spending. Note, that it does not address the enormous lump of debt amassed by your general public. In other words people will have to be poorer in real terms for possible long term future gain. That does not sound very American to me.
The only one of the declinism waves that we got out of clean, was the Sputnik one. Of course there have been arguments that Apollo was its own sort of bubble, and that the failure to replace the shuttle program is the last bit of air wheezing out of the balloon.
The Vietnam debt bubble is a precursor to the 1970s oil crises, and started the inflationary spiral. We got into the inflationary spiral as a way to deal with the debt, and then when Volcker squeezed the currency to get inflation under control; we went into a debt splurge to get out of the recession. So you can argue that today’s huge bubble tidal is the ripple that started with Vietnam.
The jury is still out on the Peak Oil portion of Carter’s Malaise, and the inflationary part of the Malaise we covered two paragraphs ago.
Japan (and the Soviet Union} blew themselves up – as IMO the Chinese are getting set to do right now.