Washington's killer touch


By Julian Delasantellis
Asia Times
Jan 7, 2010


For their groundbreaking 1976 rock musical Evita, Andrew Lloyd Webber and Tim Rice meant for a character called "Che" to be the piece's narrator; when the work arrived at London's West End and New York's Broadway, it was self-evident who "Che" was supposed to be.

With his shaggy dark hair and beard, and his de rigueur urban revolutionary uniform of multi-pocketed vest and dark beret, this was an obvious representation of Che Guevara, the ferociously handsome Argentinean revolutionary whose dreamy eyed poster was almost a required furnishing in the 1970s coed dormitory rooms of the most expensive colleges originally financed by the most avaricious of capitalist robber barons in the West.

But more than just a simple narrator, Che, who in actuality had been executed by Central Intelligence Agency-directed Bolivian army units in 1967, was meant to be the musical's Greek chorus and conscience, looking at the Eva Peron story with a mixture of dread, contempt and morbid, obsessive fixation. Here he was, like a good part of the Latin American left, eventually giving their lives in vain attempts to obtain power, while all Evita had to do to rule was to fix her hair and wear designer clothes.

By the time of the 1996 movie adaptation of the play, starring Madonna as Evita and Antonio Banderas as Che, the movie's American producers gave Che a shave and a haircut - none of that silly socialist nonsense for an American audience looking more for a matinee idol than a Maoist. Still, among the many passages from Che's lines that made it into the movie was this, a lament of the world left still befuddled by the fact that it needs to learn more Oscar de la Renta and less dialectical materialism.

Sung at the curtain's rise, at Evita's 1952 death, Che looks back on her life.

She had her moments, she had some style.
The best show in town was the crowd
outside the Casa Rosada crying, "Eva Peron."
But that's all gone now.
As soon as the smoke from the funeral clears,
We're all gonna see and how, she did nothing for years.

... just like the governments of the West, especially free market capitalism's head cheerleaders, the United States and Great Britain. As the first 10 years of the 21st century are now concluded, a rough consensus seems to have been reached on a name for that first decade - the "oughts" - although some prefer the "naughties"; whatever your choice, both capture what was actually accomplished in these societies during this period - naught, or nothing.

You've probably heard the statistics by now. No advance of any kind in any major US or British stock index over the period; the best performer being the US Dow Jones, down about 9% over the decade, while the US NASDAQ continues to flail about in the crater created by the dot-com crash, down 44%. Add in the effects of inflation, which rising stock prices are supposed to hedge, and things look much, much worse.

Net new jobs created in the USA? Zip. Net advance in real workers' wages? You gotta be kidding. Almost 15 million more people in the country without health insurance than when the decade commenced. If you, as many did think, the oughts would be the decade to make money in real estate rather than in stocks, one would hope you managed to get scuba training before your dives into the now hopeless underwater wreckage of American housing finance.

But the funny thing is that it hardly looked as if this was so at the time. As the decade was passing the Anglo-Saxon world by, the overwhelming impression was of being on a madly broken carousel, accelerating beyond all design or reason, watching the world pass by in a blinding blitz of shiny bling, fast Bentley's, and all that in-the-know idolatry of Frank Gehry's absolutely gorgeous Guggenheim in Bilboa. Three American movies, The Dark Knight, The Lord of the Rings - The Return of the King and Pirates of the Caribbean - Dead Man's Chest, all topped the US$1 billion worldwide box-office marks - as did Avatar as 2009 gave way to 2010.

It seemed like the deal-makers who had created the great media conglomerates - the Viacoms, the News Corps, the Time Warners and the GEs - were all succeeding in their apparent desire to cross-promote their products on so many retail platforms that takeover specialists would be required at all heterosexual romantic moments to sign off that the possible progeny's DNA would be fully marketable and brandable into cereal varieties, new fast-food menu items, and mobile-phone rate plans ...

A key measure as to whether any organization or organism will be able to sustain itself into the future is the balance of what it consumes versus what it produces; any entity that becomes addicted to consuming more than it produces must inevitably starve to death. Here, the statistics for the US and Britain are not promising. At no point during the past decade did either sell more than what it bought from the world.

In terms of fiscal policy, what the government takes in as revenue as opposed to what it sends out in spending, and with the exception of a couple of years at the commencement of the oughts, when government coffers were flush with capital gains taxes paid from sales of dot-com bubbled stocks, both governments have been in deep fiscal deficit since, especially as the full brunt of the current global recession took force.

Do anything long enough, and often enough, and it's natural that you get good at it. That's what is happening this year - one of the cleverest tricks discovered by the American government to live beyond its means is coming full due this year. Wait until you hear about it, it'll just kill you.

In actuality, that's exactly what it'll do.

The novel and two film adaptations of Richard Condon's The Manchurian Candidate speculate on the existence of secretive, malicious powers able to bend men's souls against their wills to suit their destiny - these were a communist psychiatrist called Yen Lo in the book and first movie, the multinational conglomerate Manchurian Global in the second.

But secretive organizations able to bend wills is not science fiction. The polling divisions of the US Republican Party, and to a much lesser extent the Democratic Party, do it every single day.

Around the time of the early 1990s, Republican pollsters found they could get far more political traction campaigning against something they called a "death tax", the now common government charge against the value of large estates before being passed on to beneficiaries, instead of its more standard categorizations as the "estate tax" or "inheritance tax". Those two appellations caused middle-class Americans to make great flying lunges for the TV remote control on hearing them, while "death tax" seemed to hit home on an almost visceral level, as if it meant that black-jacketed, machine-gun-carrying government thugs were going to be scouring the cupboards to seize recently deceased Grandma's rhubarb pie recipe.

The truth was far different. Over time, legislative income exemptions from the estate tax, along with reductions in the actual rate, meant only those beneficiaries of US taxpayers standing to inherit estates in the upper fifth percentile in value of all estates were paying the tax. With the new George W Bush administration taking over amid a recession in 2001, and with even the Fed chief, Alan Greenspan, famously and fatuously asserting that he was now worried about excess government surpluses, it was open season on taxes, all taxes, and, in this, the estate/death tax was hardly one to be spared.

In the bill formally known as "The Economic Growth and Tax Relief Reconciliation Act of 2001", already planned reductions to the estate tax for 2006 would be accelerated and broadened. From 2001 to 2009, the maximum applicable estate tax rate would be lowered to 45%; the amount exempted from any tax would rise from the first $675,000 of inheritance to the first $2 million.

But here's the kicker. For this year, 2010, the estate tax is gone. If you die this year, no matter how big your estate is, your inheritors will get every single last penny of it.

But woe be to those, or the beneficiaries of the will of those, whose breath hangs out until January 1, 2011. For them, the tax will return, at a 55% maximum rate with the first one million of inheritance exempted. Talk about family values.

What this means is extraordinary.

Let's say that it's 11 months from now, the year 2010 grows old and grey; likewise in some retirement center or hospital in some gated community in Hilton Head, South Carolina, or Coral Gables, Florida, does the focus of the exercise. As the year is wheezing its way out of existence, so is Grandpa Moneybags Carnegie Sourpuss Sr, sitting on top of a $20 million fortune earned through a lifetime of stinginess, pennypinching and saving on dentures by wearing his only very infrequently, meaning that any memory of him includes the hollowed out cheeks instantly recognizable as belonging to the guy always yelling at the kids riding by on their bikes.

But the dilemma is not really that of Moneybags; he will learn his fate soon enough. Who really has to make the fateful decision are the heirs to that $20 million estate.

To make the example easier, let's say that there is only one heir. Moneybags II. Should his dad pass on prior to 11:59:59 pm on December 31, MII gets the entire estate free and clear of any federal estate tax. However, if the breath hangs in there after the ball drops in Times Square to open 2011, when the estate tax returns, MII will get the estate minus what the US Internal Revenue Service will take out of it back at the 55% rate, possibly almost $10.5 million.

This could certainly lead to some interesting family vignettes.

It's late in December of this year. Moneybags II is talking to his wife:

"Dear, I think it's time we took little Newt [their five-year-old son] to see his grandpa before its too late."

"Oh, Boopsie. Is that such a good idea? Your father is so sick, and with the doctors still not getting a handle on little Newt's ADHD; after all, we still haven't gotten the bill for all the damage he caused to the nuclear power station on the school trip "

"Nonsense. We'll just sit little Newt down, right besides the spot where the plug on my father's life support machine goes into the wall. He'll be fine."

But it doesn't even have to be this hard. The number of Americans who now die not from their "natural causes" but from an agreement between doctors and family members to discontinue some kind of life support, even if it's only hydration or nutrition, is American miracle medicine's dirty little secret. How much more so under these circumstances - where family members whose loved one dies next year will be rolling lemons, but this year, straight sevens.

How this happened back in 2001 speaks volumes about American society then and now. In 1990, with Democrats in control of the senate, Robert Byrd of West Virginia sponsored a senate rule called PAYGO - or pay as you go. This necessitated that both tax cuts and/or government expenditures be paid for with corresponding offsets somewhere else in the budget. As applied to the estate tax, letting it return to 55% in 2011, after being 45% for the oughts and 0% for this year, would supposedly make up for the revenue just previously lost.

But it's more than that. When the solons played around with rates that weren't to be effective for almost a decade, they perfectly illustrated another key current component of the American character - the desire to keep putting off problems for as long as possible.

In 2001, the congress, specifically, the unified bloc of 269 US House and Senate Republicans who voted for the Bush tax cuts looked out and saw two presidential and four national congressional elections between then and 2010, an absolute eternity in politics. Like a student who has a math test on a Monday but still goofs off all weekend, Monday will, and eventually, did, arrive.

But never let it be said that Americans have slumbered at the switch of national crisis. Congress is trying to find a solution to all this; why shouldn't it? With their advanced age and fabulous wealth, the politicians know very well that any one of them might be the next unfortunate to wake up in a hospital bed just in time to see the bony hand of the Angel of Death moving to flip the switch on the life support machine to off.

In early December, the US House of Representatives voted to raise the 2010 estate tax from 0%, to which it was just falling, back to the 2009 rate of 45%, then keeping it at that level for the foreseeable future.

But here, as in so many other recent controversies, the problem is with the senate. There, the effort to save grandma from the ultimate Sarah Palin "Death Panel", aka her own heirs, may founder on the emergent, virulent new politics of the tea-party movement. Conservatives most trying to ride the tea partiers to greater power, most notably Senator Jim DeMint of South Carolina, do not want to sanctify the recent past's 45% rate into the future. What they want to do is make today's 0% rate permanent.

The budget implications of these polemical gyrations could not be more serious. The Center for Budget and Policy Priorities estimates that permanent repeal of the estate tax would cost $56 billion in fiscal year 2013, $740 billion from 2013 to 2022. This would be added to the roughly $750 billion in yearly deficits the Congressional Budget Office expects for most of the upcoming decade. Indeed, virtually any change in the estate tax laws could act to bust the budget further because of the way in which the Bush administration structured the timetable of the estate tax changes.

Thus are the sad depths that the "roll-up your sleeves and let's all get the job done together" nation have fallen to - an endless effort to forever defer the costs of today's pleasure onto someone else's shoulder in the future.

In Stephen Vincent Benet's 1937 version of the Faust legend, The Devil and Daniel Webster, New Hampshire farmer Jabez Stone sells his soul to the Devil for 10 good years living high off the fat of the land, but when the loan comes due, 'ol Scratch is adamant about denying him any more refinancings.

So far America has been luckier than Jabez Stone in maintaining access to the credit markets to which it has sold its soul, but if the recent 50-point rise in the interest rates for US government 10-year notes is any indication, this charmed situation may be approaching its finale.

It is important to note that the problem here is not America running a budget deficit; with an ongoing economic contraction this severe, any advocacy of a current budget surplus would be nothing but national macro-economic malpractice. The problem is that the tax situation and rate structure are being set up in such a way as to ensure deficits well into the future, when the expected return of economic growth should be producing surpluses sufficient to pay off the deficits.

But, just as things are looking bleakest for poor America's Katzenjammer kids, a hero arises who is seemingly offering the country a reprieve from having to account for its profligate ways - Russia.

In a December 29 article in the Moscow Times headlined "Moscow Will Save the West", Sergei Karaganov, dean of the School of International Economics and Foreign Affairs of the Russian Research University - Higher School of Economics, offers the US and West a deal. In exchange for halting all further expansion by the North Atlantic Treaty Organization (NATO) into the former socialist republics of the old USSR, Russia will, in essence, lock China into a great bear hug of friendship and comradeship so tight that it essentially immobilizes the threats posed by the developing Asian superpower. As Karaganov put it.
It is becoming obvious that the Euro-Atlantic world, whose economic and political model seemed so triumphant 20 years ago, is now lagging somewhat behind China and other Asian countries. So is Russia, where, despite encouraging talk about innovation-based development, the economy continues to demodernize as corruption has been allowed to metastasize and the country relies increasingly on its natural resource wealth.

Indeed, it is Asia that has turned out to be the true winner of the Cold War ... While Russia's elite never considered itself defeated in the Cold War, the West essentially treated Russia as a defeated country - an attitude symbolized by NATO's eastward expansion, which laid a deep foundation for ongoing tension. It was only after the West encountered an armed rebuff in South Ossetia that NATO expansion was stopped in its tracks. Yet NATO has not given up on further enlargement. NATO expansion is nothing more than the extension of its zone of influence - and in the most sensitive military and political spheres. And yet the West's unwillingness to abandon that effort is coupled with a repeated refusal to recognize Russia's right to have its own zone of interest.

So NATO expansion has left the Cold War unfinished. The ideological and military confrontation that underlay it is gone, but the geopolitical rivalry that it entailed has returned to the fore. Thus, the old mentality survived on both sides ... Faced with the impossibility of advantageous accession to Euro-Atlantic institutions, Russia is drifting fast toward alignment with China - a "younger brother", though a respected one. Russia's "Asian choice" of today is not the same as the Slavophile or Eurasian choice of the past.

On the surface, it looks like a choice in favor of a rapidly rising civilization. But the current estrangement from Europe - the cradle of Russian civilization and modernization - threatens Russia's identity and will increase its geostrategic risks in the future. Europe does not benefit from this estrangement either. It will continue to move toward beautiful decay - Venice writ large. The United States also loses. The current Euro-Atlantic security architecture seems to suit the majority of Americans and Europeans, though it is becoming increasingly fragile and counterproductive.

So Russia will struggle to create a new architecture largely on its own. The idea of a "Union of Europe" between Russia and the European Union should be put on the long-term agenda. ... The combination of a new security arrangement for the Euro-Atlantic community and the establishment of the Union of Europe could curb the decline of the West.
Karaganov seems to be offering the US and Europe a choice. Continue to ignore Russia, or even antagonize it further with more NATO expansion, and drive Russia right into the arms of China, the nightmare that had American schoolchildrern ducking and covering under their desks in the 1950s.

On the other hand, respect Russia, and the West, including the US, can continue what he calls the West's "beautiful decay", thus curbing or cushioning "the decline of the West".

I was impressed by Karaganov's reasoned, analytical exposition of a long-term national security strategy for Russia, so different to the usual meat-cleaver-hurling, lacerating polemic that masquerades as public policy debate in the US.

But will America accede to living in what would amount to being a shadow, a museum of its former glory, a Venice, just to keep enjoying its bloated lifestyle of the present?

I don't know about you, but when the deal is announced to turn the nation into Venice, I want to be the guy owning the dealership that is selling the biggest luxury yachts in town.

Julian Delasantellis is a management consultant, private investor and educator in international business in the US state of Washington. He can be reached at juliandelasantellis@yahoo.com.

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