Editor's NOTE:
Every great empire runs the risk of imploding due to overextension and moral decadence. The American empire is currently troubled by both.
Instead of a Defense Department we actually maintain a trillion dollar per year "war department" with almost 1000 foreign bases and so-called "hot wars" in Iraq, Afghanistan and Pakistan. Paul Craig Roberts is correct that we cannot continue to waste over a trillion dollars each year in war-making and hope to survive as a nation. It alone will bankrupt us.
Moreover, the fact that the oligarchs in their hedonistic greed, successfully transferred virtually all of our manufacturing base overseas has meant the almost total destruction of our middle class and in its place the establishment of a permanent underclass while the elites become unconscionably rich.
The economy is so threatened that experts disagree about what if anything can be done in way of trying to save the nation. It may already be too late. I agree with Roberts that the one major thing that could be done is to end our foreign empire and current wars. That alone could save over half a trillion dollars per year. The closing of most of our foreign military bases would save hundreds of billions more dollars each year. Additional money could be saved by bringing the hundreds of thousands of US troops home that are stationed abroad. Over 30 thousand are based in South Korea for no reasonable purpose.
Ergo: End the Empire and end the wars!
Roberts is also correct that multinational corporations must be forced to pay a heavy price for utilizing foreign labor at the expense of American jobs.
Ergo: Tax multinational corporations for their use of foreign laborers!
Paul Krugman presents an alternative solution below in short further fiscal stimulus and quantitative easing allowing the potential inflation rate to exceed 2%. I have no problem with additional short term stimulus. A depression era make-work jobs bill to boost infrastructure would be good in the near-term. I do not favor printing more money if that is what Krugman thinks is the way to increase the inflation rate. In any case, all will ultimately be lost if the "elephant in the room" which is our constant foreign wars and growing empire is not dealt with definitively post haste!
We simply must excise the war and empire portions of the federal budget which are not only unaffordable but which are also counterproductive and morally unjustified. The prescription is obvious albeit not easy.
--Dr. J. P. Hubert
The ecstasy of empire: How Close Is America’s Demise?
By Paul Craig Roberts
August 17, 2010 "Information Clearing House" -- The United States is running out of time to get its budget and trade deficits under control. Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery. As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times Column, “Welcome to the Recovery.”
As John Williams (shadowstats.com) has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Warnings by Williams, Gerald Celente, and myself have gone unheeded, but our warnings recently had echos from Boston University professor Laurence Kotlikoff and from David Stockman, who excoriated the Republican Party for becoming big spending Democrats.
It is encouraging to see a bit of realization that, this time, Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore.
However, the solutions offered by those who are beginning to recognize that there is a problem are discouraging. Kotlikoff thinks the solution is massive Social Security and Medicare cuts or massive tax increases or hyperinflation to destroy the massive debts.
Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15% of their earnings all their life, would result in starvation and deaths from curable diseases.
Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet--thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?
Ah, but we will tax the rich. The usual idiocy. The rich have enough money. They will simply stop earning.
Let’s get real. Here is what the government is likely to do. Once the Washington idiots realize that the dollar is at risk and that they can no longer finance their wars by borrowing abroad, the government will either levy a tax on private pensions on the grounds that the pensions have accumulated tax-deferred, or the government will require pension fund managers to purchase Treasury debt with our pensions. This will buy the government a bit more time while pension accounts are loaded up with worthless paper.
The last Bush budget deficit (2008) was in the $400-500 billion range, about the size of the Chinese, Japanese, and OPEC trade surpluses with the US. Traditionally, these trade surpluses have been recycled to the US and finance the federal budget deficit. In 2009 and 2010 the federal deficit jumped to $1,400 billion, a back-to-back trillion dollar increase. There are not sufficient trade surpluses to finance a deficit this large. From where comes the money?
The answer is from individuals fleeing the stock market into “safe” Treasury bonds and from the bankster bailout, not so much the TARP money as the Federal Reserve’s exchange of bank reserves for questionable financial paper such as subprime derivatives. The banks used their excess reserves to purchase Treasury debt.
These financing maneuvers are one-time tricks. Once people have fled stocks, that movement into Treasuries is over. The opposition to the bankster bailout likely precludes another. So where does the money come from the next time?
The Treasury was able to unload a lot of debt thanks to “the Greek crisis,” which the New York banksters and hedge funds multiplied into “the euro crisis.” The financial press served as a financing arm for the US Treasury by creating panic about European debt and the euro. Central banks and individuals who had taken refuge from the dollar in euros were panicked out of their euros, and they rushed into dollars by purchasing US Treasury debt.
This movement from euros to dollars weakened the alternative reserve currency to the dollar, halted the dollar’s decline, and financed the massive US budget deficit a while longer.
Possibly the game can be replayed with Spanish debt, Irish debt, and whatever unlucky country swept in by the thoughtless expansion of the European Union.
But when no countries remain that can be destabilized by Wall Street investment banksters and hedge funds, what then finances the US budget deficit?
The only remaining financier is the Federal Reserve. When Treasury bonds brought to auction do not sell, the Federal Reserve must purchase them. The Federal Reserve purchases the bonds by creating new demand deposits, or checking accounts, for the Treasury. As the Treasury spends the proceeds of the new debt sales, the US money supply expands by the amount of the Federal Reserve’s purchase of Treasury debt.
Do goods and services expand by the same amount? Imports will increase as US jobs have been offshored and given to foreigners, thus worsening the trade deficit. When the Federal Reserve purchases the Treasury’s new debt issues, the money supply will increase by more than the supply of domestically produced goods and services. Prices are likely to rise.
How high will they rise? The longer money is created in order that government can pay its bills, the more likely hyperinflation will be the result.
The economy has not recovered. By the end of this year it will be obvious that the collapsing economy means a larger than $1.4 trillion budget deficit to finance. Will it be $2 trillion? Higher?
Whatever the size, the rest of the world will see that the dollar is being printed in such quantities that it cannot serve as reserve currency. At that point wholesale dumping of dollars will result as foreign central banks try to unload a worthless currency.
The collapse of the dollar will drive up the prices of imports and offshored goods on which Americans are dependent. Wal-Mart shoppers will think they have mistakenly gone into Neiman Marcus.
Domestic prices will also explode as a growing money supply chases the supply of goods and services still made in America by Americans.
The dollar as reserve currency cannot survive the conflagration. When the dollar goes the US cannot finance its trade deficit. Therefore, imports will fall sharply, thus adding to domestic inflation and, as the US is energy import-dependent, there will be transportation disruptions that will disrupt work and grocery store deliveries.
Panic will be the order of the day.
Will farms be raided? Will those trapped in cities resort to riots and looting?
Is this the likely future that “our” government and “our patriotic” corporations have created for us?
To borrow from Lenin, “What can be done?”
Here is what can be done. The wars, which benefit no one but the military-security complex and Israel’s territorial expansion, can be immediately ended. This would reduce the US budget deficit by hundreds of billions of dollars per year. More hundreds of billions of dollars could be saved by cutting the rest of the military budget, which in its present size, exceeds the budgets of all the serious military powers on earth combined.
US military spending reflects the unaffordable and unattainable crazed neoconservative goal of US Empire and world hegemony. What fool in Washington thinks that China is going to finance US hegemony over China?
The only way that the US will again have an economy is by bringing back the offshored jobs. The loss of these jobs impoverished Americans while producing over-sized gains for Wall Street, shareholders, and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods and services in China, corporations would have a high tax rate. If value is added to their goods and services in the US, corporations would have a low tax rate.
This change in corporate taxation would offset the cheap foreign labor that has sucked jobs out of America, and it would rebuild the ladders of upward mobility that made America an opportunity society.
If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.
Obviously, the corporations and Wall Street would use their financial power and campaign contributions to block any legislation that would reduce short-term earnings and bonuses by bringing jobs back to Americans. Americans have no greater enemies than Wall Street and the corporations and their prostitutes in Congress and the White House.
The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire.
The United States and the welfare of its 300 million people cannot be restored unless the neocons, Wall Street, the corporations, and their servile slaves in Congress and the White House can be defeated.
Without a revolution, Americans are history.
____________
US unemployment: Don't let the elite pass the buck
Congress and the Federal Reserve should be pulling out all the stops to create jobs –not seeking to move the economy's goalposts
Paul Krugman
The Observer,
Sunday 15 August 2010
Growth is slowing and the odds are that unemployment will rise, not fall, in the months ahead. That's bad. But what's worse is the growing evidence that our governing elite just doesn't care – that a once-unthinkable level of economic distress is becoming the norm. And I worry that those in power, rather than taking responsibility for job creation, will soon declare that high unemployment is "structural", a permanent part of the economic landscape – and that by condemning large numbers of Americans to long-term joblessness, they'll turn that excuse into dismal reality.
Not long ago, anyone predicting that one in six American workers would soon be unemployed or underemployed, and that the average unemployed worker would have been jobless for 35 weeks, would have been dismissed as outlandishly pessimistic – in part because if anything like that happened, policy makers would surely be pulling out all the stops on behalf of job creation.
But now it has happened and what do we see?
First, we see Congress sitting on its hands, with Republicans and conservative Democrats refusing to spend anything to create jobs, and unwilling even to mitigate the suffering of the jobless.
We're told that we can't afford to help the unemployed – that we must get budget deficits down immediately or the "bond vigilantes" will send US borrowing costs sky-high. Some of us have tried to point out that those bond vigilantes are, as far as anyone can tell, figments of the deficit hawks' imagination – far from fleeing US debt, investors have been buying it eagerly, driving interest rates to historic lows. But the fear-mongers are unmoved: fighting deficits, they insist, must take priority over everything – everything, that is, except tax cuts for the rich, which must be extended, no matter how much red ink they create.
The point is that a large part of Congress, large enough to block any action on jobs, cares a lot about taxes on the richest 1% of the population, but very little about the plight of Americans who can't find work.
Well, if Congress won't act, what about the Federal Reserve? The Fed, after all, is supposed to pursue two goals: full employment and price stability, usually defined in practice as an inflation rate of about 2%. Since unemployment is very high and inflation well below target, you might expect the Fed to be taking aggressive action to boost the economy. But it isn't.
It's true that the Fed has already pushed one pedal to the metal: short-term interest rates, its usual policy tool, are near zero. Still, Ben Bernanke, the Fed chairman, has assured us that he has other options, like holding more mortgage-backed securities. And a large body of research suggests that the Fed could boost the economy by committing to an inflation target higher than 2%. (Editor's NOTE: It's unclear whether he has in mind here printing more money [so-called quantitative easing] which would be inflationary) But the Fed hasn't done any of these things. Instead, some officials are defining success down.
For example, last week Richard Fisher, president of the Federal Reserve Bank of Dallas, argued that the Fed bears no responsibility for the economy's weakness, which he attributed to business uncertainty about future regulations – a view that's popular in conservative circles, but completely at odds with the evidence. In effect, he responded to the Fed's failure to achieve one of its two main goals by taking down the goalpost.
He then moved the other goalpost, defining the Fed's aim not as roughly 2% inflation, but rather "keeping inflation extremely low and stable".
In short, it's all good. And I predict – having seen this movie before, in Japan – that if and when prices start falling, when below-target inflation becomes deflation, some Fed officials will explain that that's OK, too.
What lies down this path? Here's what I consider all too likely. Two years from now unemployment will still be extremely high, quite possibly higher than it is now. But instead of taking responsibility, politicians and Fed officials will declare that high unemployment is structural, beyond their control. And, as I said, over time these excuses may turn into a self-fulfilling prophecy, as the long-term unemployed lose their connections with the workforce and become unemployable.
I'd like to imagine that public outrage will prevent this outcome. But while Americans are angry, their anger is unfocused. And so I worry that our governing elite, which just isn't all that into the unemployed, will allow the jobs slump to go on and on and on.
