From Nobel prize-winning economist Paul Samuelson:
How will 2006-08 work out economically and geopolitically? Here is what insiders are beginning to guess.
If there is good news, it will come from the economic side. Extensive spending on Iraq and on rebuilding after Hurricane Katrina more or less ensures that the US locomotive will continue to help sustain global growth. That is a short-run plus for Americans and for people abroad.
But for the US this short-run plus will grow into a gigantic long-term minus. Why? Because budgetary spending out of control will exacerbate the remorseless trend of increasing US indebtedness to nations abroad. Trouble, trouble for the US dollar out there a decade ahead.
Understand that American society has become a me-me, now-now, consume-consume people. Once upon a time, as a nation, we saved 10 per cent of our income. Now that's below 1 per cent. No wonder we must pawn our assets to foreigners and finance our investings from the savings of poorer people in Asia and Europe.
By good luck in Bill Clinton's second term from 1996 to 2000, his overbalanced surplus budget forced down the nation's excess consuming and stepped up the US saving rate at least a bit.
Then, as we all know, Bush's 2000-04 voodoo economics reversed all that the economic doctors had prescribed: to act now to prepare for the demographic crisis in 2010-20, when swollen numbers of baby-boom retirees will have to be supported by lean numbers of working-age taxpayers.
Ben Bernanke, who will replace Federal Reserve chairman Alan Greenspan on January 31, recently told the world that no future disorderly run against the dollar will happen because there is a "glut of saving abroad" eager to hold safe dollar assets. Being of high IQ and with superior training in economics, Bernanke will surely soon change his mind on this and return to the majority opinions of economic experts.
Good luck in economics for Bush until 2008 will not keep him from being remembered in future history books as a voodoo economics leader whose tax handouts to our upper-income classes were most definitely not the reason for present US economic stability. To understand this, only recall how Adolf Hitler's extensive spending on preparation for Germany's war of revenge did wipe out its 25 per cent depression unemployment rates.
Turn now to 2006-08 geopolitics. Accept that US voters will not "stay the [past] course" until a free, democratic and prosperous Iraq gets established. Pigs will fly before that happens. So a new exit plan has to be in the cards.
* We won't leave Iraq "until our generals there tell us we can". Canny Washington insiders translate this as "our generals will tell us it's time to leave when the Pentagon tells them to tell us that".
* When will that be? The new game plan dates this just after "a strong Iraqi army has been built". Such a build-up could be possible. With 50 per cent unemployment rates in Baghdad and 75 per cent rates in the countryside, you can recruit an army of Shi'ites in the Shi'ite regions and a largely Kurdish army in the northern areas. A strong army of minority Sunnis in the Sunni region is more problematic. (But not impossible. An anti-American Sunni, with two sons, will be tempted to send one into the new army and send the other into the insurgent terrorist ranks.)
Africa has taught us how divergent tribal armies breed incessant civil wars. Never mind. A US exit strategy is the topic under discussion. Hopefully the marines will be back in the US before those unpleasantries do break out.
A complete US pull-out from Iraq will not be necessary. When no American soldiers occupy ground space in Iraq, no longer will television show our voters pictures of the 15-plus heroes who were killed that day.
Economists understand the principles of substitution. Bombers in the sky can displace US youths on the ground.
As in Bush Sr's 1990 Gulf War, US military might can operate by remote control. Unmanned drone planes and sky-high piloted planes can safely drop millions of bombs on insurgent outposts.
But won't that kind of bombing - as with the World War II bombing of Hamburg and Bremen and Tokyo and Osaka - kill a lot of civilians? Yes, alas. But it is the US exit strategy that is under discussion.
Along with bad press among future economic historians, Bush and Dick Cheney and Donald Rumsfeld risk being remembered in 2050 along with Genghis Khan and Attila the Hun.
Moral: The game of geopolitics is not a game for sissies.