1 Through 30 – The Coming U.S. Financial Crisis By The Numbers

The American Dream
Friday, November 18, 2011
The United States is drowning in a sea of red ink from coast to coast and most Americans have absolutely no idea what is about to happen. Hopefully you have started to prepare for the coming U.S. financial crisis. If not, hopefully this article will be a wake up call for you.

Right now, governments all over Europe are on the verge of financial implosion. Most Americans aren’t paying much attention to that, but they should be, because what is happening to Greece and Italy right now will eventually be happening here. Just recently, the U.S. national debt passed the 15 trillion dollar mark. State and local government debt is also at record levels. Tens of millions of American families are in debt up to their eyeballs, and millions more Americans fell into poverty last year. Meanwhile, the “too big to fail” banks just keep getting larger and the Federal Reserve continues to inflate the debt bubble. At some point this debt bubble is going to burst, and when it does it is going to unleash financial hell all over America.
Below you will find a list of numbers – 1 through 30. For each number, a statistic has been chosen that demonstrates the financial nightmare that the United States is facing. It is simply not possible to rack up debt at staggering rates forever. At some point the debt spiral is going to stop.
A lot of politicians are claiming that they can stop the coming financial crisis from happening. But the truth is that unless our entire financial system is fundamentally transformed, nothing is going to be able to stop the financial nightmare that is headed our way.
Unfortunately, the vast majority of our politicians still believe that the current financial system can be fixed and the vast majority of them still fully support the Federal Reserve.
That is going to prove to be a gigantic mistake. The following are 30 facts that show that the United States is heading directly for a massive financial crisis….
1 – For fiscal year 2011, the U.S. federal government had a budget deficit ofnearly 1.3 trillion dollars. That was the third year in a row that our budget deficit has topped one trillion dollars.
2 – The balance sheet of the Federal Reserve has been ballooning like crazy. At this point, the Federal Reserve has very little capital backing a balance sheet that iswell over 2 trillion dollars.
The following is how Michael Pento of Euro Pacific Capital describes the situation that the Fed is in….

Today, the Fed has $52.5 billion of capital backing a $2.7 trillion balance sheet.
Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks were levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out.

3 – It is being estimated that it would take a total of 3 trillion euros to bail out all of the countries in Europe that are in imminent danger of financial implosion. Europe is heading for a gigantic financial crisis, and when it happens the United States is going to be dragged down as well.
4 – As the U.S. economy continues to decline, millions of American families are having a very hard time feeding themselves. Today, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.

5 – The U.S. Postal Service has lost more than 5 billion dollars over the past year. It looks like the federal government is going to have to help the U.S. Postal Service out financially.
6 – Freddie Mac says that it is going to need another $6 billion bailout from the federal government.
7 – Fannie Mae says that it is going to need another $7.8 billion bailout from the federal government.
8 – We are told that the economy is recovering, but the number of Americans on food stamps has grown by another 8 percent over the past year.
9 – The U.S. unemployment rate has been hovering around 9 percent for 30 straight months. It is currently sitting at 9.0 percent.
10 – The total cost of just three federal government programs – the Department of Defense, Social Security and Medicare – exceeded the total amount of taxes brought in during fiscal 2010 by 10 billion dollars.
11 – Back in the year 2000, 11.3% of all Americans were living in poverty. Today,15.1% of all Americans are living in poverty.
12 – The “free trade” agenda being pushed by our globalist politicians is absolutely killing us. Even in industries that we were once dominant in we are now getting wiped out. For instance, in 2010 South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them. Hundreds of billions of dollars that should be going to support American jobs and businesses is going overseas instead.
13 – Since 1985, the federal government has added 13 trillion dollars to the national debt.
14 – The U.S. Treasury Department says that instead of $14.3 billion, the total losses from the auto industry bailouts will actually be $23.6 billion.
15 – Amazingly, the U.S. federal government is now 15 trillion dollars in debt. When Obama first took office the debt was just 10.6 trillion dollars.
16 – According to U.S. Senator Bernie Sanders, the Federal Reserve made 16 trillion dollars in secret loans to big corporations, Wall Street banks, foreign nations and wealthy individuals during the financial crisis.
17 – The “too big to fail” banks just keep getting larger and larger. In the year 2000, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo held approximately 22 percent of all banking deposits in FDIC-insured institutions. By the middle of 2009 that figure was up to 39 percent. That is an increase of 17 percent in less than a decade.
18 – More Americans than ever are totally dependent on the government. In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for more than 18 percent of all income.
19 – As a result of the lack of good jobs, we have huge numbers of Americans in their prime working years that cannot financially support themselves. As I have written about previously, 19% of all American men between the ages of 25 and 34 are living with their parents.
20 – America is rapidly getting poorer. Today, more than one out of every seven Americans is living in poverty and more than 20 million of them are considered to be living in extreme poverty.
21 – Income inequality is rising to very dangerous levels. According to a joint House and Senate report entitled “Income Inequality and the Great Recession“, the top one percent of all income earners in the United States brought in a total of 10.0 percent of all income in 1980, but by the time 2008 had rolled around that figure had skyrocketed to 21.0 percent.
22 – It is not just the federal government with a debt problem. State and local government debt has reached an all-time high of 22 percent of U.S. GDP. Many state and local governments are even closer to going broke than the federal government is.
23 – If you can believe it, during 2010 an average of 23 manufacturing facilities a day were shut down in the United States. Our economy is literally being gutted like a fish.
24 – Right now, spending by the federal government accounts for about 24 percent of GDP. Back in 2001, it accounted for just 18 percent.
25 – According to Shadow Government Statistics, the “real” rate of unemployment in the United States is creeping up toward 25 percent.
26 – The Pension Benefit Guaranty Corporation (an agency of the federal government) says that it ran a deficit of $26 billion during the fiscal year that just ended and that it will probably need a bailout from the federal government.
27 – In the midst of everything else, the United States is bleeding national wealth like crazy. Tens of billions of dollars more goes out of this country each month than comes into it. Instead of improving, our trade deficit just keeps getting worse. For example, the U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.
28 – The U.S. housing crash is a crisis that never seems to end. According to one source, approximately 28 percent of all home loans in the United States are currently “underwater”. So what is going to happen if the economy gets even worse?
29 – The federal government has borrowed more than 29,000 dollars per household since Barack Obama first took office.
30 – 30 years ago, the U.S. national debt was about 15 times smaller than it is today. How in the world are we ever going to explain this foolishness to future generations?
Please share these facts with as many people as you can. The reality is that most Americans have no idea just how bad things have become.
Instead of dealing with the problems that this country is facing, most Americans just try to numb the pain. As a nation, we are incredibly addicted to pleasure and entertainment. It is so much easier to spend endless hours staring at the television than it is to get out there and try to do something to turn this country around.
America is in big time trouble. We desperately need a new generation of heroes to step up to the plate.
All of us have different talents and all of us have something that we can contribute.
Will you answer the call?

Tax Cuts for the Middle Class and Poor STIMULATE The Economy, But Tax Cuts for the Wealthy HURT The Economy

by Washington's Blog
July 28, 2011

Extreme conservatives push for tax cuts ... but just for the wealthy.

Extreme liberals are against all tax cuts, believing that we need higher taxes to pay for government programs ... and that taxes somehow won't create any drag on the economy.

Both extremes are wrong.

In fact, tax cuts for the middle class and poor stimulate the economy, but tax cuts for the wealthy hurt the economy.

This is actually a very simple concept, although some politicians and economists unintentionally or intentionally muddy the waters.

As Ed Harrison notes today:

Bruce Bartlett, a Republican political appointee and domestic policy advisor to Ronald Reagan, points out that:

Taxes were cut in 2001, 2002, 2003, 2004 and 2006.

It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year...

According to a recent C.B.O. report, they (Bush tax cuts) reduced revenue by at least $2.9 trillion below what it otherwise would have been between 2001 and 2011. Slower-than-expected growth reduced revenue by another $3.5 trillion  (6.4 trillion).

Spending was $5.6 trillion higher than the C.B.O. anticipated for a total fiscal turnaround of $12 trillion. That is how a $6 trillion projected surplus turned into a cumulative deficit of $6 trillion.

Bartlett offers this killer chart as a summary of the numbers:

If you recall, it was George W. Bush’s father, GHW Bush, who, when campaigning against Reagan, called supply side economics’ claims that tax cuts pay for themselves Voodoo Economics. And Bush was proved right when deficits spiralled out of control and both Reagan and Bush were forced to raise taxes.

The Bush tax cuts accrued disproportionately to the wealthy. The Tax Policy Center shows that 65 percent of the dollar value of the Bush tax cuts accrued to the top quintile, while 20 percent went to the top 0.1 percent of income earners.

If you want to talk about redistribution, there it is.

The New York Times reported in 2007:

Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline.

Based on an exhaustive analysis of tax records and census data, the study reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top — especially the top 1 percent of income earners.

The Economic Policy Institute reported in June:

The Bush-era tax changes conferred disproportionate benefits to those at the top of the earnings distribution, exacerbating a trend of widening income inequality at a time of already poor wage growth.
The top 1% of earners (making over $620,442) received 38% of the tax cuts. The lower 60% of filers (making less than $67,715) received less than 20% of the total benefit of Bush’s tax policies.

The Bush-era tax cuts were designed to reduce taxes for the wealthy, and the benefits of faster growth were then supposed to trickle down to the middle class. But the economic impact of cutting capital gains rates and lowering the top marginal tax rates never materialized for working families. Inflation-adjusted median weekly earnings fell by 2.3% during the 2002-07 economic expansion, which holds the distinction for being the worst economic expansion since World War II.

This isn't complicated. Rampant inequality largely caused the Great Depression and the current economic crisis. Cutting taxes on the middle and lower classes reduces inequality and stimulates the consumer economy. But cutting taxes for the wealthy reduces aggregate consumer demand.

As economics professor Robert Reich notes:

First, the rich spend a smaller proportion of their wealth than the less-affluent, and so when more and more wealth becomes concentrated in the hands of the wealth, there is less overall spending and less overall manufacturing to meet consumer needs.

Second, in both the Roaring 20s and 2000-2007 period, the middle class incurred a lot of debt to pay for the things they wanted, as their real wages were stagnating and they were getting a smaller and smaller piece of the pie. In other words, they had less and less wealth, and so they borrowed more and more to make up the difference. As Reich notes:

Between 1913 and 1928, the ratio of private credit to the total national economy nearly doubled. Total mortgage debt was almost three times higher in 1929 than in 1920. Eventually, in 1929, as in 2008, there were “no more poker chips to be loaned on credit,” in [former Fed chairman Mariner] Eccles' words. And “when their credit ran out, the game stopped.”

And third, since the wealthy accumulated more, they wanted to invest more, so a lot of money poured into speculative investments, leading to huge bubbles, which eventually burst. Reich points out:

In the 1920s, richer Americans created stock and real estate bubbles that foreshadowed those of the late 1990s and 2000s. The Dow Jones Stock Index ballooned from 63.9 in mid-1921 to a peak of 381.2 eight years later, before it plunged. There was also frantic speculation in land. The Florida real estate boom lured thousands of investors into the Everglades, from where many never returned, at least financially.

Tax cuts for the little guy gives them more "poker chips" to play with, boosting consumer spending and stimulating the economy.

As Reich noted last year:

Small businesses are responsible for almost all job growth in a typical recovery. So if small businesses are hurting, we're not going to see much job growth any time soon.

On the other hand (despite oft-repeated mythology), tax cuts for the wealthiest tend to help the big businesses ... which don't create many jobs.

In fact, economics professor Steve Keen ran an economic computer model in 2009, and the model demonstrated that:

Giving the stimulus to the debtors is a more potent way of reducing the impact of a credit crunch [than giving money to the big banks and other creditors].

And as discussed above, Reich notes that tax cuts for the wealthy just lead to speculative bubbles ... which hurt, rather than help the economy.

Indeed, Keen has demonstrated that "a sustainable level of bank profits appears to be about 1% of GDP" ... higher bank profits lead to a ponzi economy and a depression. And too much concentration of wealth increases financial speculation, and therefore makes the financial sector (and the big banks) grow too big and too profitable.

No wonder Ronald Reagan's budget director David Stockman called the Bush tax cuts the "worst fiscal mistake in history", and said that extending them will not boost the economy.

The Federal Reserve Made $16 Trillion In Secret Loans To Their Bankster Friends

The American Dream
July 25, 2011

A one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act has uncovered some eye-popping corruption at the Fed and the mainstream media is barely even covering it. It turns out that the Federal Reserve made $16.1 trillion in secret loans to their bankster friends during the financial crisis. You can read a copy of the GAO investigation for yourself right here. These loans only went to the “too big to fail” banks and to foreign financial institutions. Not a penny of these loans went to small banks or to ordinary Americans. Not only did the banksters get trillions in nearly interest-free loans, but the Fed actually paid them over 600 million dollars to help run the emergency lending program. The GAO investigation revealed some absolutely stunning conflicts of interest, and yet the mainstream media does not even seem interested. Solid evidence of the looting of America has been put right in front of us, and yet hardly anyone wants to talk about it.

Many Americans have a hard time grasping just how large 16.1 trillion dollars is. It is an amount of money that is almost inconceivable. It is more than the GDP of the United States for an entire year. It is more than the U.S. government has spent over the last four years combined.

The Federal Reserve was just creating gigantic piles of cash out of thin air and throwing them around with wild abandon.

One of the only members of Congress that has wanted to talk about the GAO audit has been U.S. Senator Bernie Sanders. The following is a statement about this audit that was taken from his official website….

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”

So precisely who got this money?

Well, a recent article on Raw Story named some of the big Wall Street banks that got some of this money….

Out of all borrowers, Citigroup received the most financial assistance from the Fed, at $2.5 trillion. Morgan Stanley came in second with $2.04 trillion, followed by Merill Lynch at $1.9 trillion and Bank of America at $1.3 trillion.

But it just wasn’t U.S. banksters that were showered with nearly interest-free loans. It turns out that approximately $3.08 trillion went to foreign financial institutions all over Europe and Asia.


So who in the world gave the Federal Reserve permission to bail out financial institutions all over the world?

Nobody did.

But under our current system the Federal Reserve doesn’t have to get permission. They literally get to do whatever they want.

On his website, Senator Sanders expressed his outrage over these foreign loans….

“No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president”

So should we expect Congress to approve legislation that would reduce the power of the Fed?

Of course not.

We all know that is not going to happen.

The Federal Reserve is run like a dictatorship. They get to do what they want and nobody can stop them.

Not only did the Fed dish out over $16 trillion in secret loans to their friends, but they also paid their bankster friends over 600 million dollars to help them do it.
According to the GAO, the Federal Reserve paid $659.4 million to the very financial institutions which caused the financial crisis to help the Fed manage all of these emergency loans.

Can anyone say “conflict of interest”?

Not only were the banksters raking in trillions in secret loans, they were also paid to help run the lending process.

Wow.

So why isn’t the mainstream media talking about this?

That is a very good question.

But wait, there is more.

It turns out that many Fed officials had very large investments in the financial institutions that were receiving these secret loans.

So what was done about all of the conflict of interest issues that arose?

According to Senator Sanders, “the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.”

Oh, everyone was given waivers.

Apparently corruption is okay if we just get everyone to sign a bunch of forms.

The following is one example of a conflict of interest that occurred during this lending program that Senator Sanders noted on his website….

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

This is a classic case of the foxes watching the hen house.


It was the banksters that caused the financial crisis. They were the only ones that the Federal Reserve helped. In fact, the Federal Reserve ended up having the banksters basically run the entire emergency lending program as Senator Sanders noted on his site….

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo. The same firms also received trillions of dollars in Fed loans at near-zero interest rates.

If you were not outraged by that, then you need to read it again.

What the banksters have been getting away with is absolutely mind blowing.

So will changes be made to make sure that something like this never happens again in the future?

Well, the GAO has recommended that significant changes should be made.

But as mentioned above, the only one that gets to tell the Federal Reserve what to do is the Federal Reserve.

According to the Washington Post, the Federal Reserve is promising to “strongly consider” the recommendations of the GAO….

The Fed’s general counsel, Scott Alvarez, said in a letter responding to the GAO’s audit that officials will “strongly consider” the recommendations.

Most Americans do not realize that the Federal Reserve is not actually part of the federal government. It is a privately-owned central bank that is not accountable to anyone.

But most Americans still believe that the Fed is a government agency.

The truth is that the Federal Reserve is about as “federal” as Federal Express is.

In another article about the Federal Reserve, I noted that the Federal Reserve has even admitted that it is not an agency of the federal government in court….

In defending itself against a Bloomberg request for information under the Freedom of Information Act, the Federal Reserve objected by declaring that it was “not an agency” of the U.S. government and therefore it was not subject to the Freedom of Information Act.

Basically, an unaccountable private monopoly creates our money, sets our interest rates, regulates our banking system and makes secret loans to whoever they want.

The Federal Reserve has more power over our economy than any other institution and nobody can overrule any decisions that they make.

Does that sound very “American” to you?

Since the Federal Reserve was created in 1913, it has been systematically destroying the wealth of America through constant and never ending inflation.

The U.S. dollar loses more value every single year.

According to the U.S. Bureau of Labor Statistics, what you could buy for $1.00 in 1965 will cost you $7.17 today.

Sadly, the devaluation of our money is actually accelerating. That is one reason why we are seeing precious metals soar right now.

Not only that, but the Federal Reserve was also designed to be a perpetual government debt creation machine.

Do you know how money is created in this country?

Normally, more money is only created when more debt is created.

What this sets up is a never end spiral where the amount of money and the amount of debt are continually increasing.

Most Americans believe that we could solve the government debt problem if we could just control spending.

But that is not the case.

The Federal Reserve system was designed to get the U.S. government into constantly increasing amounts of debt and this is exactly what has happened….



The U.S. government will never fix the national debt problem as long as it participates in the Federal Reserve system. 


Founding fathers such as Thomas Jefferson tried to warn us about the danger of central banking.

Jefferson strongly believed that when the federal government borrows money in one generation that must be paid back by future generations it is equivalent to theft….

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Not only that, Thomas Jefferson actually said that if he could add just one more amendment to the U.S. Constitution it would be a complete ban on all government debt….
I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

Of course we did not listen to Thomas Jefferson, did we?

Now we have gotten ourselves into one fine mess.

If the federal government shut down the Federal Reserve system, started issuing debt-free money and established a new system based on sound financial principles we might have a chance of turning this thing around.

But if we continue on the path that we are currently on, we are going to experience a financial disaster of unprecedented magnitude. We have piled up the biggest mountain of debt in the history of the world, and a day of reckoning is approaching.

Our founding fathers tried to warn us about this, but we thought that we were so much smarter than them.

Now we get to suffer the consequences of our foolishness.

Jim Rogers: 'US the Largest Debtor Nation in History'

Jim Rogers predicts more crises in the currency market, happening as early as this Fall. He thinks this will force America to do something about the flawed US dollar. Rogers says the next crisis will be worse than the financial collapse of 2008.
Posted May 16, 2011

US Budget Priorities Reflect Power of MIlitary Industrial Complex

Editor's NOTE:

Given that the Obama Administration budget calls for $3.7 trillion in spending and the projected tax revenue is only about $2.1 trillion, the projected 2012 budget deficit is at least $1.6 trillion.  Of note is that the combined US war and intelligence budgets (including the so-called "Black" budgetary items) exceed over $1.0 trillion annually. This represents 2/3's of the projected budget deficit for 2012. The obvious problem is that we are attempting to maintain an empire through armed force when as a nation we are close to being financially bankrupt. The power of the US military currently prevents our collapse. At what price however?  We are caught in a vicious cycle in which ever larger military outlays are required in order to maintain the American empire the cost of which simultaneously drives us deeper into debt. It is totally unsustainable!

As the articles below indicate, at least $500 billion of that $1.0 trillion war/intelligence/security budget could be eliminated without damage to US National Security. The reductions recommended by Secretary Gates and accepted by President Obama are totally inadequate and indicate that there is currently no desire to significantly reduce US military/intelligence/security spending. Instead, President Obama and the Republicans in Congress intend to reduce the budget deficit by punishing those Americans least capable of enduring it that is, the poor, unemployed, underemployed, middle class, union workers, sick, elderly etc. That approach is not only economically unsound, it is patently immoral.

The fact that the elite media cooperate in labeling President Obama a socialist is evidence that it has abandoned rationality for rank sophistry in its loyal service to the "Regime."  Given his actions to date, Barack Obama is behaving like a Republican by preferencing/benefiting the rich and powerful while abandoning the poor and middle class Americans who are largely responsible for his Presidency. This represents an unconscionable betrayal and must be recognized for what it is; a "sell-out" to the not so shadow government forces who now control our Regime.

The only way to save the United States is to radically reduce the size and cost of the ever expanding military/intelligence/security complex aka the "War Department" and its supportive infrastructure which presently consumes over half of all discretionary spending.

--Dr. J. P. Hubert


Obama budget projects record $1.6 trillion deficit

By Lori Montgomery
Washington Post Staff Writer
Monday, February 14, 2011; 4:26 PM

President Obama rolled out a $3.7 trillion budget blueprint Monday that would trim or terminate more than 200 federal programs next year and make key investments in education, transportation and research. The plan is aimed at boosting the nation's economy while reducing record budget deficits.
MORE...

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The Defense Department won the future, or at least the budget

By Ezra Klein
The Washington Post
February 14, 2011; 1:26 PM ET

One of the big lessons of this budget is that if you work in the federal government, you want Defense Secretary Robert Gates on your side when the budget cuts come around.

The military made out quite nicely in the 2012 budget proposal.
The administration is cutting $78 billion from the Defense Department's budget -- known as "security discretionary spending" -- over the next 10 years. That's a bit of a blow, but compare it to the $400 billion they're cutting from domestic discretionary spending -- that's education, income security, food safety, environmental protection, etc. -- over the next 10 years. And keep in mind that the domestic discretionary budget is only half as large as the military's budget. So if there were equal cuts, the military would be losing $800 billion. And you could argue that the politics of that make some sense: Military spending is one of the least popular categories of federal spending.

That's what the Fiscal Commission had wanted to do. "One of the Commission’s guiding principles is that everything must be on the table" they wrote. For that reason, they recommended "equal percentage cuts from both sides."
Nor were they the only ones who thought such cuts possible. The Sustainable Defense Task Force, formed by Barney Frank and Ron Paul (among others) and staffed by a who's who of military policy experts from both sides of the aisle, produced a report (pdf) recommending up to $960 billion in cuts over the next 10 years. These were cuts, the experts said, "that would not compromise the essential security of the United States." Others disagree with that judgment, of course. One of them was Gates, who warned that major cuts in his department would be "catastrophic."

He won. The $78 billion in cuts are the exact $78 billion in cuts Gates recommended. I bet there are more than a few Cabinet secretaries who wish they had that kind of power over the president's recommendations.

It's interesting to think about this in terms of the president's focus on "winning the future." He's been very careful to speak of our challenge as primarily one of bettering ourselves and our country, not fighting our competitors. To win the future, we need to educate our people, rebuild our roads, expand broadband Internet, invest in research and development. And some of those categories are, to be sure, getting a boost in this budget. But only a small one. The R & D budget, for instance, goes up by one percentage point. And many important programs -- like Pell Grants -- are getting shaved down.

If this is a fiscally responsible budget, then cutting $500 billion -- forget $800 billion -- from the Defense Department would've opened room for much more domestic investment. It also could've gone to pay down the debt. As it is, we're pumping that money into sustaining a fighting force that's orders of magnitude larger than anything retained by any other country. The theory implicit in that decision suggests that the fight to win the future might be rather different than the Obama administration is letting on.

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The Breakdown: In an Age of Austerity, Can't the US Cut the Military Budget?

Christopher Hayes
The Nation
February 11, 2011

The US maintains the most expansive and expensive military on the planet. More than half of the annual budget goes towards "defense." But in the ongoing debates about the appropriate austerity measures to take, cuts to military spending have been insufficiently prioritized. On this week's edition of The Breakdown, D.C. Editor Chris Hayes and Institute for Policy Studies Research Fellow Miriam Pemberton discuss just how much the US could afford to cut Pentagon spending while maintaining its status as the dominant military force in the world.


Resources

Miriam Pemberton on the misleading nature of military spending "cuts" (article to follow below)

Center for American Progress article on reducing military spending  (highly recommended)

Robert Dreyfuss discussing the "civil war" in the GOP over demilitarization

Barney Frank on cutting NATO spending: "It Serves No Strategic Purpose"

The Independent's Robert Fisk discusses the costs of war in the Middle East

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Military Spending Cuts: Depends on what the Meaning of 'On the Table' Is

By Miriam Pemberton
Institute for Policy Studies

February 10, 2011

Let's define budget cuts as spending less next year than this year. Nothing else should qualify.

Deficit pressure has put "everything on the table" for cuts, including the Pentagon. Everyone from House Majority Leader Eric Cantor to President Barack Obama agrees on this. But what they mean by this is all over the map.

The budget Obama will present to Congress next week will likely begin what the Pentagon is billing as $78 billion in cuts to its budget over five years. In fact these are cuts to their plans for expansion, i.e., slowing a proposed increase is being defined as a cut.

While both Obama and House Budget Committee Chairman Paul Ryan pay lip service to the "defense is on the table" mantra, both also exempt the defense budget from their budgetary restraining actions: a five-year discretionary freeze, in Obama's case, and $100 billion in cuts, in Ryan's.

The president’s debt reduction commission proposed real cuts, but these would leave the military budget only 5 percent below where President Reagan jacked it up to militarily defeat the Soviet Union — shortly before its collapse.

Defense Secretary Gates describes even those modest potential cuts as "catastrophic."
Let's define budget cuts as spending less next year than this year. Nothing else should qualify.

Savings aren't just needed because of the nation's massive debt. We also need to address our security deficit. The civilian and uniformed military leadership agrees on a key point: U.S. foreign policy needs to be less dominated by the military. Achieving that goal would entail decreasing the proportion of resources devoted to offense (the military) relative to defense (homeland security) and prevention (non-military foreign engagement). IPS will score this proposed budget's mix of security expenditures, and report the results after Obama releases it.

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“Budgets,” Jim Wallis reminds us, “are always moral documents.”

John Nichols
The Nation

Barely a month after demanding that the Constitution be read into the Congressional Record, House Republicans voted against a motion to that would have protected against Patriot Act abuses of privacy rights. Then they voted to extend the act's surveillance authorities. The first test of that morality, explains the theologian who chairs the Global Agenda Council on Faith for the World Economic Forum, is how those with the least power, the fewest political connections and the greatest economic challenges fare. “Our budget should not be balanced on the backs of the poor,” says Wallis. “Cuts should not come from the services and programs that people rely on now more than ever. The reality is that we have a lot of wasteful spending in our federal budget, but most of it does not come from things that help the most vulnerable people in our society.”

So how does President Obama’s $3.73 billion budget proposal, which has as its takeaway line a promise to reduce deficits by $1.1 trillion over the next decade, fare on the moral test?

The president’s approach is far less draconian than was proposed last fall by the co-chairs of his deficit commission, who would have had the president consider processes of privatizing Social Security, Medicare and Medicaid. Obama is not proposing to raise the retirement age or to cut the benefits available to those who reach it. At the same time, he proposes new education spending and some needed investments in high-speed rail ($53 billion over the next six years), building a nationwide wireless network ($15.7 billion) and establishing a national infrastructure bank ($50 billion) that would encourage investment in needed projects to create jobs.

All that’s got House Budget Committee chair Paul Ryan, R-Wisconsin, sputtering about how the president “is abdicating leadership on that point.”

The president counters: “I’ve called for a freeze on annual domestic spending over the next five years. This freeze would cut the deficit by more than $400 billion over the next decade, bringing this kind of spending—domestic discretionary spending— to its lowest share of our economy since Dwight Eisenhower was President.”

But the way to a moral budget is not to try to strike some sort of balance between the Ayn Rand–derived fantasies of Paul Ryan and the reality that millions of American families rely on programs paid for by that “domestic discretionary spending” to survive.
The way to a moral budget is to assure that the most vulnerable Americans are protected. At the very least, it should place more serious demands of the wealthy and Pentagon contractors than on low-income and working-class households. The Progressive Chance Campaign Committee gets to the heart of the matter when it suggests: “Every proposed cut to necessary programs like Pell Grants and heating for low-income seniors needs to be judged in the context of the unnecessary tax cuts for Wall Street millionaires that passed at the end of last year.”

By that measure, the Obama budget—with its emphasis on domestic spending cuts that would would trim or terminate more than 200 federal programs in the coming year—fails some serious moral tests.

Among other things, the president’s proposed budget would:

• Cut $2.5 billion in heating assistance for low-income people.
• Cut $350 million from Community Development Block Grants.
• Save $100 billion over ten years by eliminating Pell Grants for needy students who want to take summer classes in order to finish their degrees sooner while allowing interest on graduate school loans to begin building up while students are still in school, meaning that the costs of getting an education will rise dramatically.
• Undermine an essential environmental initiative by cutting a quarter of the funding for the multi-state Great Lakes clean-up project. This project is especially important to so-called “rust-belt” cities where unaddressed pollution problems invariably poses the most serious health and safety threats to low-income and working-class neighborhoods.

The proposed cuts, coming just weeks after the president worked with Republican Congressional leaders to maintain Bush-era tax cuts for billionaires and to expand estate-tax exemptions for millionaires, drew a rebuke from Iowa Senator Tom Harkin, who chairs the Senate Appropriations subcommittee with jurisdiction over labor, health and education programs.

Referring to proposed cuts that harm low-income Americans, Harkin said, “There can be pain, but I want to make sure it’s not just on them. I want to make sure there’s Wall Street pain, there’s Pentagon pain, that there’s wealthy pain.”

There will be specific opposition to the $2.5 billion hit Obama proposes for the Low Income Home Energy Assistance Program, or LIHEAP. Massachusetts Congressman Ed Markey, a top House Democrat, says the cut would “have a devastating effect on millions of American families.” Vermont Senators Bernie Sanders and Patrick Leahy and Congressman Peter Welch declared that: “the last thing we should be doing is making it harder for the most vulnerable people in this country to stay warm in the winter.”

But it is perhaps even more unsettling to see a move to slash the far-reaching antipoverty programming that is maintained with the help of Community Development Block Grant funding. “The question is why? Why pick on this program?” asks David Bradley, director of the National Community Action Foundation, who warns: “Once the Obama administration throws a poverty program in the water, it starts a feeding frenzy.”

By doing that, Ohio Congresswoman Marcy Kaptur, the second-ranking Democrat on the House Appropriations Committee, said the Obama administration is letting Republicans like Ryan set far too much of the agenda.

“His people aren’t giving us a very wise set of choices. They’re cotton-balling rather than hard-balling,” explained Kaptur, who said of Obama: “He keeps waiting for Congress to save him. He ought to save himself.”

So what is available in the way of wise choices for balancing the budget?

Even conservatives such as Kentucky Senator Rand Paul say that it makes sense to look at the military budget. The Obama budget includes recommendations for a set of Department of Defense spending reductions that could reach $78 billion reduction by 2015. That sounds good. But the actual 2012 budget request for the Pentagon is for more than $550 billion—a 5 percent increase over what the Department of Defense spent last year.

As Lawrence Korb, the former assistant secretary of defense in the Reagan administration who now serves as a senior fellow at the Center for American Progress, notes (writing with CAP’s Laura Conley): “In inflation-adjusted dollars, this figure is higher than at any time during the Bush years or during the Cold War.”

Instead of the spike in Pentagon spending, Jim Wallis argues that, to meet the moral test of budgeting, it’s “time to cut needless military spending. The Pentagon currently takes up more than half of our country’s discretionary spending. This does not include the billions spent on other military related expenditures or most of our spending on homeland security…. Reps. Barney Frank (D-Massachusetts) and Ron Paul (R-Texas) came up with a plan that they say would leave our country just as safe but save us $960 billion by 2020! Even with these cuts, we would still be by far the world’s most dominant military. When you list the countries in the world by order of their military expenditures, the United States tops the list and spends more than the next 13 countries combined.”