President Lyndon B. Johnson's policy of Great Society spending and Vietnam War is credited with the rising American inflation that persisted until checked by President Reagan's supply-side policy.
In Johnson's time the American economy and the US dollar were strong, and there was no current account deficit. Yet, LBJ's policy of guns and butter did long-term harm.
The Bush/Obama 21st century policy of guns and butter makes LBJ look like a piker.
The 2009 and 2010 federal budget deficits will be monstrous even without guns. But Obama is exiting (apparently) the Iraq War in order to start two, possibly three, more wars.
Obama has announced a doubling of US troops in Afghanistan. Widening that war will require the US to occupy, or attempt to occupy, parts of Pakistan. The disrespect for Pakistan's sovereignty will further radicalize that large, nuclear-armed country and bring Pakistan, or at least parts of it, into armed conflict with the US.
As if this isn't enough new war, President Obama (and the incoming CIA director, Leon Panetta), accused Iran of developing a nuclear weapon, an uninformed accusation that stands in conflict with the National Intelligence Estimate, [PDF] which concludes that Iran halted all work on a nuclear weapon years ago.
Shades of "weapons of mass destruction" and "al Qaeda connections!" The Bush Regime and the complicit US media persisted in accusing Saddam Hussein of possessing weapons of mass destruction, weapons that the prime minister of Britain, Tony Blair, otherwise known as Bush's poodle, said could be employed in "45 minutes." National security adviser Condi Rice and VP Cheney warned of "mushroom clouds" going up over American cities.
All of these lies were told in the face of the documented evidence from weapons inspectors on the ground in Iraq that no weapons of mass destruction existed.
Now Obama is employing the same tactic, creating fear over nonexistent Iranian nuclear weapons.
Even without the massive expense of the bailout and stimulus programs, the US has no capability of fighting wars in Pakistan, Afghanistan, and Iran. Conflict with Iran would likely bring Iraq, now in the hands of Shi'ites allied with Iran, into the conflict. The entire Middle East would likely explode. Considering that the US had to end the war in Iraq by paying the Sunni insurgents not to fight and by agreeing to a withdrawal agreement dictated by the Shi'ite government, there are no prospects for US success in such an extensive new war.
Before Obama overcommits the US both financially and militarily, he needs to find some competent advisors. Overreach is heading for new levels that will bring America to its knees.
Obama has only been in office a couple of weeks, and he is already proving to be even more reckless than Bush. Bush's largest guns and butter deficit was $455 billion. Obama's 2009 budget deficit will be at least $2 trillion, a five-fold increase in one year, to be followed by another monster deficit in 2010.
The US has never had such near-term massive financing requirements, much less at a time when the rest of the world is in economic turmoil and very displeased with the US.
Obama needs a reality check and an escape from Washington hubris. If the US cannot finance its monster deficits except by printing money, it will mean the end of the dollar as reserve currency and the end of American power.
Mr. President, as you said in your first press conference on February 9, the party really is over.
Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan's first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider's Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice. Click here for Peter Brimelow's Forbes Magazine interview with Roberts about the recent epidemic of prosecutorial misconduct.
