Repost: Michael Hudson - US Black Debt Hole

I am reposting this as it is time to keep what Dr. Hudson's analysis in full view. CONgress is back in session and the storm of fighting is about to take off again.

It will appear to be Obama versus the Republicans (backed up by Democratic Party support) - but the fight is much, much larger. It's the ability to maintain a middle class without everyone having to join the military to have money versus bank$ter$ and very infantile economics understanding.

The new excuse for Obama's failure to rein in the military over WAR CRIME is that he was afraid of a coup by the military. Personally, I cannot see anyway we are going to see one anyway as the military brass is not so stoopid as to NOT understand the effects of #austerity on the American population. The military has no interest in giving up basic American resources to foreigners.
Instead, the US plan has been to quietly and roughly, fold Canada into being the next neoliberal colony. Canada has been militarized exponentially.
Barry and Co. have trotted the globe trying to prop up the sagging dollar for over a year. They've taken over Canada behind the scenes for the resources there and driven Mexico into a hostage for drugs and Big Corporative rule. But they are far from having built-in stability.

Watch what is happening in the Eurozone which should have given Robert Rubin and his pathetic economic coup pause for thought! Banks are going to need recapitalization. We are headed swiftly toward #GFC2 (global financial/fiscal crisis 2) and there is not much to be done about it. Sueing 17 banks isn't going to "cut it."

The global fight back is ON. Egypt, Tunisia, (no, NOT Libya), Israel, Syria, Yemen, Greece, Spain, Bahrain, Ireland, the UK - the list is very long of those who aren't "having it" anymore. Merkel is about to be thrown out of office; she's lost her business base.

I could rabbit on about the military "culture" of America which is not an attractive portrait. Instead of creating China into the new monster to be fought after Osama bin Laden, we were given Libya - a country in which Chinese cooperation with Khaddafi was in full swing. Losing their resources, bought and paid for, in Libya is not going to make the Chinese leadership "happy." Talk about disequalibrium!

Anyway, I post this an important backgrounder. Bear what he is saying in mind. This is not "stale" - it's

simply the TRUTH.

The Debt Ceiling Debate That Didn't Happen

War and Debt

By MICHAEL HUDSON

To begin with the most obvious question: If governments run up their debt in the process of carrying out programs that Congress already approved, why would Congress have yet another option to stop the government from following through on these authorized expenditures, by refusing to raise the debt ceiling?

The answer is obvious when one looks at why this fail-safe check was introduced in almost every country of the world. Throughout modern history, war has been the major cause of a rising national debt. Most governments operate in fiscal balance during peacetime, financing their spending and investment by levying taxes and charging user fees. War emergencies push this balance into deficit – sometimes for defensive wars, sometimes for aggression.

In Europe, parliamentary checks on government spending were designed to prevent ambitious rulers from waging war. This was Adam Smith’s great argument against public debts, and his urging that wars be financed on a pay-as-you-go basis. He wrote that if people felt the economic impact of war immediately – rather than postponing it by borrowing – they would be less likely to support military adventurism.

This obviously was not the Tea Party position, nor that of the Republicans. What is so remarkable about the August 2 debt ceiling crisis in the United States is its seeming dissociation with war spending. To be sure, over a third ($350 billion) of the $917 billion cutback in current spending is assigned to the Pentagon. But that simply slows the remarkable escalation rate that has taken place from Iraq to Afghanistan to Libya.

What is even more remarkable is that last month, Democrat Dennis Kucinich and Republican Ron Paul sought to make President Obama obey the conditions of the War Powers Act and get Congressional approval for his war in Libya, as required when warfare goes on for more than three months. This attempt to apply the rule of law to the Imperial Presidency was unsuccessful. Obama clamed that bombing a country was not war. It was only war if a country’s soldiers were being killed. Bombing of Libya was done from the air, at long distance, and perhaps also by drones. So is a bloodless war really a war – bloodless on the aggressor’s side, that is?

Here was precisely the situation for which the debt ceiling rule was introduced in 1917. President Wilson had taken the United States into the Great War, breaking his election campaign promise not to do so. Isolationists in the United States sought to limit America’s commitment, by imposing Congressional oversight and approval of raising the debt ceiling. This safeguard obviously was intended to be used against unscheduled spending that occurred without Congressional approval. 

The present rise in U.S. Treasury debt results from two forms of warfare. First is the overtly military Oil War in the Near East, from Iraq to Afghanistan (Pipelinistan) to oil-rich Libya. These adventures will end up costing between $3 and $5 trillion. Second and even more expensive is the more covert yet more costly economic war of Wall Street against the rest of the economy, demanding that losses by banks and financial institutions be passed onto the government balance sheet (“taxpayers”). The bailouts and “free lunch” for Wall Street – by no coincidence, Congress’s number one political campaign contributor – cost $13 trillion.

It seems remarkable that Obama’s major focus on the debt ceiling is to warn that Social Security funding must be cut back, along with that of Medicare and other social programs. He went to far as to say that despite the fact that FICA wage set-asides have been invested in Treasury securities for over half a century, the government might not send out checks this week.

A radical double standard is at work for democracies. Wall Street investors certainly had no such worry. In fact, interest rates on long-term Treasury bonds actually have gone down over the past month, and especially over the last week. So institutional debt holders obviously expected to get paid. Only the Social Security savers were to be stiffed – or was Obama simply trying to threaten them, so as to depict himself as a hero coming in to save their Social Security by negotiating a Grand Bargain?

Wall Street had it right. There was no real crisis. Authorization to raise the public debt ceiling is not a proper occasion to discuss long-term tax policy. Since 1962 – just as the Vietnam War was starting to escalate – it has been raised 74 times. This averages out to about once every eight months. It is like going to a Notary Public – just to make sure that the President is not doing something wrong. Mr. Obama could have asked for a limited vote just on this, without riders. Never before have riders such as this been attached. And even more remarkably, there was no attempt to impose a rider restricting the Obama Administration from spending any more funds on Libya, without getting an official Congressional declaration of war.

Obama could have invoked the 14th Amendment to pay. He could have taken the proposal made by Scott Fullwiler and other UMKC economists for the Treasury to issue a few $1 trillion coins and pay the Fed for Treasury securities, to retire. But Mr. Obama steered right into the debate, turning it into a discussion of how to cut back Social Security and Medicare in the emerging U.S. class war, rather than over extending the Oil War to North Africa.

The first great victory for the financial sector in America’s domestic class war was the Bush “temporary” tax cuts on the wealthy. This aggression was not undone in order to restore budget balance. No temporary tax cuts were revoked, no loopholes closed. The burden of balancing the budget was pushed even further onto the Democratic Party’s own base: urban labor, racial and ethnic minorities, the Eastern and Western seaboards. Yet the Democrats split 95/95 on the vote to raise the debt ceiling by slashing social spending on their major voting constituency.

Voting constituency, but not campaign contributors. That looks like the key to how the debt crisis has unfolded. Although leading Democrats such as Maxine Walters Waters, Dennis Kucinich, Henry Waxman, Barney Frank, Edolphus Towns, Charles Rangel and Jerrold Nadler opposed it (and on the Republican side, Ron Paul, Michele Bachmann and Ben Quayle), much of the principled opposition has come from traditional Republicans. Reagan’s Assistant Treasury Secretary Paul Craig Roberts accused the deal as being too right-wing and favoring the wealthy to a degree threatening to bring on depression.

The essence of classical free market economics was to restrict Executive power – in an epoch when war-making power was the major abuse of national interests. Just as the lower house of bicameral legislatures had taken over the power to commit nations to permanent national debt – rather than royal debts that died with the kings, as were the norm before the 16th century – so parliaments asserted their rights to block warfare.

But now that finance is the new form of warfare – domestically, not externally – where is the power to constrain Treasury and Federal Reserve power to commit taxpayers to bail out financial interests at the top of the economic pyramid? The Fed and other central banks claim that their political “independence” is a “hallmark of democracy.” It seems to be rather a transition to financial oligarchy. And now that finance has joined with the oil industry, major monopolies and privatizers of the public domain, the need for some kind of Congressional oversight is as necessary as was parliamentary power over military spending in times past.

No discussion of this basic principle was voiced in the debt-ceiling debate. Even critics who voted (ostensibly) reluctantly (so as to provide plausible deniability to what no doubt will be their later condemnations of the deal when election time comes around) acted as if they were saving the economy. The reality is that there is now little hope of rebuilding infrastructure as the president promised. Cutbacks in federal revenue sharing will hit cities and states hard, forcing them to sell off yet more land, roads and other assets in the public domain to cover their budget deficit as the U.S. economy sinks further into depression. Congress has just added fiscal deflation to debt deflation, slowing employment even further.

How indeed will they explain all this in the November 2012 elections?

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@michael-hudson.com

The Decline and Fall of the American Empire: Paul Craig Roberts

http://www.opednews.com/author/author12495.html

The United States Government and its presstitute media have wasted time and energy creating hysteria over a non-existent "debt ceiling crisis." After reading the "news" in the Ministry of Propaganda and witnessing the stupidity of the US government, the rest of the world is struck dumbfounded by the immaturity of the "world's only superpower." 

What kind of superpower is it, the world wonders, that is willing to go to the eleventh hour to convince the world, which holds its banking reserves in US Treasury debt, that the US government will default on the debt?

Every country in the world now worries about the judgment and sanity of the country with the largest nuclear arsenal in the world.

This is the achievement of the Republicans, who took an ordinary commonplace increase in the debt-ceiling limit, an event that has occurred routinely many times over the course of my life, and turned it into a crisis threatening the world financial system.

To be clear, there was never any risk whatsoever of US default, as President Obama has power established by President George W. Bush's Presidential Directive 51 to declare default a National Emergency and to set aside the debt-ceiling limit and Congress' power of the purse, and to continue to issue the debt necessary to fund the US government and its wars. 

That the American press ever took this highly-hyped "crisis" seriously merely demonstrates their prostitute status.

The US public debt is rising too rapidly against US GDP, although it is still below the percentages during World War II. The problem that is ignored by the idiots in Washington and the presstitutes is that the debt is rising relative to the economy because the economy is not rising, but war expenditures are.
   

Why is the economy not rising?

It is not rising, because it has been off-shored. What formerly was US GDP produced in Gary, Indiana, St. Louis, Detroit, Silicon Valley, and other US locations is now GDP for China, India, Indonesia and other countries where manufacturing labor and professional services can be hired below US rates.

What happens with off-shoring? The answer is clear. US GDP, consumer income, career opportunities, and tax base leave the country. Corporate profits and bonuses rise due to the lower labor costs.

Who is this good for?
  

The answer is that it is only good for Wall Street, corporate shareholders, and corporate management. Their incomes go up, and the GDP goes down along with the employment opportunities of Americans and the tax base for government.

The other destroyer of American economic prospects was the deregulation of the financial sector. Economists theorized that markets were self-regulating and created the illusion that greed was never a problem. This was music and dollars to Wall Street's ears. Federal Reserve Chairman Alan Greenspan and the Wall Street-owned US Treasury jumped on board. Those, who like Brooksley Born, were empowered by US law to regulate derivatives, were driven out of office by the  Federal Reserve Chairman, the US Treasury Secretary, and the Securities and Exchange Chairman.

Financial institutions freed from Glass-Steagall, freed from capital requirements, and freed from oversight, immediately took debt leverage on highly unrealistic bets to amazing heights. When the schemes collapsed, the Federal Reserve lent US and foreign banks $16.1 trillion dollars, a sum larger than the US national debt and larger than the US GDP.

Where did the Federal Reserve get $16.1 trillion to lend? The Fed created it out of thin air with a stroke of a computer entry.

While the Federal Reserve created $16.1 trillion in new loans for private banks, the bailed out banks bulldoze the foreclosed homes of the evicted Americans.

So in America, the light unto the world, American citizens are thrown out of their homes in order that banks can bulldoze their homes. 

Only in America does this makes sense.

And it is not only Americans who are being made homeless by US policies. Afghans, Pakistanis, Iraqis, Yemenis, Somali, Libyans are also consigned to homelessness by American policy. Moreover, America's wars against these peoples, together with the supporting military/security budget, account for 75% of the US budget deficit. Indeed, the cost of these wars exceed the planned future budget savings from the debt limit deal.  

In other words, the cost of the wars that make millions of foreigners homeless use up revenues that the federal government could have used to keep Americans in their homes and teachers in the schools. As much as many Republicans profess to be concerned about the US public debt, Republicans were not sufficiently concerned to address their issue by cutting back the $1.2 trillion military-security budget or by raising the low tax rates on the mega-rich.

Look at these July 30 headlines, just two days prior to the default deadline, from the online group, Stop NATO:

  US Military To Be Based In Australia To Confront China

  Call To Expand American Counterinsurgency Operations In Philippines

  US Could Upgrade Polish Warships For Baltic Sea

  Bulgaria: Pentagon Continues Upgrading Military Bases

  US Uses Romanian Air Base To Supply Afghan War

  America's Africa Partnership Station In East Africa

  Mongolia: US Leads NATO, Asian NATO Allies In Military Exercise

  Libyan War: Over 17,000 NATO Air Missions, Nearly 6,500 Strike Sorti

  The Big Picture: War on Libya is War on Africa

What in the world is a country facing bankruptcy and default doing conducting military exercises in Mongolia and Central Asia? What is the North Atlantic Treaty Organization, designed to counter a Soviet thrust into Western Europe, doing in Mongolia?

Why are these military expenditures necessary, but not expenditures to keep America's homeless population from rising while homes are destroyed?

Why do not the Republicans listen when mega-billionaire Warren Buffet says that the tax rate on his massive income is lower than the tax rate on his secretary's income?

The answer is that the Republicans have an agenda: War. And Republicans want to fund this war, not by taxing high incomes but by cutting support programs for the down and out.

To cut to the chase: Even if all the cuts actually happen, the weakening economy will result in new deficit projections that will wipe out the expected savings from the debt limit agreement.

What then will the government do?

Until US policymakers comprehend that the economy has been moved offshore and take steps to bring it home, there will be no solution to America's debt problem or to its unemployment problem.

~ Billionaires Thank Legislators ~

~ Billionaires Thank Legislators ~Thanks for keeping our tax rate lower than the middle class (and the poor)

Keeping us at an effective tax rate of 7.7% for the wealthy, compared to 10.3% - 12.5% for the middle class, is an important priority for the Minnesota Legislature.  Our servants - making under $11,000 a year -are paying 22.1%.  Nice!  Millionaires and billionaires make more campaign contributions to politicians and therefore have more influence while enjoying lower taxes. Isn't that just Maaaaarvelous?  Few politicians have the courage to stand up to US, the privileged few.  Aren't we fortunate? Let's keep it that way.

We applaud (clap! clap!) the proposed House cuts to the "service" sector- $411 million from higher education (resulting in $200 million in tuition increases), DNR cuts that will close 10 state parks, $1.6 billion from Health & Human Services (although we think those could have bit a bit deeper). a 15% cut in the State workforce, $22 million in cuts for schools, cuts to mass transit and economic development, also,.  As we say, Minnesota can balance the budget by cutting programs for the elderly, the disabled, both the poor and middle classes - surely, NOT by raising taxes on the wealthy, the uber rich, the privileged and the fortunate few !

CUT!  CUT!  CUT!  CUT! CUT! CUT!  CUT!  CUT!  CUT! CUT!

Government, as we have said repeatedly, is NOT the answer - what we need are corporate jobs.  Let's privatize.  Let's privatize everything!  We applaud the proposal to cut corporate taxes in the hope that corporations might provide a few jobs.  The record profit$ in 2010, helped us top 1% take home nearly 24% of the nation's total income.  And just think, these corporations created more jobs overseas than in then here (1.6 million versus 1 million).  Pretty attractive, don't you think?  Give us a reason to go globe trotting to see our nice new locations.  We so enjoy these working vacations.

Our thanks and best wishes to the Billionaire Koch Brothers and their steadfast Friends at the American Legislative Council, while were at it.

ALEC has legislators at state and federal levels across the country.  They are so very clever, too, secretly sitting at the tables and bars with Koch Industries, WalMart and AT&T executives.  They are working, working, working (not like these "welfare slobs") together to craft and spread legislation that limits the power of unions while cutting back on all that excessive pay and benefits for the public sector.  Please, sweeties ask for and encourage your representatives to join ALEC.  
Nothing like something that furthers our billionaires' agenda and Minnesota is doing a fabulous job at putting our feudalistic legislation forward this session!  They are so very helpful.  We'll get to keep those tax loopholes, subsidies, and publically paid kickbacks to our friends. 

Let's further drive down wages by weakening public sector unions!  It's just great for corporate profit$ and for corporate owners and their minions by taking the time to weaken those pesky public sector unions.  It may not be so great for the US economy, it sure is good for globalISM.  This is an excellent time to be w-e-a-l-t-h-y.  Just think about it our way- "My word!  Isn't it wooonderful that now just 400 people own more wealth than one half of the American public combined." A good friend of ours, a hedge fund "manager" is making up to $20 million a week and he did that by 2009. We say:  "Way to go!"  Corporations are sitting on record profits and evading taxes as never before. Why, our Oil/Gas Cowboy friends showed us how to do "it' -

Oil giant Exxon made $34 billion of net income in 2009, but paid no income taxes in the United States. Chevron (CVX) Of this year's taxes, just $200 million were paid in the U.S." That's a 1% tax rate…

 Wars Improve Corporate Profits

We have our priorities and the continued wars in Iraq, Afghanistan and now Libya are  so great for that bottom line.  Alliant Tech, Blackwater/Xe and Halliburton has seen steady growth in profitability with the endless expansion of the War Machine.  Nothing like endless war to stimulate the economy, boost our profit$ and keep people from looking too closely at the ongoing class war here at home.  You, yes YOU, support the war$ for oil and water!  Send DC more of your lovely money - so far MN has given $24 bn in taxes for wars.

Watch our pertinent video on youtube as we are Pleased with Draconion Cuts and Thank Legislators.  bit.ly/g00N95. Contact Women against Military Madness @www.worldwidewamm.org to oppose the Billionaires' agenda.  Billionaires for cuts ask you to help us keep taxes low or nonexistent for billionaires.  We love personal notes and valentines so email us at BillionairesForCuts@gmail.com.  Or contact WAMM at 612-827-5364.  Ta Ta for Now!



~ Billionaires Thank Legislators ~

Thanks for keeping our tax rate lower than the middle class (and the poor)

Keeping us at an effective tax rate of 7.7% for the wealthy, compared to 10.3% - 12.5% for the middle class, is an important priority for the Minnesota Legislature.  Our servants - making under $11,000 - are paying 22.1%.  Nice!  Millionaires and billionaires make more campaign contributions to politicians and therefore have more influence while enjoying lower taxes. Isn't that just Maaaaarvelous?  Few politicians have the courage to stand up to US, the privileged few.  Aren't we fortunate? Let's keep it that way.

We applaud (clap! clap!) the proposed House cuts to the "service" sector- $411 million from higher education (resulting in $200 million in tuition increases), DNR cuts that will close 10 state parks, $1.6 billion from Health & Human Services (although we think those could have bit deeper), a 15% cut in the State workforce, $22 million in cuts for schools, cuts to mass transit and economic development, also,.  As we say, Minnesota can balance the budget by cutting programs for the elderly, the disabled, both the poor and middle classes - surely, NOT by raising taxes on the wealthy, the uber rich, the privileged, the fortunate few !

CUT!  CUT!  CUT!  CUT! CUT! CUT!  CUT!  CUT!  CUT! CUT!

Government, as we have said repeatedly, is NOT the answer - what we need are corporate jobs.  Let's privatize everything!  We applaud the proposal to cut corporate taxes in the hope that corporations might provide a few jobs.  The record profit$ in 2010, helped us top 1% take home nearly 24% of the nation's total income.  And just think, these corporations created more jobs overseas than in then here (1.6 million versus 1 million).  Pretty attractive, don't you think?  Give us a reason to go globe trotting to see our nice new locations.  We so enjoy these working vacations.

Our thanks and best wishes to the Billionaire Koch Brothers and their steadfast Friends at the American Legislative Council, while were at it.

ALEC has legislators at state and federal levels across the country.  They are so very clever, too, secretly sitting at the tables and bars with Koch Industries, WalMart and AT&T executives.  They are working, working, working (not like these "welfare slobs") together to craft and spread legislation that limits the power of unions while cutting back on all that excessive pay and benefits for the public sector.  Please, sweeties - ask for and encourage your representatives to join ALEC. 
Nothing like something that furthers our billionaires' agenda and Minnesota is doing a fabulous job at putting our feudalistic legislation forward this session!  They are so very helpful.  We'll get to keep those tax loopholes, subsidies, and public paid kickbacks to our friends.

Let's further drive down wages by weakening public sector unions!  It's just great for corporate profit$ and for corporate owners and their minions by taking the time to weaken those pesky public sector unions.  It may not be so great for the US economy, it sure is good for globalISM.  This is an excellent time to be w-e-a-l-t-h-y.  Just think about it our way- "My word!  Isn't it wooonderful that now just 400 people own more wealth than one half of the American public combined." A good friend of ours, a hedge fund "manager" is making up to $20 million a week and he did that by 2009. We say:  "Way to go!"  Corporations are sitting on record profits and evading taxes as never before. Why, our Oil/Gas Cowboy friends showed us how to do "it'

Oil giant Exxon made $34 billion of net income in 2009, but paid no income taxes in the United States. Chevron (CVX) Of this year's taxes, just $200 million were paid in the U.S." That's a 1% tax rate…

 Wars Improve Corporate Profits

We have our priorities and the continued wars in Iraq, Afghanistan and now Libya are  so great for that bottom line.  Alliant Tech, Blackwater/Xe and Halliburton has seen steady growth in profitability with the endless expansion of the War Machine.  Nothing like endless war to stimulate the economy, boost our profit$ and keep people from looking too closely at the ongoing class war here at home.  You, yes YOU, support the war$ for oil and water!  Send DC more of your lovely money - so far MN has given $24 bn in taxes for wars.

Watch our pertinent video on youtube as we are Pleased with Draconion Cuts and Thank Legislators.  bit.ly/g00N95. Contact Women against Military Madness @www.worldwidewamm.org to oppose the Billionaires' agenda.  Billionaires for cuts ask you to help us keep taxes low or nonexistent for billionaires.  We love personal notes and valentines so email us at BillionairesForCuts@gmail.com.  Or contact WAMM at 612-827-5364.  Ta Ta for Now!