Monday, August 24, 2009

United States: 'Too big to fail'?

By William J. Murray
© 2009

AIG, the largest insurance company in the world has been bailed out by taxpayers three times. Although it was "too big to fail," it failed. General Motors also "too big to fail," went into bankruptcy. The great Merrill Lynch brokerage went belly up, but was saved by the taxpayers and given to Bank of America by the Bush administration. In turn, Bank of America had to be bailed out by taxpayers. Citibank has been bailed out more than once, as have other banks that were "too big to fail."

The Soviet Union is gone. In the 1960s and 1970s, the CIA reported that this massive nation that covered almost one-third of the land area of the world was just "too big to fail." Presidents were told by our security agencies that America would face this daunting enemy for generations. By the 1990s the Soviet Union was in the trash heap of history. A nation "too big to fail" had failed, and had broken apart into numerous smaller states that began battling each other.

History is full of nations and empires that were "too big to fail." The Roman Empire is gone; the Holy Roman Empire is gone; the Byzantine Empire is gone. The great British Empire on which "the sun never set" is now a tiny Island in near bankruptcy.

But don't worry: The United States is "too big to fail."

The United States no longer has a real manufacturing base, and almost 90 percent of the economy is based on consumption, mostly of imported goods. But don't worry, our leaders say that the American consumer society is so big it can't fail. The leadership believes that the Chinese and the Saudi royals will continue to loan us money to consume because our nation and our economy are just "too big to fail." Congress and the president believe that the leaders of rich nations understand they must bail out America from time to time, sort of the way American taxpayers had to bail out AIG, GM, Merrill Lynch, Bank of America, Citibank and others.

Denial is not a river in Egypt. Denial is the state in which the American people and the American leadership live. The trillions of dollars the Bush and Obama administrations have spent to "stimulate" the economy have to be paid back from the future income of taxpayers. Translation: Our children and grandchildren are yoked to a huge debt they cannot possibly repay. Far from being too big to fail, the United States has become too big to survive.

The American problem is not just debt, it is the sheer size of the government. The federal government is so involved in so many of the aspects of the everyday life of Americans that it simply cannot keep track of its own activities, or of how much is spent or even how it is actually spent.

I was present in the Soviet Union for the coup and for the Great Collapse. Soviet communism failed because of the size of government. As a nation the Soviet Union simply could not afford to pay all of the accumulated debt, pensions and health care, and also spy on all dissidents and field an army. Despite being an oil rich nation, the Soviet Union collapsed because of central planning and the inability to pay its obligations. Rather than being too big to fail, it was so big it had to fail.

Having witnessed the Soviet failure firsthand, the parallels with the current path of the United States are all too clear. The more the federal government does, the greater its role in our lives, the greater its debt, the higher the taxes, the greater the central planning – the closer we are to failure as a nation-state.

Fortunately the people of the Untied States have a safety net in the individual states. Once our "too big to fail" federal government defaults and fails, the various states will still remain functioning democratic entities. The states will be able to provide the core services needed by the people, including law enforcement and education. When will this happen? Soon enough that state governments should be planning now for the possibility.

First appeared in World Net Daily on August 24, 2009

Also see the article by Carmen M. Reinhart and Vincent Reinhart