War and peace

It is time to talk about war and peace, possible events that could change us more than any we have been routinely discussing. The American-led world order is being challenged by both Russia and China.

What’s the American world order?

Word War II almost literally destroyed every major nation in the world: China, Japan, the USSR, Britain, France and Italy. But the USA emerged stronger – immensely stronger. It commanded two huge navies, two huge armies that were still increasing in size (the Soviet army was tapped out), a huge air force with atomic bombs and the world’s best aircraft. Our homeland hadn’t really been touched.

It was an historic moment.

The world was at the feet of the USA.

And we stepped up to international responsibilities for the first time. We rejected George Washington’s advice to stand clear of entangling alliances and realized what we had too dimly seen after World War I. If the world was to have peace, the USA was the only nation to lead it.

Batson

We had two goals. One, no more wars. Disputes would be handled as in a court of laws. So the UN was formed and we agreed to host the headquarters.

Second, we insisted on peaceful trade. No more tariff wars and scrambles for colonies causing wars. Low tariffs would allow each country to offer what it produced best and to import everything else.

The dollar would be the basic currency of exchange. It was the only currency worth anything.

Lower tariffs on Germany and Japan allowed them to recover from war quickly – at our expense.

“America First” was discredited. Conservatives around the world were suspicious but everyone saw that the next war could be the last war for all. So the world lined up behind America’s hopeful vision of a “liberal world order.”

Today, I think it’s safe to say that America has lost this vision, at least our conservatives have. George W. Bush provocatively ended weapons treaties with Russia and pushed the eastward expansion of NATO, both for unclear reasons. Then he invaded Iraq claiming preemption, a howler that claimed that Iraq was about to attack us with weapons of mass destruction.

Russia and China both checked out of America’s liberal order. The so-called inspirational world leader ignores the laws when it wants to, just like anyone else, they stated. They returned to nationalism.

So Russia brazenly invaded Georgia, the Crimea, and then Ukraine, just like Putin wanted to.

China brazenly took over four islands in the South China Sea, violating international law. It lowered the value of its currency to gain competitive trade advantage, breaking the World Trade Organization’s rules and stole perhaps a trillion dollars of U.S. industrial and military secrets. When President Obama visited they didn’t roll out a red carpet.

Now we face possible war with both. What should we do?

Under President Trump strange, even incoherent policies emerged. Trump fairly worshiped Putin as one who demonstrated “strength.” Trump insulted Ukraine. At first chumming up with Xi of China and ignoring his provocations, he turned on him when Covid-19 threatened to harm our economy, bringing frighteningly cold relations.

President Biden followed Trump’s policies with China for unclear reasons but supported Ukraine, returning to the world leadership role against Russia. China, convinced of American decline, continued to threaten Taiwan and insisted that he, Xi, would bring Taiwan into China before he retired. He provoked all his neighbors – India, Australia, Taiwan and Japan – while ignoring the liberal UN Declaration of Human Rights. He began his barbaric forced Sinification of his Chinese Muslim Uyghur people and then he forcibly took over Hong Kong, ignoring treaty terms.

Finally Biden reacted, stating that the U.S. would protect Taiwan militarily.

We are now toe-to-toe with two adversaries who have signed a friendship treaty. This is perhaps more dangerous that most Americans realize. Five years ago, we ran 12 computer exercises posing a war with China. We lost all 12. And China has gotten more powerful since that time.

More on this later.

Jack Batson is a former member of the Fairfield City Council. Reach him by email at jsbatson@ prodigy.net.

One could call it the “big squeeze.”

It’s the ever-increasing conflict between the state government’s current and projected tax revenues, which are drifting downwards, and the demands for billions of additional dollars for vital services, such as health care, homelessness and mass transit.

In January, when Gov. Gavin Newsom unveiled his initial budget for the 2023-24 fiscal year that begins July 1, he projected a $22.5 billion deficit – just a few months after boasting the state had a $97 billion surplus. This month, in a revised budget, he said the deficit had grown to $31.5 billion.

As worrisome as those numbers appear, they might be a best case scenario, according to the Legislature’s budget analyst, Gabe Petek.

“Based on our assessment, there is a roughly two-thirds chance revenues will come in below May Revision estimates,” Petek said. “As such, while we consider the May revision revenues plausible, adopting them would present considerable downside risk.”

Moreover, Petek said that using the Newsom administration’s own projections and assumptions, “the budget condition would worsen in future years” with annual operating deficits of around $15 billion in the following two years, and hinted that the real shortfalls in the final years of Newsom’s governorship could be larger.

These estimates of a chronic and perhaps widening gap between income and outgo also assume that the state’s economy won’t be clobbered by recession.

Many economists believe that the Federal Reserve System’s increasing interest rates, meant to slow the economy and battle inflation, could trigger a recession within the next year. If it occurred, Newsom’s budget says, “revenues could decrease by $40 billion in 2023-24 alone, largely driven by losses in personal income tax,” adding that “revenue declines relative to the May Revision forecast could reach an additional $100 billion through 2026-27.”

While the state has amassed more than $30 billion in reserves to cushion the impact of recession, an even moderate economic downturn would quickly consume them, drowning the budget in red ink as the Great Recession did.

To summarize: California’s budget faces several years, at least, of budget difficulty. But the demand side of the fiscal ledger is not shrinking.

After the January budget was released, advocates for programs, particularly health care and social services, cranked up pressure on legislators to protect their slices of the pie. That pressure is even more intense with the May revision’s deficit increase.

They have been joined by three other major stakeholders seeking multi-billion-dollar increases in state aid: hospitals, transit systems and cities on the front lines of the state’s worst-in-the-nation homelessness crisis.

Hospital and transit system officials say they have been unable to fully recover from the impacts of COVD-19 on their patronage and finances and may be forced to shut down or at least reduce services. Mayors of the state’s largest cities say they need an additional $2 billion per year to maintain ongoing efforts to house those on the streets.

None of the three fared well in the May revision. Newsom offered just a $150 million loan fund to hospitals, didn’t include any extra money for local homelessness efforts, and only said he would be willing to discuss transit’s self-proclaimed “fiscal cliff.”

There’s little question that advocates for existing and new state financing would prefer that Newsom and the Legislature tap into reserves and/or raise taxes to satisfy their demands. In fact, the state Senate’s budget framework proposes a hike in corporate income taxes, although Newsom has rejected it. Were California’s budget squeeze to continue or grow tighter, as seems likely, the remainder of Newsom’s governorship would be dominated by the difficult task of resolving it. CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to Commentary.

My wife and I discussed finances with our grandchildren as they got older. We were the children of Depression Era and World War II, people who understood the old saying: “the value of a dollar.” Up until the early 1960s anyone could go into any bank in America with a Silver Certificate (so-called Blue Note 1878-1964) and exchange the note for real money with intrinsic value – a silver dollar.

The notes and silver coins were recalled by President Johnson. He also put the Social Security Trust Fund on budget in 1968, enabling its use in intergovernmental funds transfers. Our government was approximately $315 billion on debt then, now we’re $31 trillion in debt. Our politicians say they never took a dime from the Fund. Yet somehow the fund is owed $2.7 trillion. Where did it go? Isn’t government accounting great; don’t you wish you could do this with your checkbook too?

We are told the government will run out of money on or about June 1. I’m no financial genius but if we’re $31-plus trillion in debt, doesn’t this mean we’ve been bankrupt a long time? I remember discussions with my father about money and how to use or not it. The most important rule was number one “don’t spend what you don’t have.” Fools have overseen the government budget, just as in 2008, risking default by breaking rule No.

1. We took in $4.90 trillion in revenue in 2022, overspent by $1.38 trillion.

JPMorgan’s CEO, Jamie Dimon, arguably the “money man” on Wall Street, spoke the unthinkable becoming thinkable, U.S. default. Regardless of what you, I, Treasury Secretary Yellen or Federal Reserve Chairman Powell has to say, real money people pay attention when Dimon speaks. On May 12 he said: “there is potential for widespread panic if politicians don’t get their act together and strike a debt deal.” Will they?

Panic affects more than American investors and savers. It threatens world stock markets, the dollar’s world reserve currency status, contracts, collateral, etc., all the mechanism of trade and global banking. Dimon was there during 2008’s U.S. financial crisis and near default. In a recent interview with Bloomberg he said: “he has put together a War Room at JPMorgan planning for contingencies around default ... his team can meet up to three times a day if politicians in Washington continue to drag their feet on negotiations … he doesn’t anticipate the country will default but the clock is running … Markets will get volatile, maybe the stock market will go down, the Treasury Bond market will have its own problems.”

Dimon saw an opportunity recently and bought up the assets of the failed First Republic Bank. He noted things should never happen this way as any tumult in America impacts markets worldwide. As far as the banking crisis goes: “It’s time for regulators to put an end to the chaos – but he is predicting policymakers will carry the wrong lessons moving forward.”

Today, we have more compliance officers than loan officers in banks. People have been educated to believe more government regulations is the answer to problems. Unfortunately, we have forgotten President Reagan’s scary admonition: “I’m from the government and I’m here to help.” Dimon wisely said: “Regulations, if you overdo them, can create more problems than they solve.” Bank executives have culpability here but “regulators should be looking in the mirror too,” the principle of interference in our work and personal lives is on full display with the “Administrative State” here in California and nationally. We need relief from the destructive deficit spending of more than a generation. We need the line-item veto, balanced budgets and cuts in pre-programed spending. Balance the damn checkbook Joe!

Jim McCully is a former chairman of the Solano County Republican Central Committee and former regional vice chairman of the California Republican Party.