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He's desperate. He doesn't want to have to look for work next year
in a ruined economy.<br>
<br>
<br>
On 7/26/11 3:46 PM, C. G. Estabrook wrote:
<blockquote cite="mid:4E2F2794.4010908@illinois.edu" type="cite">
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[Obama tells (and repeats) a flat-out lie about SS checks. And he
must know it's a lie.]<br>
<br>
July 26, 2011<br>
<b>Under Cover of "Crisis"<br>
Obama's Ambush on Entitlements<br>
</b>By MICHAEL HUDSON<br>
<br>
You know that the debt face-off is as staged as melodramatically
as a World Wrestling Federation exhibition when Obama makes the
blatantly empty threat that if Congress does not “tackle the tough
challenges of entitlement and tax reform,” there won’t be money to
pay Social Security checks next month. In his debt speech last
night (July 25), he threatened that if “we default, we would not
have enough money to pay all of our bills – bills that include
monthly Social Security checks, veterans’ benefits, and the
government contracts we’ve signed with thousands of businesses.”<br>
<br>
This is not remotely true. But it has become the scare theme for
over a week now, ever since the President used almost the same
words in his interview with CBS Evening News anchor Scott Pelley.<br>
<br>
Of course the government will have enough money to pay the monthly
Social Security checks. The Social Security administration has its
own savings – in Treasury bills. I realize that lawyers (such as .
Obama and indeed most American presidents) rarely understand
economics. But this is a legal issue. Obama certainly must know
that Social Security is solvent, with liquid securities to pay for
many decades to come. Yet . Obama has put Social Security at the
very top of his hit list.<br>
<br>
The most reasonable explanation for his empty threat is that he is
trying to panic the elderly into hoping that somehow the budget
deal he seems to have up his sleeve can save them. The reality, of
course, is that they are being led to economic slaughter. (And not
a word of correction reminding the President of financial reality
from Rubinomics Treasury Secretary Geithner, neoliberal Fed
Chairman Bernanke or anyone else in the Wall Street Democrat
administration, formerly known as the Democratic Leadership
Council.)<br>
<br>
It is a con. Obama has come to bury Social Security, Medicare and
Medicaid, not to save but kill them. This was clear from the
outset of his administration when he appointed his Deficit
Reduction Commission, headed by avowed enemies of Social Security
Republican Senator Alan Simpson of Wyoming, and President
Clinton’s Rubinomics chief of staff Erskine Bowles. Obama’s more
recent choice of Republicans and Blue Dog Democrats to be
delegated by Congress to rewrite the tax code on a bipartisan
manner – so that it cannot be challenged – is a ploy to pass a tax
“reform” that democratically elected representatives never could
be expected to do.<br>
<br>
The devil is always in the details. And Wall Street lobbyists
always have such details tucked away in their briefcases to put in
the hands of their favored congressmen and dedicated senators. And
in this case they have the President, who has taken their advice
as to whom to appoint as his cabinet to act as factotums to
capture the government on their behalf and create “socialism for
the rich.”<br>
<br>
There is no such thing, of course. When governments are run by the
rich, it is called oligarchy. Plato’s dialogues made clear that
rather than viewing societies as democracies or oligarchies, it
was best to view them in motion. Democracies tended to polarize
economically (mainly between creditors and debtors) into
oligarchies. These in turn tended to make themselves into
hereditary aristocracies. In time, leading families would fight
among themselves, and one group (such as Kleisthenes in Athens in
507 BC) would “take the people into his party” and create a
democracy. And so the eternal political triangle would go on.<br>
<br>
This is what is happening today. Instead of enjoying what the
Progressive Era anticipated – an evolution into socialism, with
government providing basic infrastructure and other needs on a
subsidized basis – we are seeing a lapse back into neo-feudalism.
The difference, of course, is that this time around society is not
controlled by military grabbers of the land. Finance today
achieves what military force did in times past. Instead of being
tied to the land as under feudalism, families today may live
wherever they want – as long as they take on a lifetime of debt to
pay the mortgage on whatever home they buy.<br>
<br>
And instead of society paying land rent and tribute to conquerors,
we pay the bankers. Just as access to the land was a precondition
for families to feed themselves under feudalism, one needs access
to credit, to water, medical care, pensions or Social Security and
other basic needs today – and must pay interest, fees and monopoly
rent to the neo-feudal oligarchy that is now making its deft move
from the United States to Ireland and Greece.<br>
<br>
The U.S. Government has spent $13 trillion in financial bailouts
since Lehman Bros. failed in September 2008. But . Obama warns
that thirty years from now, the Social Security fund may run a $1
trillion deficit. It is to ward it off that he urges dismantling
the plans for such payments now.<br>
<br>
It seems that the $13 trillion used up all the money the
government really has. The banks and Wall Street firms have taken
the money and run. There is not enough to pay for Social Security,
Medicare or other social spending that the Blue Dog Democrats and
Republicans now plan to cut.<br>
<br>
Not right away. The plan will be to “paper over” the current
crisis by delegating the plans to a “Deficit Reduction Commission
#2,” appointed from Congressional members.<br>
<br>
Finally, we have “Change we can believe in.” Real change is always
surprising, after all.<br>
<br>
The faux crisis<br>
<br>
Usually a crisis is needed to create a vacuum into which these
toxic details are fed. Wall Street does not like real crises, of
course – except to make quick computer-driven speculative gains on
the usual fibrillation of today’s zigzagging markets. But when it
comes to serious money, the illusion of a crisis is preferred,
staged melodramatically to wring the greatest degree of emotion
out of the audience much like a good film editor edits a montage
sequence. Will the speeding train run over the girl strapped to
the tracks? Will she escape in time?<br>
<br>
The train is debt; the girl is supposed to be the American
economy. But she turns out to be Wall Street in disguise. The
exercise turns out to be a not-so-divine comedy. Obama offers a
plan that looks very Republican. But the Republicans say no. There
is an illusion of a real fight. They say Obama is socialist.<br>
<br>
Democrats express shock at the giveaway being threatened. Many
say, “Where is the real Obama?” But it seems that the real Obama
turns out to be a Republican Wall Street imposter in Democratic
clothing. That is what the Democratic Leadership Committee
basically is: Wall Street Democrats.<br>
This is not as much of an oxymoron as it may sound. There is a
reason why today’s post-Clinton Democrats are the natural party to
undo what FDR and earlier Democrats stood for. A Democratic Senate
never would stand for such giveaways to Wall Street and
double-cross of their urban constituency if a Republican president
would propose what . Obama is putting before them.<br>
Here’s what the next Republican presidential candidate can say:
“You know that whatever we Republicans want, Obama will support
us. If you don’t want a Republican policy, they you should vote
for me for president. Because a Democratic Congress will oppose a
Republican policy if we propose it. But if. Obama proposes it,
congress will be de-toothed, and cannot resist.”<br>
It’s the same story in Britain, where the Labour Party is called
upon to finish up the job that the Conservatives start but need
New Labour to subdue popular opposition to privatizing the
railroads and a Public/Private Partnership financial giveaway for
the London tube line. And it’s the same story in France, where a
Socialist government is supporting the privatization program
dictated by the European Central Bank.<br>
<br>
Round up the usual fallacies<br>
<br>
Whenever one finds government officials and the media repeating an
economic error as an incessant mantra, there always is a special
interest at work. The financial sector in particular seeks to
wrong-foot voters into believing that the economy will be plunged
into crisis of Wall Street does not get its way – usually by
freeing it from taxes and deregulating it. <br>
Obama’s first fallacy is that the government budget is like a
family budget. But families can’t write IOUs and have the rest of
the world treat it as money. Only governments can do that. It is a
privilege that the banks would now like to obtain – the ability to
create credit freely on their computer keyboards, and charge
interest for what is almost free, and what governments can indeed
create for free.<br>
<br>
“Now, every family knows that a little credit card debt is
manageable. But if we stay on the current path, our growing debt
could cost us jobs and do serious damage to the economy.” But
economies need government money to grow – and this money is
provided by running federal budget deficits. This has been the
essence of Keynesian counter-cyclical spending for more than half
a century. Until the present, it was Democratic Party policy.<br>
<br>
It’s true that Pres. Clinton ran a budget surplus. The economy
survived by the commercial banking system supplying the credit
needed to grow – at interest. To force the economy back into this
reliance on Wall Street rather than on government, the government
needs to stop running budget deficits. The economy will then have
a choice: to shrink sharply, or to turn almost all the economic
surplus over to banks as economic rent on their credit-creation
privilege.<br>
<br>
Obama also pretends that credit ratings agencies are able to act
as mascots for their clients, the large financial underwriters, by
making the entire economy pay even higher interest rates on its
credit cards and banks. “For the first time in history,” . Obama
dissembled, “our country’s Triple A credit rating would be
downgraded, leaving investors around the world to wonder whether
the United States is still a good bet. Interest rates would
skyrocket on credit cards, mortgages, and car loans, which amounts
to a huge tax hike on the American people.”<br>
<br>
The reality is that running a budget surplus would increase
interest rates, by forcing the economy into captivity to the
banking system. The Obama administration is now deep into its
Orwellian rhetorical phase.<br>
<br>
During Obama’s speech I could not help feeling that I had heard it
all before. And then I remembered. Back in 2008, Treasury
Secretary Henry Paulson sought to counter Sheila Bair’s argument
that all FDIC-insured depositors would be able to ride out the
September crisis, with only the reckless gamblers losing the gains
they hoped to make on their free credit. “If the financial system
were allowed to collapse,” he warned in his Reagan Library speech,
“it is the American people who would pay the price. This never has
been just about the banks; it has always been about continued
prosperity and opportunity for all Americans.”<br>
<br>
But of course, it is all about the banks. Wall Street knows that
to get sufficient Congressional votes to roll back the New Deal,
Social Security, Medicare and Medicaid, a Democratic president
needs to be in office. A Democratic Congress would block any
Republican president trying to make the kind of cuts that Obama is
sponsoring. But Congressional Democratic opposition is paralyzed
when President Obama himself – the liberal president par
excellence, America’s Tony Blair – acts as cheerleader for cutting
back entitlements and other social spending.<br>
<br>
So just as the City of London backed Britain’s Labour Party in
taking over when the Conservative Party could not take such
radical steps as privatizing the railroads and London tube system,
and just as Iceland’s Social Democrats sought to plunge the
economy into debt peonage to Britain and Holland, and the Greek
Socialist Party is leading the fight for privatization and bank
bailouts, so in the United States the Democratic Party is to
deliver its constituency – urban labor, especially the racial
minorities and the poor who are most injured by Pres. Obama’s
austerity plan – to Wall Street.<br>
<br>
So Obama is doing what any good demagogue does: delivering his
constituency to his campaign contributors on Wall Street. Yves
Smith has aptly called it Obama’s “Nixon goes to China moment in
reverse.”<br>
<br>
The Republicans help by refraining from putting forth a credible
alternative presidential candidate. The effect is to give Obama
room to move far to the right wing of the political spectrum. Far
enough so that it is his own Democrats who are most intent on
scaling back Social Security, not the Republicans.<br>
<br>
This is done most easily under pressure of near panic. This worked
after September 1008 with TARP, after all. The Wall Street bailout
melodrama should be viewed as a dress rehearsal for today’s
debt-ceiling non-crisis.<br>
<br>
[Michael Hudson is a former Wall Street economist. A Distinguished
Research Professor at University of Missouri, Kansas City (UMKC),
he is the author of many books, including Super Imperialism: The
Economic Strategy of American Empire (new ed., Pluto Press, 2002)
and Trade, Development and Foreign Debt: A History of Theories of
Polarization v. Convergence in the World Economy. He can be
reached via his website, <a moz-do-not-send="true"
class="moz-txt-link-abbreviated"
href="mailto:mh@michael-hudson.com">mh@michael-hudson.com</a>.]<br>
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