Could Bankruptcy Be Good For America?

Gideon Rachman is a well-known commentator for the Financial Times who writes what is usually a very insightful piece every few days.

His article in today's FT, entitled Bankruptcy Could be Good For America, really bothers me. Rachman believes that financial crisis is what caused China and India to reform their economies, and what caused totalitarian regimes to fall in France (in 1789), in Russia (in 1991) and across Latin America (in the 1980s). He therefore believes that, with the US's uncontrollable deficit and no medium term plan to close the gap, the US is ultimately headed for the precipice. He furthers that Rahm Emanuel recognized this great opportunity when he said “you never want a serious crisis to go to waste”.

Rachman's article represents the type of British arrogance that I guess still exists but should have ended after the US won the revolutionary war and become independent of Great Britain, but still exists occasionally among those in the UK who harbor an inferiority complex. The very idea that the most democratic, egalitarian and free-market economy in the world could benefit from the profound economic crisis that the Obama administration will leave as a legacy is simply absurd. The parallels that he draws are completely off-base.

Rachman also fails to recongize that the Rahn Emanuel quote was made in defiance. Emanuel was speaking the entire Obama administration and explaining why the Democrats were so anxious to pass broad health care legislation even though it pushes us closer to the precipice.

Let there be no mistake. There is nothing good about the US administration's efforts to throw money at every probem in order to solve it without any understanding of where the money is coming from. Playing with monopoly money is dangerous and it is similar to the behavior of the Soviet Union as it wondered towards bankruptcy in the late 1980s or the Latin American regimes before them. But for the US, there is nothing to gain and everything to lose.

Our current administration is a tragedy for the next generation.