Most of the Republican establisment takes it as a given that the American economy and military will always be strong and as a result are neglecting the work that needs to be done to keep it that way. But the longer that goes on the more and more fragile it becomes. Just as Detroit used to think that the domestic auto market was their personal fiefdom, this hubris will bite hard eventually. More and more supposedly American companies have merged with international companies to stay in business. More and more government debt is held by foreign banks and governments. The US dollar is beginning to wane as the most popular reserve currency, even among drug dealers. The practice of running a bigger and bigger deficit in our government accounts only hastens the day when the Euro becomes more attractive. Unless our government begins to show that it has the capacity to generate real revenue to meet its current and future obligations, our creditors are going to make a run on the bank and get out of dollars while the getting is good.
We need to show the financial markets that we are determined to put our financial house in order or it will be too late. We need to find ways to raise tax revenue that is relatively painless and does not disrupt our markets. We need to recognize that having an overpowering military does not keep us safer, it just makes it easier for unwise heads to use it for political purposes rather than national defense. I'll have more on what I think makes for a plan of rational taxation in a later post.