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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 class="moz-txt-link-abbreviated" href="mailto:mh@michael-hudson.com">mh@michael-hudson.com</a>.]<br>
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