Michael Hudson argues that there is no real need to raise the debt ceiling (below). Rather than slashing social security, medicare and other social support programs, we could cut spending that is funding our various wars, end Wall Street bailouts, claw back outrageous profits from fraudsters acting through the TBTF banks, and stop pandering to other special interest groups. We could raise taxes on the ultra-wealthy – the top 0.1% – those who measure their monthly income and capital gains (non income for tax purposes) in millions. But there is no political will, or big campaign contributors, that will support a real solution. The issue is another example of creating a crisis so that emergency measures can be rammed through à la Rahm Emanuel’s famous statement about never letting a good crisis go to waste.
As Jim Quinn of Burning Platform points out: “We will hit $20 trillion in debt by 2015. That is a lock. Total Federal government revenue today is $2.175 trillion. We spend approximately $1 trillion per year on our military related adventures, or 46% of our total revenue. If interest rates are 5% in 2015, we will spend $1 trillion on interest. If rates are 10%, we will spend $2 trillion on interest.
“Do you get the picture? An unsustainable trend will not be sustained. We have two choices. We can proactively address the problem or just wait for the collapse of our economic system. This debt ceiling reality show is all the proof I need. Our leaders will choose to wait. It won’t be long.” (THE SHOW MUST GO ON)
How much do we spend on military? According to usgovermentspending.com, we spent an estimated 848.11 Bn in 2010.
According to Warresters.com, we spend even more on military as a whole. Its numbers include past expenses: “‘Current military’ includes Dept. of defence ($653 billion), the military portion from other departments ($150 billion), and an additional $162 billion to supplement the Budget’s misleading and vast underestimate of only $38 billion for the ‘war on terror.’ ‘Past military’ represents veterans’ benefits plus 80% of the interest on the debt.* (*Analysts differ on how much of the debt stems from the military; other groups estimate 50% to 60%. We use 80% because we believe if there had been no military spending most (if not all) of the national debt would have been eliminated.)”
For 2009, Warresters calculated: Total Outlays (Federal Funds): $2,650 billion, MILITARY: 54% and $1,449 billion, NON-MILITARY: 46% and $1,210 billion.
Courtesy of Michael Hudson
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And in Washington the drama over whether the United States Congress will raise the debt ceiling or not continues. The Republicans defend the need to cut spending and get government under control and the Democrats standing, defending the people’s social programs–at least that’s the theatre that’s being played out. What is the reality? Well, for his take on all this, we’re now joined by Michael Hudson. Michael is a distinguished professor at the–distinguished research professor, I should say, at the University of Kansas City. He’s the author of Super Imperialism: The Economic Strategy of American Empire. And he joins us again from New York City. Thanks for joining us, Michael.
MICHAEL HUDSON, RESEARCH PROF., UMKC: Thank you, Paul.
JAY: So, what do you think? Good versus evil. We’re playing out the debt struggle and the debt ceiling issue. And if we don’t raise the debt ceiling, we’ll be in the apocalypse. What do you make of it all?
HUDSON: I think it’s evil working with evil. I think the whole argument in Congress is a charade that was pretty much set up two years ago, when the Obama administration first took office and Mr. Obama appointed the reduction commission of Republican Senator Simpson and Clinton manager Bowles. When Mr. Obama went on television two days ago, he said he’s hoping to reach a compromise, which is pretty much what this commission said. And the people he appointed to the commission to head it were the people who said, number one, cut back Social Security. If you have to choose between paying Social Security and Wall Street, pay our clients, Wall Street. And secondly, cut back Medicare. But most especially, cut back Medicaid to the poor. You have to give money to the job creators, mainly the financial managers who are closing down firms, downsizing, and outsizing–outsourcing on labour. They’re called job creators instead of–to the people who actually get work and spend money on goods and services, which is what’s keeping the market going in business.
JAY: Now, somebody who defends the Obama administration would probably say, number one, Obama was dealing with the political reality in America that public opinion and the press and the media were heavily on the side that government needs to be cut. And they would also probably make the argument that there are inefficiencies that could be cut. I mean, Obama did at least early on in his administration say–talk about the need for stimulus. So that certainly his waned. Do you think there’s any merit to some of that defence?
HUDSON: I think that words–Mr. Obama’s great with words. He says one thing, and he does the opposite. Here’s basically the charade that’s happening when he’s trying to be reasonable. In order for him to move way to the right and to continue the Bush administration policies, he needs the Republicans to move even further to the right. They have to be so extreme that they’re perceived as the crazies. And then Mr. Obama can say, look, they will give Mr. Obama room to move way to the right, because he’ll say, I’m not as crazy as Michelle Bachman. I’m not as crazy as Boehner. I’m not as crazy as the Republican leaders. But they were going to close down the government, and that would have really hurt us. And we have to–we do have to cut what’s inefficient. What’s inefficient? Paying for people on Medicaid. Got to cut it. What’s inefficient? Medicare. Got to cut it. What’s inefficient? Paying Social Security. What is efficient? Giving $13 trillion to Wall Street for a bailout. Now, how on earth can the administration say, in the last three years we have given $13 trillion to Wall Street, but then, in between 2040 and 2075, we may lose $1 trillion, no money for the people? That is absolutely crazy. So when we talk about public opinion, we’re talking not about public opinion that watches your Real News Network; we’re talking about the public opinion of Fox TV and sort of the echo chamber that says–that presents the financial sector as job creators rather than job destroyers.
JAY: Well, what would you think are the real repercussions if, let’s say, they don’t raise the debt ceiling now in August? Let’s say Obama calls the Republicans’ bluff. It seems to me it is quite a bit of a bluff, seeing as the US Chamber of Commerce has told the Republicans they have to vote in favour of raising the debt ceiling. It’s kind of hard to believe that in the long run the Republicans are going to defy the business and banking community. But let’s say they play this out and Obama says, OK, we’re not going to savage government spending the way you want us to, and if you want to not–if you want to force us into this quote-unquote “abyss”, we’ll go there because it’s on you. So what is the abyss? I mean, is this really such a serious issue?
HUDSON: It’s not about the abyss at all. It’s not about the debt ceiling. It’s about making an agreement now under an emergency conditions. You remember what Obama’s staff aide Rahm Emanuel said. He said a crisis is too important to waste. They’re using this crisis as a chance to ram through a financial policy, an anti-Medicare, anti-Medicaid, anti—selling out Social Security that they could never do under the normal course of things. They’re using this to stampede the Democrats.
JAY: Yeah, I understand the point. What I’m saying is is, you know, whether Obama would want an alternative policy or not. What if he says to Republicans, OK, do your worst, we’re not going to go down this road? What would be the repercussions of him saying–. I mean, I think the Republicans, personally, would more or less cave in, because they’re not going to defy the whole business community. But let’s say–. So, what happens? So they don’t raise the debt ceiling. So, what happens next?
HUDSON: Then, obviously, they have to cut back some kind of government spending. What are they going to cut back? They’re not going to cut back the war in Libya. They’re not, because that’s–.
JAY: They have to cut back because they can’t borrow more. That’s the point you’re making.
HUDSON: Right. They’re going to have to decide what to cut back. So they’re going to cut back the bone and they’re going to keep the fat, basically. They’re going to say–they’re going to try to panic the population into acquiescing in a Democratic Party sellout by cutting back payments to the people–Social Security, Medicare–while making sure that they pay the Pentagon, they pay the foreign aid, they pay Wall Street.
JAY: Yeah. But what–I hear you. But what I’m–I’m saying, what could be an alternative policy? For example, don’t raise the debt ceiling. Number two, raise taxes on the wealthy. Number three, cut back military spending. I mean, there are ways to do this without having to borrow more money, aren’t there?
HUDSON: Of course. There’s no need at all. Of course they’d–. First of all, the Federal Reserve can basically print money. And whether they count this as the debt or not, they can say this is off-balance-sheet activity. They can technically sell Treasury bonds to themselves and say this is–. They can do Enron-type accounting if they wanted to.
JAY: [crosstalk] probably is some of that going on anyway. But go on.
HUDSON: Of course they could cut back the fat. Of course what they should do is change the tax system. Of course they should get rid of the Bush tax cuts. And the one good thing in President Obama’s speech two days ago was he used the term spending on tax cuts. So that’s not the same thing as raising taxes. He said just cut spending by cutting spending on tax cuts for the financial sector, for the speculators who count all of their income that they get, billions of income, as capital gains, taxed at 15 per cent instead of normal income at 35 per cent. Let’s get rid of the tax loopholes that favour Wall Street.
JAY: I mean, this is, I guess, the point you were making at the beginning of this segment. Obama has bought into the only solution is some form of cutting. The alternative strategy’s not even being talked about. So of course he loses the battle of public opinion, because he’s not fighting it.
HUDSON: That’s correct. And that shows where his actual beliefs are. Lawyers very rarely understand economics anyway. But Mr. Obama has always known who has been contributing primarily to his political campaigns. We know where his loyalties lie now. And, basically, he promised change because that’s what people would vote for, and he delivered the change constituency to the campaign contributors…
Knee-jerk conservatives may say, “yes, we have to slash all social support programs like unemployment benefits and food stamps”.
Knee-jerk liberals might say “raise taxes instead of cutting any spending”.
And stopping bailouts and giveaways for the top .1% of the richest elite (which weaken rather than strengthen the economy, as shown here, here and here) and slashing spending on unnecessary imperial wars (which reduce rather than increase our national security, as demonstrated here and here) is what the budget really needs.
As I wrote last year:
Why aren’t our government “leaders” talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?
And why aren’t they taking away the power to create credit from the private banking giants – which is costing our economy trillions of dollars (and is leading to adecrease in loans to the little guy) – and give it back to the states?
If we did these things, we wouldn’t have to raise taxes or cut core services to the American people.I pointed out the next month:
If there’s any shortfall, all we have to do is claw back the ill-gotten gains from the fraudsters working for the too big to fails whose unlawful actions got us into this mess in the first place. See this, this, this, this and this.***
Matt Taibbi agrees with Michael Hudson that the debt ceiling debate is a charade and that Obama’s move to the right is a political strategy that has nothing to do with solving, let alone identifying, the real problems in our economy.
But what is becoming equally obvious, to both sides, is that the Obama White House is using this same artificial calamity to pitch its own increasingly rightward tilt to voters in advance of the 2012 elections.
It has been extremely interesting in the last weeks to see observers on both sides of the aisle make this point. Just yesterday, the inimitable New York Times conservative Ross Douthat listed Obama’s not-so-secret rightward push as a the first in a list of reasons why the Republicans should dig in even more, instead of making a sensible deal:
Barack Obama wants a right-leaning deficit deal. For months, liberals have expressed frustration with the president’s deficit strategy. The White House made no effort to tie a debt ceiling vote to the extension of the Bush tax cuts last December. It pre-emptively conceded that any increase in the ceiling should be accompanied by spending cuts. And every time Republicans dug in their heels, the administration gave ground.
The not-so-secret secret is that the White House has given ground on purpose. Just as Republicans want to use the debt ceiling to make the president live with bigger spending cuts than he would otherwise support, Obama’s political team wants to use the leverage provided by those cra-a-a-zy Tea Partiers to make Democrats live with bigger spending cuts than they normally would support.
This is interesting because just last week, the liberal opposite of Douthat at the Times, Paul Krugman, came to the same conclusion:
It’s getting harder and harder to trust Mr. Obama’s motives in the budget fight, given the way his economic rhetoric has veered to the right. In fact, if all you did was listen to his speeches, you might conclude that he basically shares the G.O.P.’s diagnosis of what ails our economy and what should be done to fix it. And maybe that’s not a false impression; maybe it’s the simple truth.
The blindness of the DLC-era “Third Way” Democratic Party continues to be an astounding thing… They’ve abandoned the unions-and-jobs platform that was the party’s anchor since Roosevelt, and the latest innovations all involve peeling back their own policy legacies from the 20th century. Obama’s new plan, for instance, might involve slashing Medicare and Social Security under “pressure” from the Republicans.
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