The Other Deficit

{NOTE: This piece was submitted by loyal reader Bob, who drives a taxi in Tallahassee. Bob is originally from Ohio and has an avid interest in economic issues}

But it's gonna take money
A whole lotta spending money
It's gonna take plenty of money
To do it right child
--Got My Mind Set on You,
Traveling Wilbury's
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Who poses a military threat to the United States?

During the Cold War the US worried that the Soviet Union might take over the oil resources of the Middle East to deprive the West of them in a war, but what prospective Arab regime of any ideological stripe desires Middle Eastern oil for any reason other than to sell it?

During the Cold War our military presence in the Middle East was small. Even after the fall of the Shah in Iran, we had no significant presence on the ground until the Gulf War.

Since the removal of the Soviet threat, our Middle East presence has only grown, and it is hard to see how our policy has done anything except de-stabilize a region in which our primary interest should be political stability.

The only thing that threatens Western access to Middle Eastern oil is chaos, yet that is exactly what our policies have promoted. Our invasion of Iraq didn’t simply destroy the Iraqi government, replacing it with an uncertain regime, or foster a new generation of jihadists, it has also spawned a potential Kurdish nationalist movement that could de-stabilize both Turkey and Iran, with other negative implications for the West.

These effects are contrary to our national interests. Why has the U.S. thrown Realpolitik out the window? Why do we conduct our national affairs like an episode of the Bounty Hunter, acting like moral police going after "Bad Men" and Mad Men. It seems like something at the frontier of what Sarah Palin and the Tea Partiers might contrive, yet that is what America has become.

And what about the money financing these adventures? Few discuss the “other deficit.” We hear a great deal about the budget deficit and our serious financial problems, but the other deficit -- the foreign exchange deficit -- is rarely discussed except on the business page and never in the context of our overseas military spending. Every year, this country spends about $800 billion more overseas than it takes in. Currently, the world is awash in dollars – $12 Trillion of them outside the United States. This is almost as much as our GDP and far more than is needed by foreign governments for domestic reserves.

If this trend continues (and it has been going on for at least a decade), the rest of the world may soon say, “We don’t want any more dollars; we have enough," leading to the possibility of a dollar collapse. If foreigners don’t want dollars, how will we pay to maintain American troops overseas? We won’t. We will have to bring them home.

So how do we deal with this “other deficit?” The issue is complex, but a major contributor to this deficit is the cost of maintaining American troops in over 800 bases in 130 countries around the globe. Congressmen Ron Paul and Barney Frank have co-sponsored a proposal to withdraw most of our troops from most of these countries. Some air and naval bases would remain, but the ground troops basically would all be brought home. They estimate that their proposal would save about $100 billion a year.

That is the money saved. That would reduce the budget deficit, but the reduction in the foreign exchange deficit would be far greater. All the money our soldiers spend in Berlin, Tokyo, and Seoul would be spent in the US instead. So would most of the money we spend to support them. So the Paul/Frank proposal could reduce the foreign exchange deficit by $200-300 Billion. Such a move wouldn’t completely solve the problem, but it would go a long way toward averting a dollar collapse. It wouldn’t preserve our “empire,” but it would preserve a forward defense for our republic.

The United States cannot micro-manage the political affairs of the entire world, but we can go broke trying. It’s time to bring the troops home.

--by Bob Haley