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Ruff’s E-Letter
America in Danger
Steve Studdert, former White House advisor to George Bush, Ronald Reagan and Gerald Ford has written a terrific book, America in Danger — What You Must Know to Protect Yourself . I read a great interview with the author at Meridian Magazine www.meridianmagazine.com. I knew Steve when he was a ranking advisor at the Reagan White House. I have digested and edited it.
He writes:
“Things feel of late like the planet is on a downhill runaway train. The inevitable crash is around the next bend, or the next. There are frightening clouds of instability on the close horizon. We are a nation sinking under its own weight. My fear is that the avalanche may suddenly come crashing down before we get our houses in order.”
His intent is to help readers assess the risks and dangers that exist from the policies America is currently pursuing. He says, “We need to hear the real facts and the plain truth, even if it hurts.”
Studdert lists the dangers including the triple threat to our global economic dominance posed by China, India and Russia; the time bomb of American debt; our unfunded entitlement programs; radical Islam and terrorism; the bursting of the housing bubble; our unquenchable thirst for oil; immigration insanity; pandemic plagues; and America’s failing infrastructure. Studdert connects the dots so we can pull our heads out of the sand.
Meridian Magazine: You are very worried about America. Why?
Studdert: I told my wife when I first went to the White House when I was 26-years old, I’ve been exposed to too much information that is just frightening. Sometimes I wish that I hadn’t been.
However, as I look at the issues facing America, I have never seen a more potentially dangerous time since the Civil War, and what worries me most is that if two or three of these possible dangers hit simultaneously, our ability to respond to is very limited. We have a housing/credit crunch with the burst of the housing bubble and foreclosures are already at a historical high. Theoretically to avoid a recession, the government passed a so-called stimulus $160 billion refund to the taxpayers, but it is a refund of taxes never yet collected, so in reality it’s $160 billion more debt on the backs of the American public.
Meridian Magazine: Tell us about the economic threat facing America.
Studdert: For over a century, the United States has been the economic powerhouse of the world. But not much longer. We are not paying enough attention to the triple threat of China, India and Russia that are emerging as global economic powers.
China has three-billion new capitalists, and is consuming an increasing amount of global resources, which is driving the cost and availability up for the U.S. In 15 years it is estimated they will have 160 million cars. Where will the fuel for those cars come from?
India has a billion people, they are well educated, they speak English, and the cost of labor there is a fraction of what it is here. We will see more and more jobs migrate from the United States to India.
Russia’s geopolitical objectives are counter to ours, and Russia has enormous gas and oil reserves, which will make it a new and dangerous power. Each country has global objectives that do not necessarily align with our objectives. They have newfound wealth and America has enormous debt.
Meridian Magazine: Is U.S. debt something to be concerned about or will increased productivity help?
Studdert: Our debt is a ticking time bomb. Last year, we Americans, spent $20 for every $19 we made. We can’t sustain that for very long. At all levels, the government, corporate and personal level, we have been spending money we don’t have, by financing debt.
China is the largest buyer of our public debt. When looked at from a Chinese perspective, which is thousands of years in the making things look very different. They are on a course to restore themselves to what they see as a rightful position of world dominance. We are indirectly funding it.
David Walker, the comptroller general, says that if the federal government were a private business, it would be declared bankrupt. If we don’t deal with it now, the only choice in a handful of years will be to cut the federal budget by half or double taxes. Those are draconian measures that would be enormously disruptive, but he says we have no choice.
Our children will be the first generation of Americans to enjoy a lesser quality of life.
Meridian Magazine. Why don’t the politicians do anything about it?
Studdert: If you watch our electoral behavior, we tend to ask our elected officials “what’s in it for me?” Federal program after federal program is being funded so that we the voters will keep electing them. It’s self-serving, reckless and ultimately very destructive.
We see politics at its self-serving worst. If we say the true federal government debt is only nine-trillion dollars, that ignores all of the unfunded federal obligations and entitlement programs, which is about $77 trillion. A trillion is a thousand billion, and a billion is a thousand million.
It troubles me that so many of our public officials at every level — federal, state, and local — are more concerned with their own political preservation than the public good. In Washington today, the long-term aggregate impact is never assessed. They only look at the immediate, short-term political benefit.
We look to the government to fund all kinds of things, and the money spent and the influence of special-interest groups on public officials, is unprecedented. Elected officials who used to be beholden to the public are now much more beholden to the various special interest groups who fund their re-election campaigns.
Meridian Magazine: You mention that many Americans are losing their pensions because businesses have made promises they can’t fulfill.
Studdert: Many pension funds are broke. For example, Vacaville, California, is filing bankruptcy, because of their inability to pay police and fire pension obligations. Kentucky has a multi-billion dollar shortfall for state employees’ pensions. With 78-million baby boomers starting this year to retire, that problem will accelerate and worsen.
Meridian Magazine: We are all feeling a new crunch at the pump as gasoline prices continue to climb.
Studdert: We are in a very fragile position regarding oil. Today we’re an oil dependent nation and our five biggest oil providers are Saudi Arabia, Iran, Iraq, Nigeria, Venezuela. We have to be insane to have handed our security to those countries. They are not known for long-term stability or for true friendship to the United States.
Nigeria is as corrupt a government as there is in the world and is primarily a Muslim country. Iran’s leader is a madman who says Israel should be obliterated from the face of the earth and refers to America as the Great Satan. Saudi Arabia has spent billions over the last twenty years funding schools that teach Wahhabism which teaches that America should be destroyed.
Meanwhile, we prohibit drilling ANWR in Alaska and prohibit drilling off the coast of Florida, and yet Cuba is drilling 40 miles off the coast of Florida — go figure. I appreciate being sensitive to the environment, when we work to be good stewards, but it also means being a wise steward, and we haven’t been.
Meridian Magazine: Are the mortgage failures included in your list of dangerous issues?
Studdert: Most of those are adjustable rate mortgages where the rate resets and the home-owners can’t make the higher payments. The market has fallen so much that the owner sometimes owes more on the home than it is worth.
People wonder if the housing market will rebound. I am of the opinion that the current problem is not temporary, and we will see it spread to multiple other fronts as we’ve seen it spread to the bond insurance companies.
Meridian Magazine: What about terrorist attacks.
Studdert: There are approximately one billion Muslims. 10% or so, could be categorized as extremists. That is 100 million people who would like to see the United States destroyed because of the values we’ve adopted that they find offensive. I occasionally meet with those in the intelligence and national-security community. They are doing a masterful job of preventing terror attack. People in these agencies are working to the point of exhaustion to protect this country. They deserve our respect, but they all speak in terms of not if, but when. They speak in terms of the inevitability of a terrorist attack on this country, be it nuclear, chemical, biological or other kinds of terror.
If the anti-American terrorists don’t have access to nuclear weaponry it is only a question of time when you look at North Korea, Pakistan and Iran.
As we were talking about the terror threat to the United States and what our government has prevented, a senior official said to me, “if the public had any idea what we’ve already prevented, it would scare them to death.”
Meridian Magazine: Which terrorist problem worries you the most?
Studdert: I suppose the one that concerns me the most would be a terrorist attack where the terrorists used an EMP, an electromagnetic pulse, which we know exists in Russia. If one of those were detonated over the continental US at 30 miles up, it would cripple this country instantly. An EMP will destroy electronics, so power plants, the starter on your car, computer systems, refrigerators — all would be instantly destroyed and the country would collapse. Instantly, no vehicle in this country with an electric starter would run. What would we do for food tomorrow if we haven’t stored it? That frightens me most. The other problems are sneaking up on us one day at a time. Hopefully, our national defenses could prevent some of the other terrorist possibilities, but we are not equipped to prevent an EMP. The only way we could stop that is through good intelligen! ce. If one explodes, in a matter of milliseconds the damage is done.
Meridian Magazine: Why don’t Americans realize the dangers that we are in?
Studdert: As I watch the so-called news reporting today, the media are not reporting the hard news as much as such ridiculous issues as steroid use by major-league baseball players. We’re too often bogged down in the thick of thin things. Because so many of these problems are seemingly over the horizon, we’re busy managing our own daily lives.
9/11 came as a complete surprise. As tragic as it was, it was limited just to one city. We could learn from that or from Katrina how without warning, devastating things can occur. What would happen if China — who is the largest holder of U.S. treasury debt — were to say, “We won’t hold this anymore. Or “we’re going to sell all of these debts at a discounted price.” It would have an enormous destabilizing force on our country and we would not have even seen it coming.
Meridian Magazine: What can any of us do about this personally?.
Studdert: We ought to feel an urgency, but not panic. And while you and I can’t fix the nation on my own, we can certainly take care of our own lives and our own houses and our own families.
We have to be serious about getting out of debt. We ought to be serious about living within our means. We ought to be serious about higher education for the best employment for which we can qualify, and we ought to be serious about things like food storage and family preparation.
My son worked in a car dealership in an LDS community. He observed that people bought cars that were bigger and more costly than they could possibly afford, but because financing was so readily available, they splurged. We don’t need that big house. We don’t need that SUV. We need to be safe and secure first. The savings rate is negative. In China the average person saves 30%. Just that number alone speaks volumes about where our two countries are going.
Last week, wheat futures closed at $22 per bushel and wheat supplies are at an all-time low. If you talk about a perfect storm for trouble, there it is.
We need to make choices between good, better and best. We need to simply our lives so we can focus on weightier matters without all the bombarding confusions of the world.
Meridian Magazine: Beyond helping our own families, what can we do for America’s future?
Studdert: I love America, and I am deeply concerned about the future. I wish we could change the definition of P.C. to be political courage. To make political decisions that are right for the country may be unpopular, and most politicians today won’t make unpopular decisions.
Today there is a poison of politics. The personal costs of running for public office and serving in public office are very dear because that vitriolic tone has made the notion of being involved in public service less appealing to more and more people. During the administration of the former George Bush, the number two position at the state department became vacant. The position was quietly offered to 59 people before someone would accept the appointment because of the cost, the stress, the drain and the innuendo and the attacks. Not one of those 59 wanted to expose themselves to that.
I’m of the view that America was created under the hand of providence and it had and has divine purposes. For 200-plus years, America has been the light of the world and the envy and desire of most of the world. In any country there are lines at the U.S. embassy to get visas to come here. There are no lines at other embassies, but because of our reckless spending and self-serving public policy we are dooming ourselves.
Being my brother’s keeper includes alerting him to danger and that was a driving force in writing this book. The second driving force is my love of America. because it is still the best system in the world.
Great civilizations throughout history have failed when they didn’t follow the words of the Lord, and I pray we will not choose this.
Howard J. Ruff, the legendary author and financial advisor, has remained in the public eye for more than a quarter of a century. He is founder and editor of The Ruff Times Financial Newsletter. This article appeared in the March 28, 2008 issue of The Ruff Times www.rufftimes.com. The newsletter is much more comprehensive and deals with a broad spectrum of middle-class financial issues and includes an Investment Menu from which you can build your portfolio. You can learn about it here). The Ruff Times has served more than 600,000 subscribers – more than any financial-advisory newsletter in the world.
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