[Mb-civic] Taste of the Future - David Ignatius - Washington Post Op-Ed

[William Swiggard]

Taste of the Future

By David Ignatius
Friday, February 24, 2006; A15

"Suppose you were an idiot. And suppose you were a member of Congress. 
But I repeat myself." The acidulous wisdom of Mark Twain speaks to us 
across the ages, and never more than this week during the great 
congressional mobilization to save America's ports from the dreaded hand 
of Dubai.

The furor over Dubai is misplaced on so many levels, but let's start 
with the supposed terrorist threat. Military and CIA officials will tell 
you privately that the United Arab Emirates is among the most effective 
intelligence partners the United States has today in the Arab world. Its 
operatives are risking their lives to help gather information about 
al-Qaeda and other terrorist groups. They don't advertise it, and when 
an operation goes bad -- such as the U-2 spy plane that crashed last 
June returning from Afghanistan to al-Dhafra air base -- they keep their 
mouths shut.

Certainly, al-Qaeda knows who the enemy is. Among the documents released 
last week by the Combating Terrorism Center at West Point was a spring 
2002 al-Qaeda warning to officials of Abu Dhabi and Dubai. It accused 
the UAE leaders of working with the U.S. government "in order to appease 
the Americans' wishes which include: spying, persecution and 
detainments." Al-Qaeda claimed it has penetrated the UAE government, and 
the United States should certainly vet any UAE personnel working in the 
United States. But the idea that by purchasing the British company that 
has been managing six U.S. ports, Dubai Ports World is somehow opening 
the door to terrorism is, frankly, racist.

The hubbub over terrorism isn't the biggest problem with the Dubai flap. 
In a sense, the Bush administration had it coming, after having beaten 
congressional opponents over the head with the terrorism club for four 
years. What goes around comes around, and while it may be comical to 
hear a legislator accuse President Bush of having a pre-Sept. 11 
mind-set, the White House made itself a fat target.

The real absurdity here is that Congress doesn't seem to realize that an 
Arab-owned company's management of America's ports is just a taste of 
what is coming. Greater foreign ownership of U.S. assets is an 
inevitable consequence of the reckless tax-cutting, deficit-ballooning 
fiscal policies that Congress and the White House have pursued. By 
encouraging the United States to consume more than it produces, these 
fiscal policies have sucked in imports so fast that the nation is 
nearing a trillion-dollar annual trade deficit. Those are IOUs on 
America's future, issued by a spendthrift Congress.

The best quick analysis I've seen of the fiscal squeeze comes from New 
York University professor Nouriel Roubini, in his useful online survey 
of economic information, rgemonitor.com. He notes that with the U.S. 
current account deficit running at about $900 billion in 2006, "in a 
matter of a few years foreigners may end up owning most of the U.S. 
capital stocks: ports, factories, corporations, land, real estate and 
even our national parks." Until recently, he writes, the United States 
has been financing its trade deficit through debt -- namely, by selling 
U.S. Treasury securities to foreign central banks. That's scary enough 
-- as it has given big T-bill holders such as China and Saudi Arabia the 
ability to punish the U.S. dollar if they decide to unload their reserves.

But as Roubini says, foreigners may decide they would rather hold their 
dollars in equity investments than in U.S. Treasury debt. "If we 
continue with our current patterns of spending above our incomes, by 
2013 the U.S. foreign liabilities could be as high as 75 percent of GDP 
and an increasing fraction of such liabilities will be in the form of 
equity," he explains. "So, let us stop whining about the dangers of 
unfriendly foreigners owning our firms and assets and get used to it."

Here's how bad it is: The worst thing that could happen to the United 
States, paradoxically, would be for Arab and other foreign investors to 
take us at our xenophobic word and decide that America doesn't really 
want foreign investment. If they pulled out their money, U.S. financial 
markets would plummet in a crash that might make 1929 look like a sleigh 
ride.

Let's rashly assume that Bill Frist and Dennis Hastert, the Republican 
Senate and House leaders, are serious in their expressions of concern 
about foreign ownership of American assets. What they should do right 
now is begin changing the fiscal policies that are transforming the 
United States into a ward of the world.

I'm dreaming, of course. Such policies would mean financial sacrifice on 
the part of Congress and the American people. They would require 
political leadership instead of quick-hit news conferences. What a 
quaint idea, that members of Congress actually might want to solve 
problems rather than make headlines.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/23/AR2006022301412.html?nav=hcmodule
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