Debt, Defense, and Diplomacy: Foreign Policy Dilemmas before the
President-Elect
Remarks to the State Association of County Retirement
Systems
Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Costa Mesa, California, November 13, 2008
Last week
Americans voted in record numbers for a new president. However you felt about the outcome, you must
have been moved, as I was, by how the two candidates reacted to the election
results. In defeat, Senator McCain was gracious, sincere, and – as always – put
our country ahead of himself. His
patriotic call for all of us to “help our new president lead us through the
many challenges we face” reminded us why he deserves our respect both as a man
and as a public figure.
President-elect
Obama’s remarks at his victory celebration in Chicago were eloquent and
inspiring. Two-and-a third centuries
ago, our founders pledged that we would be a nation in which “all men are
created equal.” We have finally made
that proposition an unrefutable reality.
November 4,
2008, was a night to be proud – more proud than ever – to be American.
Now it is the
morning after. We must turn our
attention to the grim realities of our current situation. Those realities
didn’t change because we elected Barack Obama as our president. Given the magnitude of the problems we face,
it wouldn’t surprise me at all if, once the sting of defeat wears off, Senator
McCain feels grateful that someone else has been saddled with these problems. As Joe McCain, John McCain’s fiercely
partisan younger brother, said the day after the election, “there is no time for looking back, not with
what history will inevitably throw at us. . . . Times are going to get more
challenging, possibly even very dark . . .
Problems will be thrown at us we cannot even imagine . . . . I am going . . . to try to help our
President-to-be to bring the land to a safer, better place,” he said. “ . . . For if Barack Obama fails, we all
fail. Together.”
In that spirit,
I want to speak with you about some of the choices President-elect Obama and
the American people now confront. A few
of these choices are unavoidable; many entail painful consequences for us and
for our foreign relations; most are difficult.
The list of our problems is long, but I want to leave time for
discussion, so I will try to be brief.
That means I will be superficial – but that has never bothered me at
all. Years ago, a wise man from the East
told me that if something is worth doing, it is worth doing superficially. (He was from the East Coast of the United
States. I can’t remember whether he was
in Washington then or still on Wall Street.)
I don’t have to
tell this audience that our current economic outlook is dire. We are entering a deep recession. It was born in America but now affects every
country in the world. Our debt-ridden financial system and economic model have
been discredited. In many ways, the
Obama Administration faces a more difficult set of economic and related foreign
policy challenges than the Hoover and Roosevelt Administrations did at the
outset of the Great Depression.
In 1930, the US
national debt was less than 18 percent of our GDP. Almost all of it was held by American rather
than foreign investors. Our government
had no unfunded obligations. We therefore
had plenty of borrowing capacity on which to draw for Keynesian
counter-cyclical deficit spending.
Today, our
acknowledged national debt comes to about three-fourths of our GDP, and
bailouts and stimulus packages are rapidly driving it toward 100 percent. About two-fifths of this debt has been
borrowed from entitlement programs, like Social Security, government employee
pension plans, set-asides for veterans programs, and the like, many of which
are themselves technically insolvent.
The other three-fifths are held by investors, about half of whom are
foreign, many of them instrumentalities of foreign governments like Japan,
China, and major oil exporting countries.
It is
politically incorrect to do so, but honesty obliges me to add that, if the federal
government applied the accounting principles used by corporations and state and
local governments to itself, its unfunded obligations would be recorded as
debt. The official explanation for this
accounting exception is that we can always decline to pay Social Security,
Medicare, Medicaid, veterans’ benefits, and so forth, so they aren’t really
debt. I don’t know about you, but I am
not reassured by this explanation. These unfunded obligations now total more than
$60 trillion. Including them would bring
our national debt to something well over $70 trillion, or more than five times our current GDP. It would show our current budget deficit to
be $2 trillion or more. These numbers do
not, however, serve the purposes of political spin, so you will rarely hear
them mentioned in polite company. They
haven’t been mentioned since Lyndon Johnson changed the rules to understate the
burden of the Vietnam War on the
.
The fact is
that we have kept huge amounts of debt off our books while running our
government, paying for our wars, and financing our consumer society with credit
rollovers – increasingly, rollovers from foreign lenders. The bailouts and stimulus packages we have
recently conceived just repeat this practice.
We have formulated no plans to pay for them. Instead, we intend to finance them with more
borrowing. And we expect foreigners to
continue to buy at least half the resulting growth in our ballooning national
debt.
Amazingly, so
far, so good. For the past month and a
half, T-bills and the dollar have seemed to most investors like the only
relatively safe places, other than the Japanese yen, to stash their money. In these circumstances, there hasn’t been
much of a problem selling government bonds, and the value of the dollar has
actually risen against other currencies.
But the panic will pass. The day
of scrutiny by our current and prospective creditors will be upon us. The dollar will then rapidly decline. For the first time in living memory, resource
constraints will compel the
The American
people have just voted for change.
That’s good. But, I am sorry to
say that, in the national interest, the Obama Administration and the 111th
Congress must now actually produce change, and then persuade the world that it
has occurred. Specifically, we must
convince foreign investors that the
Becoming
creditworthy means cutting spending and raising taxes to show that we can and
will bring our budget back into balance within a reasonable time. As Herbert Hoover inadvertently taught us,
however, neither cutting spending nor raising taxes is a good idea in a
recession, particularly one as severe as this one may be. So the most urgent task before the incoming
administration will be to negotiate a financial workout plan with foreign
lenders. Such a framework will be
essential to assure us the lines of credit we need to put people back to work
and to ease the pain of returning to prosperity with pay-as-you-go government.
This brings me
to yet another dimension of our fiscal problems with foreign policy
ramifications. When you look at the
federal budget with an eye to cutting outlays, as President Obama has promised
to do, you quickly discover that options are severely limited. Thirty percent of the federal budget is
devoted to Social Security, Medicare, Medicaid, unemployment, education and
other human resource programs. Unfunded
obligations in this category of the budget are huge. The amount that we would have to set aside
this year to ensure that we can pay for currently unfunded Social Security,
Medicare, and Medicaid obligations alone is $41 trillion. Far from cutting funding for this budget
category, we should be increasing it.
Meanwhile, 18
percent of the budget goes to veterans’ benefits and interest on past military
spending. To cut either would be
dishonorable and self-defeating. Eleven
percent of the federal budget goes for government operations, including
homeland security, law enforcement, international affairs, and non-military
national debt. Hard to cut much out of
that. Five percent is spending on
physical resources like agriculture, transportation, energy, the environment,
and other infrastructure. Bridges are
already collapsing, highways are gridlocked, and there are man-eating potholes
out there. Not much can come out of
these programs. In fact, most Americans
think we should be spending a lot more on them.
(Doing so would put more people to work than handing out checks to buy
Chinese consumer products at the local big box store.)
This leaves
spending on current military activities, only a little over half of which are
covered by our $515 billion defense budget, with the rest of the funding
authorities hidden like Easter eggs all over the rest of the federal
budget. In the aggregate, military
spending accounts for 36 percent of government outlays, or about $965
billion. Roughly $200 billion of this is
for combat operations in Iraq and Afghanistan.
About $222 billion is for military research, development, and
procurement. I hate to have to say this
in Southern California, but, in practice, defense is the only part of the
budget in which substantial cuts are feasible.
This
unpalatable fact is unlikely to escape those we are trying to convince to lend
us more money. Most, but not all of them
– Arabs, Brazilians, Chinese, Europeans, Japanese, Russians and others – oppose
our wars of choice. And some fear that
they themselves are the intended targets of our military R & D and
procurement. (By our own admission, some
of them are.)
This raises a
vexing question. Why should these
foreigners lend us the money to bully or bomb them? If you know the answer, please put it in an
envelope along with a résumé and mail to the Obama Transition team. They will welcome your help on this matter
and may even make you Secretary of the Treasury. Just be sure to rule yourself out as
Secretary of Defense. In the era of
steep cuts in defense expenditures that now seems inevitable, wars of choice
are unaffordable, and support for the defense industrial base will be
problematic. Only constipated masochists
with impeccable military backgrounds and no illegal alien cleaning staff should
apply for the position.
A last word on
the budget. Total federal outlays –
before the bailouts, stimulus packages, and unemployment offsets became
necessary – were budgeted at $2.65 trillion.
Of this, proposed nonmilitary expenditures came to $1.21 trillion, or 46
percent. The other $1.45 trillion was
for past and present wars and military programs. That is a good deal more than military
spending in all the rest of the world combined.
The stated purpose of this huge defense effort has been to ensure
unchallengeable global supremacy for the United States – to patrol a global
sphere of influence in which others can act only with our permission or
acquiescence, or at their peril. We must
be able to protect or change regimes and override the sovereignty of foreign
nations as we choose – without allies and without fear of serious
opposition. Or so we have believed.
This vision of
American hegemony has fit both the human rights and humanitarian agenda of
liberal interventionists and the militarist agenda of neoconservatives. For both, the United States is “the
indispensable nation” that stands higher, sees farther, and always knows
best. This coincidence of arrogance
explains past bipartisan support for our interventions in Somalia and Haiti,
our willingness to bypass the United Nations in Bosnia and Kosova, and the invasion
of Iraq. It accounts for the current
consensus on reinforcing military failure in Afghanistan and embracing Georgia
and Ukraine.
A major problem
with hegemony is, of course, that it generates its own antibodies. In time, foreign resistance brings it
down. But nothing clears the mind of
overweening ambition as abruptly as bankruptcy.
We are not, of course, technically bankrupt – our creditors have not
agreed to
excuse our debts and there is no applicable international mechanism by which
they can do so. But we are insolvent,
which is good enough for government work.
We became the
preeminent society on the planet not by force of arms but by the power of our
principles and the attraction of our example.
The effort to replace that preeminence with military dominion has
failed. It has discredited us
internationally and exhausted our armed forces while generating hundreds of
millions of new enemies for our country.
It has now all but broken us financially. It’s time to ask whether military hegemony is
a reasonable or feasible goal, and, if not, whether a less belligerent approach
might assure our security more effectively, at a cost we can afford.
Of course, if
all you have is a bomber, everything looks like a target. Unless something is done to beef up our
diplomatic service, Americans will have to continue to look first to the use of
force in our foreign relations, and our military will continue to be asked to
do things that civilians can do much better and less expensively. There are more personnel assigned to military
bands or in a single carrier battle group than there are American Foreign
Service Officers worldwide. The weapons
of diplomats are words, and their power is their persuasiveness. Talk is cheaper than firepower and does less collateral
damage, so it makes sense to try it before launching a military sucker
punch. But even as we add another 92,000
billets to our armed forces, 12 percent of our diplomatic positions overseas
remain unfilled, as do one-third of such positions in Washington, and there is
no significant staff increase in sight.
Staffing up for diplomacy is a requirement that must be added to the
huge task of recapitalizing our military – replacing all the equipment we have
worn out in Iraq and Afghanistan – and restoring readiness.
The
alternatives to a military-based foreign policy all involve heavy reliance on
diplomacy as part of a strategy of burden-shifting. They require the enlistment of allies to do
their part in attending to common interests and values so that we do not have
to do it all on our own. They involve
the selective use of our strength on a restrained basis to buttress regional
balances of power or to tip those balances back toward equilibrium when it is
disturbed. They include taking as much
or more care in deciding which enemies to make as in determining which allies
and friends to cultivate. They imply
caution before we act based on asking ourselves some basic questions, like:
What’s in this for us? What will this
cost? How will this end?
They entail the
development of grand strategy, in which our political, economic, and cultural
strengths can complement our military power to advance and defend our interests
abroad. Nowhere is there a better
illustration of that than in Iraq and Afghanistan. More of the same won’t do in
either place.
Iraq’s
infrastructure now has been smashed, its domestic tranquility shattered, and a
fifth of Iraqis – the equivalent of sixty million Americans – are displaced
from their homes, driven into exile, or dead.
Iraq resembles nothing so much as many of the American veterans who have
served there: it is battered, embittered, and in physical and mental pain. The fact that the Iraqi polity has somewhat
stabilized in this condition is better than the alternative. It may not provide much cause for
celebration, but it has created conditions in which Iraqis are prepared to take
their chances on getting along without continuing foreign occupation.
The Iraqis are
demanding that we set a schedule for getting out of their country. They will meet with no argument about that
from President-elect Obama, but withdrawal from Iraq will test the diplomatic
skills of his administration. We owe it
to our allies and ourselves to withdraw in a way that maximizes the prospect that
Iraqis can restore peace among themselves.
We must leave in a manner that reduces rather than enhances the Iranian
hold on Iraqi politics our occupation facilitated, that denies al Qa`ida
opportunities to reconstitute its battered franchise operation among Sunni
Arabs there, and that restores Iraq as an element in a regional balance of
power we can buttress from afar, with a minimal presence in the Persian Gulf
and at minimal expense. The object of
war is always to produce a better peace.
It remains to be seen whether the Iraq war can meet this test.
Meanwhile, in
Afghanistan and along the Afghan-Pakistan border, we are in a war of attrition,
and we are losing. We need to recall the
reason we went there in the first place.
Our purpose was not to reform Afghanistan or to rectify our lack of
attention to it after the Soviet defeat there twenty years ago. It was to deny the use of Afghan territory to
terrorists with global reach. That was
and is an attainable objective. It is a
limited objective that can be achieved at reasonable cost.
We must return
to a ruthless focus on this objective.
We cannot afford to pursue goals, however worthy, that contradict or
undermine it. The reform of Afghan
politics, society, and mores must wait.
First things first. Our policies
and programs toward that country must aim above all to reduce the likelihood of
its involvement in terrorist attacks on the United States or Americans
abroad. Bombing, strafing, seizing, and
mercilessly interrogating villagers from a warrior culture do not support this
objective. Nor do denigrating and
seeking to erase aspects of Afghan culture we consider benighted – even if they
are. A little collateral damage and
disparagement can convert a lot of formerly harmless people into supporters of
terrorism.
President-elect
Obama has pledged to add many more American soldiers and marines to the 31,000
now in Afghanistan. This will strengthen
our military effort there. But a strategy
that continues to rely primarily on military means seems likely to deepen our
confrontation with Pashtun nationalism, push the destabilization of Pakistan to
a new stage, and promote the further spread of anti-American terrorism in the
region and beyond it.
The purpose of
our troop increase should not be to do more of the same. It should be to strengthen our hand for
negotiations that accomplish the expulsion of al Qa`ida from the
Afghan-Pakistan border region and then keep it out of both Afghanistan and
Pakistan. Saudi Arabia has reportedly
begun to broker such negotiations between the Taliban and the Afghan and
Pakistani governments. Rumor has it that
Saudi diplomats are also seeking the return of Osama Binladen to Saudi Arabia
to stand trial under Islamic law. An
outcome like this would be a major victory for us and all those who stand with
us against terrorist extremists. We
should apply all the military and diplomatic power at our command to its
achievement.
Ending the wars
in Iraq and Afghanistan on terms that serve our interests must be a first order
of foreign policy business for our new president. It will open the way to the renewal of
alliances and partnerships that are essential to our security, domestic
tranquility, and – now, more than ever – our prosperity. But doing this won’t be easy.
Our post-Cold
War experiment with diplomacy-free foreign policy has cost us our global
political leadership. Our disregard for
international law and comity has inspired scofflaw behavior by others. Our betrayal of our values at Bagram,
AbuGhraib, and Guantánamo has left us without credibility as a champion of
human rights and the rule of law. Our efforts to unseat those brought to power
by democratic elections we supported have earned us a reputation for
unprincipled hypocrisy. Our invasions of
Iraq and Afghanistan have shown our military reach and prowess while
demonstrating the limits of our military strength to our enemies and devaluing
its deterrent power. The panic of 2008
has now brought our financial system into disrepute.
Those who
cannot live by their brawn or their wallets must live by their charm and their
wits. America cannot lead if it does not listen. We have much to learn from the answers others
have found to their own dilemmas. Often
these have paralleled the serious problems in our current human and physical
infrastructure – our education, health care, pension, and transportation
systems. Our competitiveness is being
eroded not just by these problems but by the unwelcoming face we now display to
foreigners and their ideas. We are a
less open society than we were. We need
to do better by ourselves.
The United
States has been blessed with a vast land of uncommon beauty, rich resources,
and a diverse population united by the democratic ideals of our founders. We are famously optimistic and open to
change. We have a resilience and
capacity for self-renewal that has been the envy of the world. Now we must once again demonstrate these
qualities.
Our values as a
nation are our greatest asset, but they are only as strong as our practice of
them and only as influential as our openness to foreign visitors. The best way to spread democracy, good
governance, regard for human rights, and the rule of law is to exemplify these
virtues both at home and in our behavior abroad. The surest way to protect the weak from the
mighty is to insist that all nations, including our own, must follow the same
rules. The most effective way to keep
the peace is to work respectfully with others to address their concerns by
peaceful means. We cannot foster respect
for our own sovereignty by disrespecting that of others. We cannot assure prosperity without the
active cooperation of the world’s other major economies.
We have just
voted for change at home, but we also need it abroad. The institutions our country crafted for the
world after World War II are no longer up to the job. We must reinvent them. We cannot do this on our own, nor can we
dictate how it should be done. We
require the cooperation of many nations.
When he takes
office in a little less than ten weeks, President Obama will have his work cut
out for him. He will lead a weakened
country in a world in which the power of other great powers is rising in
relation to our own. He can succeed only
if all of are prepared to put the country ahead of ourselves – to be
patriots. In our own interest that is
what we as Americans must now be. If
Barack Obama fails, we all fail. Together.