[Peace-discuss] Tell Me Lies

[C. G. Estabrook]

[Obama tells (and repeats) a flat-out lie about SS checks.  And he must know 
it's a lie.]

July 26, 2011
*Under Cover of "Crisis"
Obama's Ambush on Entitlements
*By MICHAEL HUDSON

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."

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.

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.

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.)

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.

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."

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.

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.

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.

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.

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.

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.

Finally, we have "Change we can believe in." Real change is always surprising, 
after all.

The faux crisis

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?

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.

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.
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.
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."
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.

Round up the usual fallacies

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.
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.

"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.

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.

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."

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.

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."

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.

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.

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."

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.

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.

[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, mh at michael-hudson.com.]

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