For those not shaken enough by the Greek financial crisis (and this is more than possible as the Greek’s spending behavior seemed so abnormally destructive and self deluding, in other words ‘that’s the Greeks, not us’) the collapse of the Irish debt situation should get your attention. More importantly, it should awaken those tasked with running the United States government. The Wall Street Journal breaks down the steps Ireland will need to take to get their house in order (emphasis mine):

The measures are draconian. The government plans to shed nearly 25,000 public-sector jobs, slash welfare spending and reduce the minimum wage. A new property tax will be introduced, water charges imposed, and the tax base expanded to bring in lower-income earners. It all adds up to €10 billion in cuts and €5 billion in taxes over the next four years.

Ministers argue that such radical measures are needed to tame Ireland’s gargantuan budget deficit, which this year stands at 32% of GDP—the largest in Europe—and to reasssure investors who have stampeded out of Irish government debt. Yields of Ireland’s 10-year bonds reached a record Friday of nearly seven percentage points above benchmark German bunds.

Yikes. Though the US debt level is no where near Ireland’s astounding 32% level, it is solidly moving in the wrong direction. Ireland is now forced to live the worst of both worlds for a modernized economic state: higher taxes and less government services.

Economist Robert Samuelson describes the Irish bailout’s fallout for the rest of Europe:

The proposed rescue of Ireland, as with Greece before, represents a gamble that Europe can arrest growing doubts and win the patience of bond holders and voters: the investors not to continue dumping bonds (of Ireland and other countries) in panic, which raises interest rates and could precipitate a self-fulfilling financial collapse; and the ordinary citizens to tolerate austerity (higher unemployment, lower social benefits, heavier taxes) without resorting to paralyzing street protests or ineffectual parliamentary coalitions. Whether the gamble will succeed is unclear, as are the potentially chaotic consequences if it doesn’t.

With Portugal on the docket, and much more critically Spain (whose economy is bigger than Ireland, Portugal, and Greece’s economies combined), the EU is undoubtedly facing a financial crisis. When will the German voters bankrolling these bailouts say ‘enough’s enough’? Will the protests in Britain and France over government decisions to either cut back on education spending or raise the retirement age start to paralyze their respective state’s ability to address their growing debt issues?

These crises in Europe may not only foreshadow a future one in the United States, but according to Dr. Robert Shapiro, who served as Under Secretary of Commerce for Economic Affairs in President Clinton’s administration, they may negatively impact our economy drastically right now. Shapiro argues that “a default in Spain would endanger French and German banks and that would have serious consequences for U.S. financial institutions because they all have counterparty risk. Just as Lehman Brothers spread to Europe, a European banking crisis would spread to the United States.”

Many Western states have been living a life of getting their cake and eating it too. ‘I want low taxes and lots and lots of entitlement goodies.’ This combined with a willingness to pay for this all by letting others buy your bonds is unsustainable. In many ways, I view the rioting teenagers and college students in Britain and France as rather pathetic. The situation they’ve been handed is almost entirely not their fault, but now their just worried about getting to eat their cake. Want another metaphor? These youth are seemingly willing to throw good money after bad. Well, the way these governments have spent, more like bad money after bad.

For a worthwhile debate on the present and future role of American government and spending, I highly recommend this debate between Congressman Paul Ryan and New York Times columnist David Brooks.

Those are the words of the current American President, Barack Obama. If this statement is true, which of course I believe it largely to be (prosperity = money= power, simple, but hard to argue with), than the charts below should worry all Americans and those around the world that depend on it as the guarantor of their security.

These two charts layout the projected deficits facing the US in the next ten years based on the Obama administration’s just released budget for 2010 and beyond. David Sanger of the New York Times and Gerald Seib of the Wall Street Journal are only the latest to warn how these deeply red numbers, which showcase a new ‘normal’ level of US debt around 5% of GDP, will have a negative impact on the US’s ability to defend itself and project power abroad. Here is Seib’s bleak assessment:

The U.S. government this year will borrow one of every three dollars it spends, with many of those funds coming from foreign countries. That weakens America’s standing and its freedom to act; strengthens China and other world powers including cash-rich oil producers; puts long-term defense spending at risk; undermines the power of the American system as a model for developing countries; and reduces the aura of power that has been a great intangible asset for presidents for more than a century.

Seib, Sanger are not alone as Richard Haass, President of the Council on Foreign Relation, states that “We’ve reached a point now where there’s an intimate link between our solvency and our national security. What’s so discouraging is that our domestic politics don’t seem to be up to the challenge. And the whole world is watching.”

So the US is pretty deep in debt and is not likely to get out from under it anytime soon (Las Vegas…’put it on black! Come on, come on. big money!…… Double Zero! What!… Mr. President, Mr. President….What?! It’s President Hu on the line. He wants to talk about the late interest payments. Uh….tell him to talk to Biden, I’m now the President of Mexico’), but the US has had serious debt issues before (Civil War, WWI, WWII, 1980s) and was able to keep growing economically and militarily. Is this time different? I think it really could be, but don’t count me as one of those ‘it’s only a matter of time before we fall flat on our faces. Many aspects of our debt (social security, medicare) are as difficult to penetrate as a rock inside of diamond that was swallowed by General Patton, but it’s not like other great powers don’t have similar or even more challenging problems themselves. Nevertheless, a growing deficit will have consequences and America will have to face them sometime.

Seib lists four of the ways that budget deficits threaten American’s national security; let’s take a look:

1. They make America vulnerable to foreign pressures.

China is what is on everyone’s mind here, but we must remember that this goes both ways, as it is in China’s interest to have their held reserves stay stable and strong. A recent story regarding Russia’s attempt to dump their Fannie and Freddie Mac holdings during the Georgia-Russian war in 2008 makes this a little more scary though.

2.  Chinese power is growing as a result.

Beijing’s ability to combine budget surpluses with American deficits no doubt puts itself in a more favorable position, but what it can actually do with this situation is less known. China has definitely shown itself to be a more confident and aggressive international power player in recent months.

3. Long-term national-security budgets are put at risk.

This is what worries me the most. If one believes in Paul Kennedy’s theory that great powers fall when they overextend themselves and can no longer support the large national security/power projection apparatus they have built, they have to start scaling back their global ambitions in concrete ways. All aspects of the American state budget will be looked at for cutting, the defense department’s included. A real way to save some money is to close foreign bases, bring troops home, and cut expensive weapons programs. All of these can be detrimental to US national security and international stability.

4. The American model is being undermined before the rest of the world.

If the US can’t keep its house in order, why should other states follow it? A good question and one definitely worth following, but I find this to be the weakest of the four. After all, the US has been deep in the red before and only came out stronger. Not many other countries have this record.

So how important are these current and projected budget deficits to US national security/power projection and to international security? Are these latest numbers just another downturn in otherwise American ascendancy and global power or are they portending the beginning of the end of the US as the world’s sole superpower? Something in between?