Saudi Prince Offers Fiscal Policy Advice; Tell him to Take a Powder

In truly disturbing news, PrinceAlwaleed bin Talal of Saudi Arabia warned that the US government budget deficit is a ticking time bomb. "You need some structural changes in the United States," said the Saudi investor, a nephew of King Abdullah and one of the kingdom's wealthiest men. "You can't go forever with $1 trillion in arrears." Prince Alwaleed is the biggest shareholder in Citigroup and a major investor in Rupert Murdoch's News Corp. His wealth is estimated at $20 billion. As they say, he's got a few dogs in the hunt. And so he feels quite comfortable in lecturing US policymakers on appropriate policy. http://uk.news.yahoo.com/saudi-prince-urges-us-tackle-budget-shortfall-154723903.html Why is this disturbing? First it indicates just how successful hedge fund manager Pete Peterson's campaign has been in whipping up deficit hysteria. This has allowed foreign princes space to believe that they've got a duty to lecture America on its domestic policy. No doubt Prince Alwaleed would like to see “structural changes” to bring US living standards down to those enjoyed by third-class foreign workers in his own country. Perhaps America should also ban women from driving—a nice structural change that might reduce US consumption of his country's sole contribution to the global economy. That could reduce our trade deficit and hence our government's budget deficit—whilst also reducing Saudi Arabia's export income. Second it indicates just how out of touch Saudi princes are with basic macro accounting. His country's accumulation of dollar denominated wealth is directly related to US consumption of his nation's export—oil. Our government's deficit is the counterpart injection to our current account leakage. If we really were to reduce our government's deficit that would mean either that our domestic private sector would return to massive spending deficits (a major contributing cause to the death of Goldilocks in 2001 and to the global financial crisis in 2007) or that somehow the US would stop running a trade deficit. That in turn would shut off the spigot of dollars that makes the Prince a wealthy man, able to buy shares in an insolvent Citigroup and as well in the right wing media empire run by Murdoch. Is this diabolical cleverness, or monumental stupidity? One cannot tell. Third, given the revolts all over the middle east, doesn't a Saudi prince have something more important to do than to lecture the US on its domestic policy agenda? Let us leave aside the obvious, which is that the half life of a Saudi regime without US protection would be shorter than the expected run at the top of the pops by a one-hit wonder. In other words, suppose Washington reacted negatively to the uninformed warblings of a Saudi Prince by cutting off its support of an undemocratic regime. What are his subjects to think? Rather than dealing with their own severe domestic problems, their Prince chooses to spend his time providing unwelcome policy advice to Obama? Can anyone say “revolt”? And, fourth, his advice is pure nonsense, no more on-the-mark than the silliness issuing daily from the Peterson-funded deficit hysteria crowd. In other words, his voice will be drown out by the clones and drones within the Washington beltway. He is saying nothing new so the only publicity he can possibly get is negative, as Americans rightly tell him to mind his own business. Who needs a Saudi Prince to recommend bad economic policy when we've got our own home-grown clowns in Washington?