Recently, the bond rating agencies that gave junk derivatives triple-A
ratings threatened to downgrade US Treasury bonds if the White House and
Congress did not reach a deficit reduction deal and debt ceiling increase.
The downgrade threat is not credible, and neither is the default threat.
Both are make-believe crises that are being hyped in order to force cutbacks
in Medicare, Medicaid, and Social Security.
If the rating agencies downgraded Treasuries, the company executives would
be arrested for the fraudulent ratings that they gave to the junk that Wall
Street peddled to the rest of the world. The companies would be destroyed
and their ratings discredited. The US government will never default on its
bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are
payable in its own currency. Regardless of whether the debt ceiling is
raised, the Federal Reserve will continue to purchase the Treasury's debt.
If Goldman Sachs is too big to fail, then so is the US government.
There is no budget focus on the illegal wars and military occupations that
the US government has underway in at least six countries or the 66-year old
US occupations of Japan and Germany and the ring of military bases being
constructed around Russia.
The total military/security budget is in the vicinity of $1.1-$1.2 trillion,
or 70 per cent - 75 per cent of the federal budget deficit.
In contrast, Social Security is solvent. Medicare expenditures are coming
close to exceeding the 2.3 per cent payroll tax that funds Medicare, but it
is dishonest for politicians and pundits to blame the US budget deficit on
Entitlements are funded with a payroll tax. Wars are not funded. The
criminal Bush regime lied to Americans and claimed that the Iraq war would
only cost $70 billion at the most and would be paid for with Iraq oil
revenues. When Bush's chief economic advisor, Larry Lindsay, said the Iraq
invasion would cost $200 billion, Bush fired him. In fact, Lindsay was off
by a factor of 20. Economic and budget experts have calculated that the Iraq
and Afghanistan wars have consumed $4,000 billion in out-of-pocket and
already incurred future costs. In other words, the ongoing wars and
occupations have already eaten up the $4 trillion by which Obama hopes to
cut federal spending over the next ten years. Bomb now, pay later. . . .
Washington's response to this dilemma is to increase the austerity! Cutting
back Medicare, Medicaid, and Social Security, forcing down wages by
destroying unions and offshoring jobs (which results in a labor surplus and
lower wages), and driving up the prices of food and energy by depreciating
the dollar further erodes consumer purchasing power. The Federal Reserve
can print money to rescue the crooked financial institutions, but it cannot
rescue the American consumer.
As a final point, confront the fact that you are even lied to about "deficit
reduction." Even if Obama gets his $4 trillion "deficit reduction" over the
next decade, it does not mean that the current national debt will be $4
trillion less than it currently is. The "reduction" merely means that the
growth in the national debt will be $4 trillion less than otherwise.
Regardless of any "deficit reduction," the national debt ten years from now
will be much higher than it presently is.
Roberts was Assistant Secretary of the US Treasury, Associate Editor of
the Wall Street Journal, and professor of economics in six universities. His
latest book, HOW THE ECONOMY WAS LOST, was published by CounterPunch/AK
Press. He can be reached at: PaulCraigRoberts@yahoo.com
[The economy's failure to recover was despite the largest fiscal and
monetary stimulus in the country's history. There was a $700 billion bank
bailout, a $700 billion stimulus program, a couple of trillion in
"quantitative easing," that is, in debt monetization or the printing of
money to finance the government's expenditures. In addition the Federal
Reserve's balance sheet had expanded by trillions of dollars as the Fed
purchased troubled mortgage bonds and derivatives in its effort to keep the
financial system solvent and functioning. According to the Government
Accountability Office's audit of the Federal Reserve released by Senator
Bernie Sanders, the Federal Reserve provided secret loans to US and foreign
banks totaling $16.1 trillion, a sum larger than US Gross Domestic Product
(GDP).--Paul Craig Roberts, "More War! The
Road to Armageddon," counterpunch.org, August 1, 2011]
[The decision by Standard & Poor's to push America into the second
division, when it comes to trustworthiness about paying its bills, puts the
USA below the UK, Germany, France, Singapore, Finland and 14 other
countries.--Mark Mardell, "How
Washington's politicians downgraded America," BBC News, August 6,
[The idea of distributing free money to end deep recessions has been
promoted theoretically by serious economists since the 1930s, . . . More
recently, as conventional policies to revive growth have faltered, with
widespread disappointment about the impact of zero interest rates and
quantitative easing, proposals for distributing money directly to citizens
have been quietly gaining traction among critics of orthodox central
banks.--Anatole Kaletsky, "A breakthrough speech on monetary
policy," ft.com, February 7, 2013]
[Money today is simply a legal agreement between parties. Nothing backs it
but "the full faith and credit of the United States". The United States
could issue its credit directly to fund its own budget, just as our
forebears did in the American colonies and as Abraham Lincoln did in the
Civil War.--Ellen Brown, "US
can fix budget woes," atimes.com, February 15, 2013]