[Foreign Policy, Ports]

Further Commentary on the Ports Controversy.

Who would have expected the great ports controversy to have become the wedge issue it is? In hindsight, it makes all kinds of sense, but I consistently fail to remember what panicked, bigoted lenses Republicans see the world through. So it is that the question of Dubai owning six American ports has become the most (only) divisive issue to hit the GOP in years.

There are a couple of nice pieces of commentary on the point. EJ Dionne has a go at the multilayered hypocricy in today's article, but I like this the best:

Republicans and conservatives would be aghast at the idea of our government owning a company that operated so many of our ports. That would be -- just imagine! -- socialism. But Dubai Ports World is, well, a socialist operation, a state-owned company in the United Arab Emirates. Why is it bad for the federal government to own our port operations, but okay for a foreign government?

And David Ignatius locates an serious point of economics I hadn't considered. While I'm still mostly untroubled by Dubai deal, he points out why it is a harbinger of much worse things to come, thanks to the destablizing effect of Bush's tax cuts.

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....

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.

Oy.