As polls begin closing in the Eastern time zone, I am actually rather complacent about the outcome. Yes, I voted for Mitt Romney, and yes, I want him to win. But I guess I have a fatalistic view about what happens regardless of which man wins tonight.
Here is what I envision over the next four years:
The bond yield is going to skyrocket as inflation begins to take hold. That will push up the deficit because of the increased interest the government will have to pay to its creditors. The effects of inflation will be horrible. We’ll do something stupid to forestall this, like feed even more debt to the Fed. It won’t work. Inflation will find our door. But if I’m wrong, and inflation doesn’t come, that is almost as bad, as it means another four years of super low interest rates and a corresponding dearth of interest income and saving. Four more years of baby boomers retiring with no increase in interest rates is very bad indeed.
Regardless of who is in charge, America will still be held back by the sclerotic state of the nation’s bureaucracy. As Meghan McArdle pointed out recently, there have been plans for hardening the essential infrastructure of the NY/NJ area for years. It would have been nice to have last week. Those plans are still in review. They will still be in review a decade from now. This, in a city that saw the Empire State Building go from a hole in the ground to completion in less than 14 months. Obamacare is just the latest circle of bureaucratic hell through which America’s entrepreneuers must wade, and even if Romney is elected, much of it, I am saddened to report, will remain intact. At some point our economic engines are like Napoleon’s troops invading Russia: supply lines were so long that there was no room for anything else in the carriage but the fodder for the horses pulling the carts. There was nothing left to do then but to eat the horse. I fear that we’re nearing that point.
An even bumpier economic ride is overdue overseas. China is on the edge of a cliff; its coming catastrophe will either be economic or cultural. Probably both. Japan is nearing the end of its free money holiday. With the highest debt load in the developed world as well as the oldest population, Japan is not just an economic mess, but serves as a warning to others who are quickly tracing the same path. Even more concerning is that China and Japan are both still very closed societies; they are unlikely to search earnestly and inwardly for blame or solution. It is easier to look outside for blame. And then there’s Europe: beset by unbridgeable divides, it will collapse with rippling economic, cultural, and perhaps even military effects upon the United States.
Unfortunately our competitors and enemies will not bide their time these next four years. Our foolishness in the Middle East and in North Africa has placed America in a damned if it does, damned if it doesn’t situation. But of the two, doesn’t–disengagement–offers the least potential downsides. Regardless of who is elected, we won’t disengage. Instead we will continue to reinforce failure overseas just as we have for years. As for Russia . . . enough said.
We are an nation divided evenly between two irreconciable ideologies. On the one side is the collectivist progressive who knows that by centralizing control in the hands of leaders empowered by special powers, that America will be a fairer place. On the other side is the rugged individualist who knows that if he were freed of extraordinary restrictions that he could accomplish extraordinary things and that will make America a stronger place.
This is not a new conflict. In fact, it’s the conflict that gave birth to our nation, when we left England and an anointed elite behind. But we didn’t leave it entirely behind. And by degree, collectivism has returned. For decades we have been able to paper over the differences between the two camps through the incredible surplusses that we have amassed. But those surplusses are soon to come to an end.
We could forestall that day, perhaps even reverse time. But unfortunately, even if Mitt Romney wins tonight, he will not win with a mandate for real change. Thus we will toddle down Japan’s path to our own end. At least that beats sprinting there.