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.
Tuesday, August 17, 2010
Monday, August 16, 2010
Gulf Oil Update: Day 119
BP to proceed with relief well after tests
By Chris Baltimore
Fri Aug 13, 2010 5:23pm EDT
HOUSTON (Reuters) - BP Plc will proceed with a relief well to kill its blown-out Gulf of Mexico well, the top U.S. spill official said on Friday.
"Everybody is in agreement that we need to proceed with the relief well," retired Coast Guard Admiral Thad Allen said. "The question is how to do it."
The decision to continue with the relief well came as Alabama announced it was suing BP for the "catastrophic harm" that the spill had caused the state.
Earlier this week Allen had raised the possibility that the relief well might not be necessary because the cement poured into the top of the blown Macondo well last week -- the so-called "static kill" -- might have permanently killed it.
But after running pressure tests, BP and U.S. officials agree that the relief well is needed to plug the well 13,000 feet beneath the seabed, Allen said. The relief well is only about 45 feet from reaching the Macondo well.
"The relief well will be finished," Allen said. "We will kill the well."
The Macondo well, a mile down in the Gulf of Mexico, blew out April 20 and began spewing oil in what has become the worst offshore oilspill in history.
The well was provisionally capped on July 15 after spewing an estimated 4.9 million barrels of oil into the Gulf, soiling marshlands, fisheries and tourist beaches along several hundreds of miles (kilometers) of the Gulf Coast.
The British energy giant has lost more than a third of its market value since the explosion and has set aside $32.2 billion to deal with clean-up costs.
BP faces hundreds of civil lawsuits from injured rig workers, fishermen, investors and property owners seeking to recoup losses. Alabama added to that pile by with its suit against BP and other companies for what Attorney General Troy King said was "catastrophic harm.
"We are suing them for the amount it will take to make Alabama whole," King said.
"WANTON FAILURE"
The suit, which did not set a damage figure, accuses the defendants of "negligent or wanton failure to adhere to recognized industry standards of care."
The spill has hurt fishing and tourism around the Gulf and has affected other sectors such as housing. People and businesses that have sustained losses can make claims against the BP compensation fund administered by Kenneth Feinberg, named by the White House as an independent overseer.
But King said Feinberg was undermining efforts by Gulf state attorneys general to make it possible for spill victims to claim damages from the fund while retaining the right to sue BP at a future date.
U.S. President Barack Obama, who has faced criticism for being slow to act in the face of the world's worst offshore oil spill, will vacation in Panama City, Florida, this weekend and make a public statement on the recovery effort on Saturday.
In Louisiana, the state hit hardest by the spill, U.S. and BP officials met with parish presidents and Gov. Bobby Jindal to discuss long-term recovery plans.
The U.S. government will enact an ocean monitoring system to detect underwater plumes of oil that could be harming undersea ecosystems, Allen said.
Meanwhile, top-level BP and U.S. officials including Energy Secretary Steven Chu and incoming BP chief executive Bob Dudley on Friday discussed how to proceed with the final well plug, Allen said.
Pressure tests completed late on Thursday showed that the well is effectively sealed, with "no communication with the reservoir," Allen said.
But engineers are worried that increased pressure from the "bottom kill" could damage the existing temporary cement plug and perhaps cause about 1,000 barrels of oil trapped in the well shaft to flow into the ocean, Allen said. Engineers are developing procedures to allay such concerns, he said.
After Allen gives the order to continue with the relief well, it will take about 96 hours to drill into the Macondo well shaft and perhaps days beyond that to complete the job, he said.
____________
Gulf seafood gets intense safety testing
By LAURAN NEERGAARD
The Associated Press
Monday, August 16, 2010; 4:33 AM
WASHINGTON -- Seafood from the Gulf of Mexico is being put under the microscope like no other kind on the market, with fish, shrimp and other catches ground up to hunt for minute traces of oil - far more reassuring than that sniff test that made all the headlines.
And while the dispersant that was dumped into the massive oil spill has consumers nervous, health regulators contend there's no evidence it builds up in seafood - although they're working to create a test for it, just in case.
More Gulf waters are reopening to commercial hauls as tests show little hazard from oil, and Louisiana's fall shrimp season kicks off Monday. Yet it's too soon to know what safety testing will satisfy a public so skeptical of government reassurances that even local fishermen voice concern.
Basic biology is key: Some species clear oil contamination out of their bodies far more rapidly than others. Fish are the fastest, oysters and crabs the slowest, and shrimp somewhere in between.
"I probably would put oysters at the top of the concern list and I don't think there's a close second," said marine scientist George Crozier, who directs the Dauphin Island Sea Lab in Alabama.
The oil contaminants of most health concern - potential cancer-causing substances called polycyclic aromatic hydrocarbons, or PAHs - show up in other everyday foods, too, such as grilled meat. Low levels also are in seafood sold from other waters.
Where Gulf seafood harvesting has been reopened, "the levels that we see are pretty typical of what we see in other areas, Puget Sound or Alaska," said Walton Dickhoff, who oversees testing at the National Oceanic and Atmospheric Administration's Northwest Fisheries Science Center in Seattle.
Here are some questions and answers about Gulf seafood safety:
Q: What are PAHs? MORE...
____________
Gulf Seafood Testing:
By Chris Baltimore
Fri Aug 13, 2010 5:23pm EDT
HOUSTON (Reuters) - BP Plc will proceed with a relief well to kill its blown-out Gulf of Mexico well, the top U.S. spill official said on Friday.
"Everybody is in agreement that we need to proceed with the relief well," retired Coast Guard Admiral Thad Allen said. "The question is how to do it."
The decision to continue with the relief well came as Alabama announced it was suing BP for the "catastrophic harm" that the spill had caused the state.
Earlier this week Allen had raised the possibility that the relief well might not be necessary because the cement poured into the top of the blown Macondo well last week -- the so-called "static kill" -- might have permanently killed it.
But after running pressure tests, BP and U.S. officials agree that the relief well is needed to plug the well 13,000 feet beneath the seabed, Allen said. The relief well is only about 45 feet from reaching the Macondo well.
"The relief well will be finished," Allen said. "We will kill the well."
The Macondo well, a mile down in the Gulf of Mexico, blew out April 20 and began spewing oil in what has become the worst offshore oilspill in history.
The well was provisionally capped on July 15 after spewing an estimated 4.9 million barrels of oil into the Gulf, soiling marshlands, fisheries and tourist beaches along several hundreds of miles (kilometers) of the Gulf Coast.
The British energy giant has lost more than a third of its market value since the explosion and has set aside $32.2 billion to deal with clean-up costs.
BP faces hundreds of civil lawsuits from injured rig workers, fishermen, investors and property owners seeking to recoup losses. Alabama added to that pile by with its suit against BP and other companies for what Attorney General Troy King said was "catastrophic harm.
"We are suing them for the amount it will take to make Alabama whole," King said.
"WANTON FAILURE"
The suit, which did not set a damage figure, accuses the defendants of "negligent or wanton failure to adhere to recognized industry standards of care."
The spill has hurt fishing and tourism around the Gulf and has affected other sectors such as housing. People and businesses that have sustained losses can make claims against the BP compensation fund administered by Kenneth Feinberg, named by the White House as an independent overseer.
But King said Feinberg was undermining efforts by Gulf state attorneys general to make it possible for spill victims to claim damages from the fund while retaining the right to sue BP at a future date.
U.S. President Barack Obama, who has faced criticism for being slow to act in the face of the world's worst offshore oil spill, will vacation in Panama City, Florida, this weekend and make a public statement on the recovery effort on Saturday.
In Louisiana, the state hit hardest by the spill, U.S. and BP officials met with parish presidents and Gov. Bobby Jindal to discuss long-term recovery plans.
The U.S. government will enact an ocean monitoring system to detect underwater plumes of oil that could be harming undersea ecosystems, Allen said.
Meanwhile, top-level BP and U.S. officials including Energy Secretary Steven Chu and incoming BP chief executive Bob Dudley on Friday discussed how to proceed with the final well plug, Allen said.
Pressure tests completed late on Thursday showed that the well is effectively sealed, with "no communication with the reservoir," Allen said.
But engineers are worried that increased pressure from the "bottom kill" could damage the existing temporary cement plug and perhaps cause about 1,000 barrels of oil trapped in the well shaft to flow into the ocean, Allen said. Engineers are developing procedures to allay such concerns, he said.
After Allen gives the order to continue with the relief well, it will take about 96 hours to drill into the Macondo well shaft and perhaps days beyond that to complete the job, he said.
____________
Gulf seafood gets intense safety testing
By LAURAN NEERGAARD
The Associated Press
Monday, August 16, 2010; 4:33 AM
WASHINGTON -- Seafood from the Gulf of Mexico is being put under the microscope like no other kind on the market, with fish, shrimp and other catches ground up to hunt for minute traces of oil - far more reassuring than that sniff test that made all the headlines.
And while the dispersant that was dumped into the massive oil spill has consumers nervous, health regulators contend there's no evidence it builds up in seafood - although they're working to create a test for it, just in case.
More Gulf waters are reopening to commercial hauls as tests show little hazard from oil, and Louisiana's fall shrimp season kicks off Monday. Yet it's too soon to know what safety testing will satisfy a public so skeptical of government reassurances that even local fishermen voice concern.
Basic biology is key: Some species clear oil contamination out of their bodies far more rapidly than others. Fish are the fastest, oysters and crabs the slowest, and shrimp somewhere in between.
"I probably would put oysters at the top of the concern list and I don't think there's a close second," said marine scientist George Crozier, who directs the Dauphin Island Sea Lab in Alabama.
The oil contaminants of most health concern - potential cancer-causing substances called polycyclic aromatic hydrocarbons, or PAHs - show up in other everyday foods, too, such as grilled meat. Low levels also are in seafood sold from other waters.
Where Gulf seafood harvesting has been reopened, "the levels that we see are pretty typical of what we see in other areas, Puget Sound or Alaska," said Walton Dickhoff, who oversees testing at the National Oceanic and Atmospheric Administration's Northwest Fisheries Science Center in Seattle.
Here are some questions and answers about Gulf seafood safety:
Q: What are PAHs? MORE...
____________
Gulf Seafood Testing:
Another View on Possible War with Iran
Israeli Generals and Intel Officials Oppose Attack on Iran
Analysis by Gareth Porter
WASHINGTON, Aug 13, 2010 (IPS) - Pro-Israeli journalist Jeffrey Goldberg's article in "The Atlantic" magazine was evidently aimed at showing why the Barack Obama administration should worry that it risks an attack by the government of Prime Minister Benjamin Netanyahu on Iran in the coming months unless it takes a much more menacing line toward Iran's nuclear programme.
But the article provides new evidence that senior figures in the Israeli intelligence and military leadership oppose such a strike against Iran and believe that Netanyahu's apocalyptic rhetoric about an Iranian nuclear threat as an "existential threat" is unnecessary and self-defeating. Although not reported by Goldberg, Israeli military and intelligence figures began to express their opposition to such rhetoric on Iran in the early 1990s, and Netanyahu acted to end such talk when he became prime minister in 1996.
The Goldberg article also reveals extreme Israeli sensitivity to any move by Obama to publicly demand that Israel desist from such a strike, reflecting the reality that the Israeli government could not go ahead with any strike without being assured of U.S. direct involvement in the war with Iran.
Goldberg argues that a likely scenario some months in the future is that Israeli officials will call their U.S. counterparts to inform them that Israeli planes are already on their way to bomb Iranian nuclear sites.
The Israelis would explain that they had "no choice", he writes, because "a nuclear Iran poses the gravest threat since Hitler to the physical survival of the Jewish people."
He claims the "consensus" among present and past Israeli leaders is that the chances are better than 50/50 that Israel "will launch a strike by next July", based on interviews with 40 such Israeli decision-makers.
Goldberg is best known for hewing to the neoconservative line in his reporting on Iraq, particularly in his insistence that that Saddam Hussein had extensive ties with al Qaeda.
Goldberg quotes an Israeli official familiar with Netanyahu's thinking as saying, "In World War II, the Jews had no power to stop Hitler from annihilating us. Six million were slaughtered. Today, six million Jews live in Israel, and someone is threatening them with annihilation."
In his interview with Goldberg for this article, however, Netanyahu does not argue that Iran might use nuclear weapons against Israel. Instead he argues that Hezbollah and Hamas would be able to "fire rockets and engage in other terror activities while enjoying a nuclear umbrella".
But Israel relies on conventional forces - not nuclear deterrence - against Hezbollah and Hamas, making that argument entirely specious.
Goldberg reports that other Israeli leaders, including defence minister Ehud Barack, acknowledge the real problem with the possibility of a nuclear Iran is that it would gradually erode Israel's ability to retain its most talented people.
But that problem is mostly self-inflicted. Goldberg concedes that Israeli generals with whom he talked "worry that talk of an 'existential threat' is itself a kind of existential threat to the Zionist project, which was meant to preclude such threats against the Jewish people."
A number of sources told Goldberg, moreover, that Gabi Ashkenazi, the Israeli army chief of staff, doubts "the usefulness of an attack".
Top Israeli intelligence officials and others responsible for policy toward Iran have long argued, in fact, that the kind of apocalyptic rhetoric that Netanyahu has embraced in recent years is self-defeating.
Security correspondent Ronen Bergman reported in Yediot Ahronot, Israel's most popular newspaper, in July 2009 that former chief of military intelligence Major General Aharon Zeevi Farkash said the Israeli public perception of the Iranian nuclear threat had been "distorted".
Farkash and other military intelligence and Mossad officials believe Iran's main motive for seeking a nuclear weapons capability was not to threaten Israel but to "deter U.S. intervention and efforts at regime change", according to Bergman.
The use of blatantly distorted rhetoric about Iran as a threat to Israel - and Israeli intelligence officials' disagreement with it - goes back to the early 1990s, when the Labour Party government in Israel began a campaign to portray Iran's missile and nuclear programmes as an "existential threat" to Israel, as Trita Parsi revealed in his 2007 book "Treacherous Alliance".
An internal Israeli inter-ministerial committee formed in 1994 to make recommendations on dealing with Iran concluded that Israeli rhetoric had been "self-defeating", because it had actually made Iran more afraid of Israel, and more hostile toward it, Parsi writes.
Ironically, it was Netanyahu who decided to stop using such rhetoric after becoming prime minister the first time in mid-1996. Mossad director of intelligence Uzi Arad convinced him that Israel had a choice between making itself Iran's enemy or allowing Iran to focus on threats from other states.
Netanyahu even sought Kazakh and Russian mediation between Iran and Israel.
But he reversed that policy when he became convinced that Tehran was seeking a rapprochement with Washington, which Israeli leaders feared would result in reduced U.S. support for Israel, according to Parsi's account. As a result, Netanyahu reverted to the extreme rhetoric of his predecessors.
That episode suggests that Netanyahu is perfectly capable of grasping the intelligence community's more nuanced analysis of Iran, contrary to his public stance that the Iranian threat is the same as that from Hitler's Germany.
Netanyahu administration officials used Goldberg to convey the message to the Americans that they didn't believe Obama would launch an attack on Iran, and therefore Israel would have to do so.
But Israel clearly cannot afford to risk a war with Iran without the assurance that the United States being committed to participate in it. That is why the Israeli lobby in Washington and its allies argue that Obama should support an Israeli strike, which would mean that he would have to attack Iran with full force if it retaliates against such an Israeli strike.
The knowledge that Israel could not attack Iran without U.S. consent makes Israeli officials extremely sensitive about the possibility that Obama would explicitly reject an Israeli strike
Goldberg reports that "several Israeli officials" told him they were worried that U.S. intelligence might learn about Israeli plans to strike Iran "hours" before the scheduled launch.
The officials told Goldberg that if Obama were to say, "We know what you're doing. Stop immediately," Israel might have to back down.
Goldberg alludes only vaguely to the possibility that the threat of an attack on Iran is a strategy designed to manipulate both Iran and the United States. In a March 2009 article in The Atlantic online, however, he was more straightforward, conceding that the Netanyahu threat to strike Iran if the United States failed to stop the Iranian nuclear programme could be a "tremendous bluff".
Analysis by Gareth Porter
WASHINGTON, Aug 13, 2010 (IPS) - Pro-Israeli journalist Jeffrey Goldberg's article in "The Atlantic" magazine was evidently aimed at showing why the Barack Obama administration should worry that it risks an attack by the government of Prime Minister Benjamin Netanyahu on Iran in the coming months unless it takes a much more menacing line toward Iran's nuclear programme.
But the article provides new evidence that senior figures in the Israeli intelligence and military leadership oppose such a strike against Iran and believe that Netanyahu's apocalyptic rhetoric about an Iranian nuclear threat as an "existential threat" is unnecessary and self-defeating. Although not reported by Goldberg, Israeli military and intelligence figures began to express their opposition to such rhetoric on Iran in the early 1990s, and Netanyahu acted to end such talk when he became prime minister in 1996.
The Goldberg article also reveals extreme Israeli sensitivity to any move by Obama to publicly demand that Israel desist from such a strike, reflecting the reality that the Israeli government could not go ahead with any strike without being assured of U.S. direct involvement in the war with Iran.
Goldberg argues that a likely scenario some months in the future is that Israeli officials will call their U.S. counterparts to inform them that Israeli planes are already on their way to bomb Iranian nuclear sites.
The Israelis would explain that they had "no choice", he writes, because "a nuclear Iran poses the gravest threat since Hitler to the physical survival of the Jewish people."
He claims the "consensus" among present and past Israeli leaders is that the chances are better than 50/50 that Israel "will launch a strike by next July", based on interviews with 40 such Israeli decision-makers.
Goldberg is best known for hewing to the neoconservative line in his reporting on Iraq, particularly in his insistence that that Saddam Hussein had extensive ties with al Qaeda.
Goldberg quotes an Israeli official familiar with Netanyahu's thinking as saying, "In World War II, the Jews had no power to stop Hitler from annihilating us. Six million were slaughtered. Today, six million Jews live in Israel, and someone is threatening them with annihilation."
In his interview with Goldberg for this article, however, Netanyahu does not argue that Iran might use nuclear weapons against Israel. Instead he argues that Hezbollah and Hamas would be able to "fire rockets and engage in other terror activities while enjoying a nuclear umbrella".
But Israel relies on conventional forces - not nuclear deterrence - against Hezbollah and Hamas, making that argument entirely specious.
Goldberg reports that other Israeli leaders, including defence minister Ehud Barack, acknowledge the real problem with the possibility of a nuclear Iran is that it would gradually erode Israel's ability to retain its most talented people.
But that problem is mostly self-inflicted. Goldberg concedes that Israeli generals with whom he talked "worry that talk of an 'existential threat' is itself a kind of existential threat to the Zionist project, which was meant to preclude such threats against the Jewish people."
A number of sources told Goldberg, moreover, that Gabi Ashkenazi, the Israeli army chief of staff, doubts "the usefulness of an attack".
Top Israeli intelligence officials and others responsible for policy toward Iran have long argued, in fact, that the kind of apocalyptic rhetoric that Netanyahu has embraced in recent years is self-defeating.
Security correspondent Ronen Bergman reported in Yediot Ahronot, Israel's most popular newspaper, in July 2009 that former chief of military intelligence Major General Aharon Zeevi Farkash said the Israeli public perception of the Iranian nuclear threat had been "distorted".
Farkash and other military intelligence and Mossad officials believe Iran's main motive for seeking a nuclear weapons capability was not to threaten Israel but to "deter U.S. intervention and efforts at regime change", according to Bergman.
The use of blatantly distorted rhetoric about Iran as a threat to Israel - and Israeli intelligence officials' disagreement with it - goes back to the early 1990s, when the Labour Party government in Israel began a campaign to portray Iran's missile and nuclear programmes as an "existential threat" to Israel, as Trita Parsi revealed in his 2007 book "Treacherous Alliance".
An internal Israeli inter-ministerial committee formed in 1994 to make recommendations on dealing with Iran concluded that Israeli rhetoric had been "self-defeating", because it had actually made Iran more afraid of Israel, and more hostile toward it, Parsi writes.
Ironically, it was Netanyahu who decided to stop using such rhetoric after becoming prime minister the first time in mid-1996. Mossad director of intelligence Uzi Arad convinced him that Israel had a choice between making itself Iran's enemy or allowing Iran to focus on threats from other states.
Netanyahu even sought Kazakh and Russian mediation between Iran and Israel.
But he reversed that policy when he became convinced that Tehran was seeking a rapprochement with Washington, which Israeli leaders feared would result in reduced U.S. support for Israel, according to Parsi's account. As a result, Netanyahu reverted to the extreme rhetoric of his predecessors.
That episode suggests that Netanyahu is perfectly capable of grasping the intelligence community's more nuanced analysis of Iran, contrary to his public stance that the Iranian threat is the same as that from Hitler's Germany.
Netanyahu administration officials used Goldberg to convey the message to the Americans that they didn't believe Obama would launch an attack on Iran, and therefore Israel would have to do so.
But Israel clearly cannot afford to risk a war with Iran without the assurance that the United States being committed to participate in it. That is why the Israeli lobby in Washington and its allies argue that Obama should support an Israeli strike, which would mean that he would have to attack Iran with full force if it retaliates against such an Israeli strike.
The knowledge that Israel could not attack Iran without U.S. consent makes Israeli officials extremely sensitive about the possibility that Obama would explicitly reject an Israeli strike
Goldberg reports that "several Israeli officials" told him they were worried that U.S. intelligence might learn about Israeli plans to strike Iran "hours" before the scheduled launch.
The officials told Goldberg that if Obama were to say, "We know what you're doing. Stop immediately," Israel might have to back down.
Goldberg alludes only vaguely to the possibility that the threat of an attack on Iran is a strategy designed to manipulate both Iran and the United States. In a March 2009 article in The Atlantic online, however, he was more straightforward, conceding that the Netanyahu threat to strike Iran if the United States failed to stop the Iranian nuclear programme could be a "tremendous bluff".
Sunday, August 15, 2010
A Neocon Preps US for War with Iran
By Ray McGovern
August 13, 2010 "Information Clearing House" -- I guess I was naïve in thinking that The Atlantic and its American-Israeli writer Jeffrey Goldberg might shy away from arguing for yet another war — this one with Iran — while the cauldrons are still boiling in Afghanistan and Iraq.
It’s worth remembering how Goldberg helped to make the case for the U.S. invasion of Iraq. For instance, on Oct. 3, 2002, as America’s war fever was building, Goldberg wrote in Slate, the online magazine:
“The [Bush] administration is planning … to launch what many people would undoubtedly call a short-sighted and inexcusable act of aggression. In five years, however, I believe that the coming invasion of Iraq will be remembered as an act of profound morality.”
Looking back on Goldberg’s commentaries at the time, it’s also a reminder of how many U.S. publications that are considered centrist or even liberal were bending over backward to get in line with that coming invasion.
Even earlier, on March 25, 2002, Goldberg filled the pages of The New Yorker with a mammoth 17,000-word story hyping Iraqi leader Saddam Hussein’s ties to terrorism and glossing over the ambiguities regarding the gassing of civilians in the Kurdish city of Halabja during the Iran-Iraq war.
Goldberg’s magnum opus, entitled “The Great Terror,” earned him high marks from other neocons and essentially “made” Goldberg’s career. The story was also made to order, so to speak, for President George W. Bush and Vice President Dick Cheney.
Presenting Goldberg with an award for the article, the Overseas Press Club saw fit to note that former CIA director James Woolsey described the story as a “blockbuster.” Woolsey, the self-described "anchor of the Presbyterian wing of JINSA (The Jewish Institute for National Security Affairs),” has been a strong advocate for the use of force against any and all perceived enemies of Israel.
Woolsey also was the prime manufacturer and a key disseminator of bogus “intelligence” on the Saddam-al-Qaeda connection. In The New Yorker article, while exaggerating Iraq’s links to terrorism, Goldberg quotes Woolsey complaining about the CIA’s alleged aversion to learning about Saddam’s ties to al-Qaeda.
It is a safe bet that Goldberg’s prose under the subhead “The Al-Qaeda Link” was inspired by Woolsey. But it gets worse; the detail in that section came mostly from a drug dealer in a Kurdish prison, whom a British journalist, following upon Goldberg’s reporting, quickly determined to be a “liar.”
A Friendly Reception
Yet, not surprisingly, Goldberg emerged from his work prepping the PR ground for the U.S. invasion of Iraq as a well-respected "journalist," so much so that he was afforded deferential treatment when he made a tour of the cable TV news programs this week promoting his new case for a new war, this time with Iran.
Goldberg had just produced a new magnum opus for another prestige journal, The Atlantic, entitled “The Point of No Return,” explaining Israel’s case for bombing Iran and the reasons why the United States should join in.
On Wednesday, Goldberg swatted away softball questions from MSNBC anchor Andrea Mitchell, who joined in a friendly chat about whether the U.S. or Israel or both should opt for what Mitchell described as a “military response” to the “Iranian nuclear threat,” and when.
Goldberg claimed that Israeli Prime Minister Netanyahu sees the challenge from Iran as being on a par with the Holocaust, believing that Iran is bent on the destruction of Israel with its 6 million people.
“Are you persuaded that Israel would take action against Iran unilaterally?” asked Mitchell. “Yes, I am; I am,” Goldberg responded.
Goldberg added that he believes that President Barack Obama is not prepared to live with a nuclear Iran but that it remains an open question whether he would take military action to prevent that eventuality. Goldberg said Obama “probably” would not.
And that being the case, Goldberg thought Netanyahu would be inclined to unleash Israeli forces unilaterally and absorb any damage this might do to bilateral relations with Washington.
At the end of the Mitchell interview, she lofted what appeared to be a canned question and, in response, Goldberg seemed downright eager to share what he called a “secret,” as he put it.
Mitchell asked when Obama planned to visit Israel. Goldberg, however, expressed a concern: “The Israelis are worried about Obama coming; they don’t want him to be boo-ed wherever he goes; that’s the last thing they need. Obama is not popular in Israel in the way Bush and Clinton were.”
The unmistakable message: An Obama tour of Israel could be an ugly affair.
Chatting with Wolf
Goldberg walked through a similar discussion on the merits of war when he appeared on CNN, a guest of Wolf Blitzer’s “The Situation Room.”
Goldberg: “The question is what can the Obama administration do to stop the Iranians from pursuing the nuclear program … it seems unlikely to me at this point that Iran is simply going to say, because President Obama asks, you know, we’re going to end our nuclear program.”
Blitzer: “You have concluded that an Israeli air strike against Iran’s nuclear facilities is — in your word — a near certainty?”
Goldberg: “Well, it’s a near certainty, in the long term, but even in the next year I give it a 50 percent or better chance. Next year, meaning by next July.”
Not that it probably would have mattered, but someone probably should have told Andrea Mitchell and Wolf Blitzer that more skeptical observers have described Goldberg’s previous “journalism” in very unflattering terms.
One critic deemed Goldberg’s pre-Iraq War reporting for The New Yorker as “a journalism-school nightmare: bad sources, compromised sources, unacknowledged uncertainties … with alarmist rhetoric that is now either laughable or nauseating, depending on your mood.”
For instance, the fact that many civilians were gassed as Iraqi and Iranian forces clashed on March 16, 1988, in the area of Halabja, just barely inside Iraq’s border with Iran, is beyond dispute.
However, what is not clear is the blockbuster charge that it was the Iraqis, rather than the Iranians, who used the deadly chemical warfare agents. The U.S. government has pointed the finger in both directions, often depending on which side of the conflict Washington was tilting toward.
A joint CIA and Defense Intelligence assessment focused in on the “blood agents (cyanogen chloride) deemed responsible for most of the deaths in Halabja and determined that the Iraqis had no history of using those particular agents, but that the Iranians did.
That particular CIA-DIA report concluded that, despite the conventional wisdom, “the Iranians perpetrated this attack.”
Dr. Stephen Pelletiere, a senior CIA analyst on Iraq during its war with Iran, told Roger Trilling of the Village Voice that he is one among many who believe that Goldberg’s account of the killings at Halabja was wrong and that the issue was far from academic.
Pelletiere said: “We say Saddam is a monster, a maniac who gassed his own people, and the world shouldn’t tolerate him. But why? Because that’s the last argument the U.S. has for going to war with Iraq.”
It may well have been the most emotionally riveting argument, I suppose.
Debunking the Junk
But what about Iraq’s alleged WMDs and supposed ties between Iraq and al-Qaeda? Goldberg made an attempt to include those canards as well, focusing mostly on chemical and biological warfare agents. (He left to the New York Times’ Judith Miller, who was later fired, and Michael Gordon, who is still chief military correspondent, to do the heavy lifting for the lies about Iraq’s supposed nuclear weapons.)
A final story about Jeffrey Goldberg’s pre-Iraq-invasion stories: Just a week before Congress bowed to Bush’s request for war authorization against Iraq, Goldberg was writing in Slate about the dangers of “aflatoxin,” which he had cited 15 times in his New Yorker article.
“Aflatoxin does only one thing well,” Goldberg wrote. “It causes liver cancer. In fact, it induces it particularly well in children.”
However, Goldberg’s obsession with “aflatoxin” didn’t stand up too well after the U.S.-led invasion found no evidence that Iraq still had bio-weapons stockpiles. Regarding aflatoxin, Charles Duelfer, the Bush administration’s chief weapons inspector in Iraq, concluded that there was “no evidence to link those tests [of aflatoxin] with the development of biological weapons agents for military use.”
Ken Silverstein of Harper’s, among the more serious journalists who have had macabre fun critiquing Goldberg’s contribution to the Iraq War effort, wrote “Goldberg’s War,” one of the best critiques.
Silverstein wrote:
“Whatever Saddam’s regime intended to do with the aflatoxin … it did not involve wholescale tot-slaughter. But it seems to me that Goldberg was out to prove that Saddam was singularly evil — a man who would kill kids using cancer, no doubt cackling with glee as he watched them expire — because the American public might be less willing to support a war if he was merely an evil dictator, which are a dime a dozen.”
But who is Jeffrey Goldberg and how did he achieve such influence, helping to create the false conventional wisdom that sleep-walked the American people into war with Iraq and is now pointing toward a new war with Iran.
For a 44-year-old writer, Goldberg surely has been around. He left college to move to Israel where he served with the Israeli army as a prison guard at the Ketziot military prison camp during the First Intifada; he also wrote for The Jerusalem Post.
Upon his return to the U.S., he worked for the Jewish daily Forward and eventually got hired by The New Yorker. Now, he’s a star writer for The Atlantic.
Pitching for War
Goldberg’s mission this time? Pitching war with Iran.
This time, Goldberg and the Israelis want us to buy into a syllogism without a valid major premise. Their argument presupposes that Iran has made the decision to develop nuclear weapons and is hard at work on such a program, which is what they want Americans to believe whether there’s evidence or not.
The Fawning Corporate Media (FCM) and the neocons who brought us the war on Iraq, and occasionally the President himself, speak as though Iran has restarted work on the nuclear weapons part of their nuclear energy program.
This internal government debate (and the external propaganda) is a replay of three years ago, when the FCM succeeded in convincing most Americans that Iran either had nuclear weapons or was on the verge of getting them.
President Bush and Vice President Cheney were out in front hyping the danger, whipping the American people into another war frenzy -- when an honest National Intelligence Estimate stopped them in their tracks.
Two things saved the day: integrity and fear.
Integrity on the part of analysts who, after the corruption before the Iraq War, were able to revert to the tell-it-like-it-is-without-fear-or-favor ethos that obtained during my 27 years as a CIA analyst; and fear on the part of the senior U.S. military that Cheney and Bush were about to order them to commit U.S. forces to war with Iran.
The integrity played out during work on a congressionally mandated National Intelligence Estimate that it took almost all of 2007 to complete. Most of those intelligence officials who had “fixed” the intelligence on Iraq had been given the heave-ho.
New leadership was installed under the direction of a non-corruptible Director of the National Intelligence Council, Tom Fingar, from the State Department.
Under Fingar, intelligence analysts rose to the occasion on the delicate issue of Iran’s nuclear development program by performing a bottom-up assessment. There would be no “fixing” of intelligence around the policy. Main question: Had Iran decided to go for the bomb?
The NIE’s first sentence conveyed the unanimous conclusion of all 16 U.S. intelligence agencies: “We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program; we also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons.”
Fearing Another War
Fear now came into play and, for once, played a salutary role. Fear is simply a by-product of a sane appraisal of what war with Iran would mean. The senior U.S. military had enough good sense to be afraid and saw the NIE as an opportunity to stop the juggernaut toward war.
And so, they and those in Congress who had commissioned the NIE insisted that its key judgments be declassified and made public, despite reluctance on the part of the Director of National Intelligence to do so.
Joint Chiefs Chairman Adm. Mike Mullen and CENTCOM commander William “Fox” Fallon had been living in fear of a Cheney-inspired order to commit U.S. forces to war with Iran. Fallon actually had told retired Col. Patrick Lang, a few months before Fallon was cashiered, “We are not going to do Iran on my watch.”
Fear? Yes, fear — an altogether sensible reaction. No commander worth his salt looks with equanimity at the prospect of being on the receiving end of an order that could decimate his troops and lead to a wider war for which his forces would not be adequate.
On a more personal basis, no commander wants to be faced with a choice between having to resign on principle on the one hand and carrying out an order he knows to be fatefully misguided on the other.
Good sense prevailed, over Cheney’s strong objections and Bush sent Mullen to Israel in June 2008 with instructions to warn the Israelis in no uncertain terms not to provoke war with Iran with any expectation that the U.S. would pull their chestnuts out of the fire.
Fast forward to the present. Where is Iran now in its nuclear program?
When an important National Intelligence Estimate needs updating, the art form often chosen is what is called a “Memorandum to Holders” — in the case at hand, holders of the original NIE of November 2007.
Such a paper need not repeat the bottom-up research and analysis completed immediately prior to November 2007; it simply requires a close look at evidence acquired from the end of 2007 to the present to determine whether there is reason to change the key judgments of three years ago.
Pressure to Rewrite?
We hear nothing from our sources about any substantial change over the past three years. That is not what the Goldbergs and other neocons of this world want to hear, and this presumably is why the Memorandum to Holders has been held up for months and months. Not a good sign.
Authoritative statements for the record have been sparse but reassuring, inasmuch as they seem to confirm the 2007 NIE's key judgments. Congressional testimony in February by then-Director of National Intelligence Dennis Blair, and in April by the Defense Intelligence Agency and the Vice Chairman of the Joint Chiefs revealed no major developments.
Moreover, Blair consistently hewed to the 2007 judgment that Iran's eventual decision on whether or not to build a nuclear weapon can still be influenced by "the international community."
Scattered statements by other high officials, including President Obama, sometimes convey a sense that Iran is again working toward a nuclear weapon, and the FCM has been leaving hints left and right that this is the case.
Folks like Jeffrey Goldberg refer casually, but intentionally, to “Iran’s pursuit of nuclear weapons.”
The neocons seem to be as strong now as under George W. Bush, with their Real-Men-Go-to-Tehran-type macho undiminished.
Can integrity trump macho this time? Without a strong man at the helm in the intelligence community, it will be very difficult. And the administration let drop months ago that this time the key judgments of the Memorandum to Holders will not be made public.
Meanwhile, Goldberg and his neocon colleague flaks are trying to create as much pressure as they can on Obama to produce a scarier Estimate … or to delay the one in progress sine die.
The outlook would seem even bleaker were it not for the availability of WikiLeaks and other non-FCM news outlets that would be ready and willing to publish documents about what is actually going on behind the scenes.
It would seem a safe bet that there are enough folks with access to the Memorandum to Holders drafts to recognize swiftly any attempt to corrupt honest judgments.
Some government officials will probably be able to recognize their own conscience, their integrity and their oath to protect and defend the Constitution against all enemies, foreign and domestic, as values that properly supersede other promises — like the promise not to release classified information that is a condition of employment.
Those who are tempted to exaggerate the threat from Iran will, at least, have to take into account how relatively easy it has become to evade the FCM’s gatekeepers and expose government dishonesty to the people.
Editor's NOTE:
As Professor James Petras has frequently reminded us, the Zionist Power Configuration (ZPC) is alive and well among the elite broadcast media. Wolf Blitzer and Andrea Mitchell are both members. Goldberg is an avid Zionist who is in the mold of those charter members who signed the PNAC document including Bill Kristol, Donald Rumsfeld, Dick Cheney and others.
At the risk of being accused of the genetic fallacy, I would point out that anyone who either admits to being a Zionist or has Zionist sympathies should have any statements they make vis a vis war with Iran immediately discounted.
--Dr. J. P. Hubert
August 13, 2010 "Information Clearing House" -- I guess I was naïve in thinking that The Atlantic and its American-Israeli writer Jeffrey Goldberg might shy away from arguing for yet another war — this one with Iran — while the cauldrons are still boiling in Afghanistan and Iraq.
It’s worth remembering how Goldberg helped to make the case for the U.S. invasion of Iraq. For instance, on Oct. 3, 2002, as America’s war fever was building, Goldberg wrote in Slate, the online magazine:
“The [Bush] administration is planning … to launch what many people would undoubtedly call a short-sighted and inexcusable act of aggression. In five years, however, I believe that the coming invasion of Iraq will be remembered as an act of profound morality.”
Looking back on Goldberg’s commentaries at the time, it’s also a reminder of how many U.S. publications that are considered centrist or even liberal were bending over backward to get in line with that coming invasion.
Even earlier, on March 25, 2002, Goldberg filled the pages of The New Yorker with a mammoth 17,000-word story hyping Iraqi leader Saddam Hussein’s ties to terrorism and glossing over the ambiguities regarding the gassing of civilians in the Kurdish city of Halabja during the Iran-Iraq war.
Goldberg’s magnum opus, entitled “The Great Terror,” earned him high marks from other neocons and essentially “made” Goldberg’s career. The story was also made to order, so to speak, for President George W. Bush and Vice President Dick Cheney.
Presenting Goldberg with an award for the article, the Overseas Press Club saw fit to note that former CIA director James Woolsey described the story as a “blockbuster.” Woolsey, the self-described "anchor of the Presbyterian wing of JINSA (The Jewish Institute for National Security Affairs),” has been a strong advocate for the use of force against any and all perceived enemies of Israel.
Woolsey also was the prime manufacturer and a key disseminator of bogus “intelligence” on the Saddam-al-Qaeda connection. In The New Yorker article, while exaggerating Iraq’s links to terrorism, Goldberg quotes Woolsey complaining about the CIA’s alleged aversion to learning about Saddam’s ties to al-Qaeda.
It is a safe bet that Goldberg’s prose under the subhead “The Al-Qaeda Link” was inspired by Woolsey. But it gets worse; the detail in that section came mostly from a drug dealer in a Kurdish prison, whom a British journalist, following upon Goldberg’s reporting, quickly determined to be a “liar.”
A Friendly Reception
Yet, not surprisingly, Goldberg emerged from his work prepping the PR ground for the U.S. invasion of Iraq as a well-respected "journalist," so much so that he was afforded deferential treatment when he made a tour of the cable TV news programs this week promoting his new case for a new war, this time with Iran.
Goldberg had just produced a new magnum opus for another prestige journal, The Atlantic, entitled “The Point of No Return,” explaining Israel’s case for bombing Iran and the reasons why the United States should join in.
On Wednesday, Goldberg swatted away softball questions from MSNBC anchor Andrea Mitchell, who joined in a friendly chat about whether the U.S. or Israel or both should opt for what Mitchell described as a “military response” to the “Iranian nuclear threat,” and when.
Goldberg claimed that Israeli Prime Minister Netanyahu sees the challenge from Iran as being on a par with the Holocaust, believing that Iran is bent on the destruction of Israel with its 6 million people.
“Are you persuaded that Israel would take action against Iran unilaterally?” asked Mitchell. “Yes, I am; I am,” Goldberg responded.
Goldberg added that he believes that President Barack Obama is not prepared to live with a nuclear Iran but that it remains an open question whether he would take military action to prevent that eventuality. Goldberg said Obama “probably” would not.
And that being the case, Goldberg thought Netanyahu would be inclined to unleash Israeli forces unilaterally and absorb any damage this might do to bilateral relations with Washington.
At the end of the Mitchell interview, she lofted what appeared to be a canned question and, in response, Goldberg seemed downright eager to share what he called a “secret,” as he put it.
Mitchell asked when Obama planned to visit Israel. Goldberg, however, expressed a concern: “The Israelis are worried about Obama coming; they don’t want him to be boo-ed wherever he goes; that’s the last thing they need. Obama is not popular in Israel in the way Bush and Clinton were.”
The unmistakable message: An Obama tour of Israel could be an ugly affair.
Chatting with Wolf
Goldberg walked through a similar discussion on the merits of war when he appeared on CNN, a guest of Wolf Blitzer’s “The Situation Room.”
Goldberg: “The question is what can the Obama administration do to stop the Iranians from pursuing the nuclear program … it seems unlikely to me at this point that Iran is simply going to say, because President Obama asks, you know, we’re going to end our nuclear program.”
Blitzer: “You have concluded that an Israeli air strike against Iran’s nuclear facilities is — in your word — a near certainty?”
Goldberg: “Well, it’s a near certainty, in the long term, but even in the next year I give it a 50 percent or better chance. Next year, meaning by next July.”
Not that it probably would have mattered, but someone probably should have told Andrea Mitchell and Wolf Blitzer that more skeptical observers have described Goldberg’s previous “journalism” in very unflattering terms.
One critic deemed Goldberg’s pre-Iraq War reporting for The New Yorker as “a journalism-school nightmare: bad sources, compromised sources, unacknowledged uncertainties … with alarmist rhetoric that is now either laughable or nauseating, depending on your mood.”
For instance, the fact that many civilians were gassed as Iraqi and Iranian forces clashed on March 16, 1988, in the area of Halabja, just barely inside Iraq’s border with Iran, is beyond dispute.
However, what is not clear is the blockbuster charge that it was the Iraqis, rather than the Iranians, who used the deadly chemical warfare agents. The U.S. government has pointed the finger in both directions, often depending on which side of the conflict Washington was tilting toward.
A joint CIA and Defense Intelligence assessment focused in on the “blood agents (cyanogen chloride) deemed responsible for most of the deaths in Halabja and determined that the Iraqis had no history of using those particular agents, but that the Iranians did.
That particular CIA-DIA report concluded that, despite the conventional wisdom, “the Iranians perpetrated this attack.”
Dr. Stephen Pelletiere, a senior CIA analyst on Iraq during its war with Iran, told Roger Trilling of the Village Voice that he is one among many who believe that Goldberg’s account of the killings at Halabja was wrong and that the issue was far from academic.
Pelletiere said: “We say Saddam is a monster, a maniac who gassed his own people, and the world shouldn’t tolerate him. But why? Because that’s the last argument the U.S. has for going to war with Iraq.”
It may well have been the most emotionally riveting argument, I suppose.
Debunking the Junk
But what about Iraq’s alleged WMDs and supposed ties between Iraq and al-Qaeda? Goldberg made an attempt to include those canards as well, focusing mostly on chemical and biological warfare agents. (He left to the New York Times’ Judith Miller, who was later fired, and Michael Gordon, who is still chief military correspondent, to do the heavy lifting for the lies about Iraq’s supposed nuclear weapons.)
A final story about Jeffrey Goldberg’s pre-Iraq-invasion stories: Just a week before Congress bowed to Bush’s request for war authorization against Iraq, Goldberg was writing in Slate about the dangers of “aflatoxin,” which he had cited 15 times in his New Yorker article.
“Aflatoxin does only one thing well,” Goldberg wrote. “It causes liver cancer. In fact, it induces it particularly well in children.”
However, Goldberg’s obsession with “aflatoxin” didn’t stand up too well after the U.S.-led invasion found no evidence that Iraq still had bio-weapons stockpiles. Regarding aflatoxin, Charles Duelfer, the Bush administration’s chief weapons inspector in Iraq, concluded that there was “no evidence to link those tests [of aflatoxin] with the development of biological weapons agents for military use.”
Ken Silverstein of Harper’s, among the more serious journalists who have had macabre fun critiquing Goldberg’s contribution to the Iraq War effort, wrote “Goldberg’s War,” one of the best critiques.
Silverstein wrote:
“Whatever Saddam’s regime intended to do with the aflatoxin … it did not involve wholescale tot-slaughter. But it seems to me that Goldberg was out to prove that Saddam was singularly evil — a man who would kill kids using cancer, no doubt cackling with glee as he watched them expire — because the American public might be less willing to support a war if he was merely an evil dictator, which are a dime a dozen.”
But who is Jeffrey Goldberg and how did he achieve such influence, helping to create the false conventional wisdom that sleep-walked the American people into war with Iraq and is now pointing toward a new war with Iran.
For a 44-year-old writer, Goldberg surely has been around. He left college to move to Israel where he served with the Israeli army as a prison guard at the Ketziot military prison camp during the First Intifada; he also wrote for The Jerusalem Post.
Upon his return to the U.S., he worked for the Jewish daily Forward and eventually got hired by The New Yorker. Now, he’s a star writer for The Atlantic.
Pitching for War
Goldberg’s mission this time? Pitching war with Iran.
This time, Goldberg and the Israelis want us to buy into a syllogism without a valid major premise. Their argument presupposes that Iran has made the decision to develop nuclear weapons and is hard at work on such a program, which is what they want Americans to believe whether there’s evidence or not.
The Fawning Corporate Media (FCM) and the neocons who brought us the war on Iraq, and occasionally the President himself, speak as though Iran has restarted work on the nuclear weapons part of their nuclear energy program.
This internal government debate (and the external propaganda) is a replay of three years ago, when the FCM succeeded in convincing most Americans that Iran either had nuclear weapons or was on the verge of getting them.
President Bush and Vice President Cheney were out in front hyping the danger, whipping the American people into another war frenzy -- when an honest National Intelligence Estimate stopped them in their tracks.
Two things saved the day: integrity and fear.
Integrity on the part of analysts who, after the corruption before the Iraq War, were able to revert to the tell-it-like-it-is-without-fear-or-favor ethos that obtained during my 27 years as a CIA analyst; and fear on the part of the senior U.S. military that Cheney and Bush were about to order them to commit U.S. forces to war with Iran.
The integrity played out during work on a congressionally mandated National Intelligence Estimate that it took almost all of 2007 to complete. Most of those intelligence officials who had “fixed” the intelligence on Iraq had been given the heave-ho.
New leadership was installed under the direction of a non-corruptible Director of the National Intelligence Council, Tom Fingar, from the State Department.
Under Fingar, intelligence analysts rose to the occasion on the delicate issue of Iran’s nuclear development program by performing a bottom-up assessment. There would be no “fixing” of intelligence around the policy. Main question: Had Iran decided to go for the bomb?
The NIE’s first sentence conveyed the unanimous conclusion of all 16 U.S. intelligence agencies: “We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program; we also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons.”
Fearing Another War
Fear now came into play and, for once, played a salutary role. Fear is simply a by-product of a sane appraisal of what war with Iran would mean. The senior U.S. military had enough good sense to be afraid and saw the NIE as an opportunity to stop the juggernaut toward war.
And so, they and those in Congress who had commissioned the NIE insisted that its key judgments be declassified and made public, despite reluctance on the part of the Director of National Intelligence to do so.
Joint Chiefs Chairman Adm. Mike Mullen and CENTCOM commander William “Fox” Fallon had been living in fear of a Cheney-inspired order to commit U.S. forces to war with Iran. Fallon actually had told retired Col. Patrick Lang, a few months before Fallon was cashiered, “We are not going to do Iran on my watch.”
Fear? Yes, fear — an altogether sensible reaction. No commander worth his salt looks with equanimity at the prospect of being on the receiving end of an order that could decimate his troops and lead to a wider war for which his forces would not be adequate.
On a more personal basis, no commander wants to be faced with a choice between having to resign on principle on the one hand and carrying out an order he knows to be fatefully misguided on the other.
Good sense prevailed, over Cheney’s strong objections and Bush sent Mullen to Israel in June 2008 with instructions to warn the Israelis in no uncertain terms not to provoke war with Iran with any expectation that the U.S. would pull their chestnuts out of the fire.
Fast forward to the present. Where is Iran now in its nuclear program?
When an important National Intelligence Estimate needs updating, the art form often chosen is what is called a “Memorandum to Holders” — in the case at hand, holders of the original NIE of November 2007.
Such a paper need not repeat the bottom-up research and analysis completed immediately prior to November 2007; it simply requires a close look at evidence acquired from the end of 2007 to the present to determine whether there is reason to change the key judgments of three years ago.
Pressure to Rewrite?
We hear nothing from our sources about any substantial change over the past three years. That is not what the Goldbergs and other neocons of this world want to hear, and this presumably is why the Memorandum to Holders has been held up for months and months. Not a good sign.
Authoritative statements for the record have been sparse but reassuring, inasmuch as they seem to confirm the 2007 NIE's key judgments. Congressional testimony in February by then-Director of National Intelligence Dennis Blair, and in April by the Defense Intelligence Agency and the Vice Chairman of the Joint Chiefs revealed no major developments.
Moreover, Blair consistently hewed to the 2007 judgment that Iran's eventual decision on whether or not to build a nuclear weapon can still be influenced by "the international community."
Scattered statements by other high officials, including President Obama, sometimes convey a sense that Iran is again working toward a nuclear weapon, and the FCM has been leaving hints left and right that this is the case.
Folks like Jeffrey Goldberg refer casually, but intentionally, to “Iran’s pursuit of nuclear weapons.”
The neocons seem to be as strong now as under George W. Bush, with their Real-Men-Go-to-Tehran-type macho undiminished.
Can integrity trump macho this time? Without a strong man at the helm in the intelligence community, it will be very difficult. And the administration let drop months ago that this time the key judgments of the Memorandum to Holders will not be made public.
Meanwhile, Goldberg and his neocon colleague flaks are trying to create as much pressure as they can on Obama to produce a scarier Estimate … or to delay the one in progress sine die.
The outlook would seem even bleaker were it not for the availability of WikiLeaks and other non-FCM news outlets that would be ready and willing to publish documents about what is actually going on behind the scenes.
It would seem a safe bet that there are enough folks with access to the Memorandum to Holders drafts to recognize swiftly any attempt to corrupt honest judgments.
Some government officials will probably be able to recognize their own conscience, their integrity and their oath to protect and defend the Constitution against all enemies, foreign and domestic, as values that properly supersede other promises — like the promise not to release classified information that is a condition of employment.
Those who are tempted to exaggerate the threat from Iran will, at least, have to take into account how relatively easy it has become to evade the FCM’s gatekeepers and expose government dishonesty to the people.
Editor's NOTE:
As Professor James Petras has frequently reminded us, the Zionist Power Configuration (ZPC) is alive and well among the elite broadcast media. Wolf Blitzer and Andrea Mitchell are both members. Goldberg is an avid Zionist who is in the mold of those charter members who signed the PNAC document including Bill Kristol, Donald Rumsfeld, Dick Cheney and others.
At the risk of being accused of the genetic fallacy, I would point out that anyone who either admits to being a Zionist or has Zionist sympathies should have any statements they make vis a vis war with Iran immediately discounted.
--Dr. J. P. Hubert
“Police-State” Tactics Replace Traditional Moral Restraint
By: Dr. J. P. Hubert
Legal Stringency vs. Legal Laxity:
Not everything that is immoral is illegal in the West. There would be insufficient numbers of police and prosecuting attorney’s to process all of the crimes were that to be the case. As a result, some behaviors which are clearly immoral based on tradition moral precepts[1] are not made criminal e.g. adultery, homosexual activity, fornication etc (in Muslim countries which observe Sharia law however, many of these immoral behaviors are considered crimes and punished severely meaning their societies are legally stringent). The degree to which immoral behavior is not made criminal is a measure of the legal laxity of a society. For a detailed discussion of the relationship of the "Common Good" to Civil Law and human virtue see: Thomas Aquinas. Summa Theologiae, I-II, 96, 1-6 HERE...
Not all Immoral Acts are Illegal and Vice-Versa:
On the other hand, most things that are illegal are immoral, e.g. murder, rape, theft etc. Clearly there are some minor crimes e.g. failure to pay a parking ticket in a timely fashion which are either morally neutral or of minimal significance compared to major criminal activity. For all intents and purposes then, there exist few crimes which are not immoral as well. If too many clearly moral acts were punishable by law, not only would enforcement be impossible but justice would be unattainable as the civil law would be capricious and confidence in it would be destroyed.
The Correct Balance of Civil Laws and Moral Code:
The ideal balance in society is for major immoral actions/behaviors to be punishable by law as well. However, as a society loses its traditional moral integrity, it becomes necessary to substitute increasingly more and more stringent laws to serve as a substitute for the moral restraint which was once practiced by the populace. Taken to the extreme, a “police-state” will be required in cases where there has been a significant repudiation of traditional morality in practice. Such societal moral depravity simply cannot be controlled by stringent police-state tactics. There is no effective substitute for individual and societal moral restraint since it is impossible to place a police officer in every home, on every street corner and so forth.
Inverse Relationship between Morality and Civil Law:
For ease of handling, one might think of morality and civil laws then as being inversely proportional to one another. Where there is a high degree of morality in a population, there is less need for prohibitive laws and large numbers of police to enforce them. Where there is moral depravity, more and more legal impediments must be erected to control human behavior and a larger number of police and prosecutors are required to enforce them. This of course assumes that it is possible to determine right and wrong in the first instance which many Post-Modernists/Utilitarian’s/Hedonist’s/Moral Relativist’s often deny. [Not only do they argue that there is no truth (an epistemological claim) but that there is no fixed morality (a moral philosophical claim)]. Most proponents of post-modernism adopt some sort of Moral Relativism or Utilitarianism in which determinations of right and wrong become reflections of what is socially acceptable at a given time. Needless to say, that is a prescription for moral anarchy but unfortunately describes quite well the current situation in the “developed” West.
The Need for a Fixed Moral Code:
In any case, despite the claims of self-professed nihilists and other non-traditional moralist’s everyone behaves in their interpersonal relations as if a fixed moral code exists. For example, we all appeal to fairness if we believe that we are being treated inequitably. To say that we must be accorded fair treatment is to imply that a standard exists by which to determine fairness. That standard might be thought of loosely as the Natural (moral) law, what for example C.S. Lewis termed the Tau in his Mere Christianity, (San Francisco: Harper, 1952).
[2] In order for there to be a standard by which all can be equally judged, there must be a universal reality to which all may appeal. That reality can be thought of as our human nature or anthropology which is fixed by virtue of our being members of the human race. In a certain sense it is specific to our DNA although not simply an epiphenomenon of it. That fixed human nature or “being” then which exists in every person is the standard or template the “is” from which all behavior or “ought’s” must be derived.
It is pointless to argue that human nature or “being” is fluid and not fixed. Quite apart from the ontological implications which have been debated ad nauseum in the biological realm, if we do not assume a fixed human anthropology, it is impossible to devise a workable moral code to which all human beings can be held. The result is to render meaningless such statements as: “All human beings are entitled to life, liberty and the pursuit of happiness” or “all human beings should be treated equally” or “it is always and everywhere wrong to intentionally kill an innocent human being.” Under such a rubric (fluidity of human nature) it is impossible to derive any human rights at all since they become nothing more than claims which certain people advance from time to time against the ruling authority, which ultimately have no basis in fact or reality.
Their existence is as impermanent as the political power possessed at a given moment by the reference group or individual in question. That is to say even if a given human right is granted temporarily there is no basis upon which to believe that it will remain so. Moreover, when it is impossible to determine right from wrong because it is constantly changing we induce a societal form of cognitive dissonance. People assume a sort of “every man for himself” mentality. The result is selfishness, greed and often all encompassing hedonistic pursuits instead of selflessness, generosity and the seeking of the “common good.”
Human Rights must be based on a Fixed Human Nature:
What we have then is the truth that human rights must be tied to the fixed reality of human "being" or nature. If we assume instead that human anthropology is fluid, that human nature is not fixed or is indeterminate; we have moral anarchy due to the lack of a suitable universal referent. Tragically that is pretty much the case currently in the “developed” West and is also the main reason that much of the so-called third world a large percentage of which is Muslim finds us to be morally repugnant.
Quite apart from what we may see as the repressive nature of fundamentalist Islamic mores’, the actual moral code (as separated from the sanctions which enforce it) is much more compatible with traditional (Aristotelian/Thomistic) morality than that which is practiced in the West since it is based upon a more accurate assessment of human nature.[3] The Islamic moral code is simply closer to traditional (what was once termed Judeo-Christian) morality than is the Moral Relativism and Utilitarianism which has overtaken us.[4]
Where Christianity is different is that it proposes a complete or total spiritual conversion of the individual (through the power of the atoning death of Jesus Christ on the Cross) as the deterent against evil rather than the severe system of corporal punishment which is associated with Islamic Sharia law. In the former it is the positive transformation of the human person into an entirely "new creature in Christ" in the latter the negative reinforcement of physical injury or death. The Christian emphasis is on conversion and mercy while still maintaining a strict moral code, the Islamic emphasis is on an Old Testament form of severe retributive attempt at justice.
Historically over the past 50 years traditional (Aristotelian/Thomistic) morality has been progressively replaced in the United States and much of the West by a combination of Utilitarianism and Moral Relativism. This has been combined with a marked change in the judicial system from what was primarily Natural Law based jurisprudence to one of Legal Positivism or Pragmatism.[5] With the loss of traditional moral precepts there has been the expected increase in immoral behavior which to wit has been associated with a marked increase in law-breaking on the part of individuals and powerful group entities (such as major corporations, the Congress and the Executive branch of the US government).
Societal Moral Depravity Promotes Advent of Police State:
Some in the research community contend that Neo-fascist tactics are the result primarily of authoritarian personalities who periodically come to power and that fascist governments represent the occasional outlier or idiosyncratic development. Little recognized perhaps is the fact that when traditional morality is abandoned by a society, it becomes much easier for nefarious forces to introduce police-state tactics.
For example, in the wake of the 911 terrorist attacks, fascist neo-Nazi tactics were quite easily adopted e.g. USA Patriot Act, attempted suspension of Habeas Corpus, Torture of Prisoners, and Rendition etc. In part this was due to the fear which gripped the nation. The fact however that for decade’s traditional morality had been degraded adds to the ease with which heretofore unimaginable infringements were made on human rights. We had in a sense become accustomed to the need for prohibitive laws which took the place of traditional moral behavior in the aggregate. The corporate media was enlisted to convince[6] average Americans that we must even surrender certain of our basic human rights and liberty in order to ensure our national and individual security. Of course that would be unnecessary if as neighbors we trusted each other to do right and to be virtuous. The fact that we don’t should tell us something profound about our moral climate currently.
In the absence of a return to traditional morality as a nation, we will find it increasingly necessary to adopt more and more draconian laws by which to control human behavior. That is simply an inevitable outcome which results from the existence of the Natural (moral) law. If human beings will not voluntarily submit to the precepts of the Natural Law, then they will be forced to do so at the point of a gun or from behind prison walls.
The only other option is complete societal dissolution/anarchy where all positive civil law is suspended and where violence and a “might makes right” vigilantism is in force. The latter development is unlikely as long as our current oligarch’s maintain authoritarian control through progressively more stringent laws and prohibitions. The institution of Marshal-Law would be the logical next step or end-result of a further degradation in societal morality.
911 and a Constitutional Coup d'état Facilitated Police-State:
Professor Francis A Boyle a leading light in the area of constitutional and international law maintains that the US constitution has already been subjected to a Coup d'état in the wake of the 9/11 attacks and the signing of the USA Patriot Act, attempted suspension of Habeas Corpus and the practice of Torture and Rendition.[7] If he is correct than we are further along the path outlined above than I would have hoped. Boyle of course sees the problem as our not being willing to abide by international law and the treaties we have signed which have made them a part of US domestic law. He is certainly correct as far as it goes. The more fundamental underlying reason in this writer’s estimation however is the increasing moral depravity of the ruling elites which has now percolated down to the level of the average American. The “ruling class” should be very nervous now that the so-called “common man” has adopted their immoral code and jettisoned traditional morality. Historically, this is when “the natives get restless” and the Oligarchical regime is most potentially threatened by the masses who are no longer governed by a desire for justice rather than vengeance or a love of the common good.
To put a finer point on this concept; people often assume that is, take-on the morality of the civil law in which they reside. When the oligarchical regime intentionally adulterates the traditional morality of a society by moving it in the direction of Hedonism/Utilitarianism/Moral Relativism through the legislative process and the courts, the new “moral code” is eventually embraced by the masses. If something is made legal which previously was not, it is assumed to be moral and vice-versa. For example, after abortion was legalized in 1974; many Americans insufficiently grounded in traditional moral precepts decided it must be moral. This was made easier due to the fact that the political class and special interest groups engaged in a form of rank sophistry[8] rather than a probative analysis and debate regarding the actual biological, philosophical and religious implications involved. That sadly is still the case today.
Another example is the issue of gay “marriage” which while illegal in a majority of states and previously thought to be immoral by a majority of Americans, is rapidly becoming acceptable and is in the process of being legalized throughout the United States. The national trajectory is now in the direction of the legalization of gay “marriage” and along with it the assumption that gay “marriage must be morally licit.[9] The point is that the ruling elite’s who have abandoned traditional morality are able through their control of the political process and the media to normalize virtually any aberrant or immoral behavior. As they do so, they must enact increasingly more stringent laws to control the choices (many of which are largely immoral from the perspective of traditional morality) which the populace wishes to make and act upon.
Conclusion:
As a nation we have abandoned traditional morality in favor of a hodge-podge of non-moral philosophical theories including Utilitarianism, Moral Relativism and Hedonism all of which ultimately translate to personal selfishness. We no longer care about the “common good.” This has made it necessary and easy to establish a more and more stringent “police-state” domestically in order to control our now unbridled passions. Such things as “hate-crime” legislation are a good example of the result where the law now attempts to ascertain the moral intention of a given perpetrator of a crime. Needless to say this is not only legally improper but is unlikely to be effective. The proper place to consider “intention” is at the level of the moral analysis which should take place prior to the performance of a given act.
Just as in the case of gay “marriage” bans, the problem is not a legal one it is a moral one in this case the repudiation of traditional morality at the level of nation-state. In the history of the world, there is no precedent at the nation state level for reversing the current situation in which the common morality has been so seriously adulterated. Moral depravity of a nation predisposes to its self destruction from within and the foolhardy overextension of empire from without. For more see THIS... and THIS... That reality (US moral depravity) means that the survival of the American experiment (barring a fundamental change in national morality and or Divine intervention) is in doubt.
NOTES:
[1] When I refer to “traditional morality” or traditional moral precepts I mean Aristotelian/Thomistic moral philosophical principles, what some have called the Judeo-Christian ethic in the past although technically, the latter is less precise than the former in terms of performing a proper moral analysis of a given moral question. Some have utilized the phrase “golden-rule” ethic to summarize what they mean by traditional morality which is also less concise than the Aristotelian/Thomistic Synthesis. Human actions which are immoral from the perspective of traditional morality are not arbitrarily so characterized. The determination is made on the basis of what it means to be human or have a human nature and how a given human being is best able to actualize the attainment of the ultimate goal which is the Sumum Bonum or supreme good.
[2] Lewis made a variant of the so-called Moral argument for the existence of God and demonstrated that it was this that in large part was responsible for his conversion from atheism first to pantheism and then to Christianity. Today we have the interesting development that a notorious atheist philosopher has converted to Theism based primarily on the Design argument reworked in light of contemporary Astrophysics data which demonstrate that the physical constants of the universe are incredibly “fine-tuned.”
[3] This is to be expected since the Muslim philosopher’s were aware of the work of Aristotle’s metaphysics, philosophy of nature and his Ethics. In fact it is they who preserved his teaching throughout the Dark Ages prior to the time of Albert Magnus (St. Albert the Great) and Thomas Aquinas who combined Aristotelian philosophy with Christianity. For an excellent treatment of the Philosophy of Nature see William A. Wallace O.P. THE MODELING OF NATURE: PHILOSOPHY OF SCIENCE AND PHILOSOPHY OF NATURE IN SYNTHESIS.(The Catholic University of America Press, Washington, D.C. 20064, 1996). Click HERE...for a short video by Professor Wallace.
[4] The irony here is that the Neoconservative/Neo-Nazi political right which has taken over the Republican Party and the Neo-liberal left the Democratic Party are both further away from traditional morality than Muslim morality based as it is in Aristotle’s metaphysics and ethical theory. In Islamic societies in which there is no Radical Jihadism and absent Sharia, the moral climate is much closer to traditional morality than is the current immoral one found in the United States. Moreover, the Neoconservatives and Neoliberals largely embrace the Neo-Nazi moral philosophy of the Radical Zionist’s who now control modern Israel e.g. all accept the immoral “Bush Doctrine” of preventive war.
[5] John P. Hubert, “The “Fruits” of Legal Positivism: Utilitarianism in Action”, Intellectual Conservative, 09 December 2005, HERE....
[6] The FCM have taken on the role of the ancient Greek Sophists in manipulating public opinion on behalf of the ruling oligarch’s.
[7] Francis A. Boyle. Tackling America’s Toughest Questions, (Atlanta Ga: Clarity Press, 2009), pp. 39-47.
[8] Rather than asking if abortion intentionally kills an innocent human being (which is always and everywhere wrong according to traditional morality), proponents framed the issue as one of a women’s “right” to control her reproductive process. Such a “right” however does not exist in traditional morality based as it is on a fixed human anthropology. The USSC has said that such a “right” exists in the Constitution of the US (a debatable issue in itself) even though no such moral “right” could be found unless the court abandoned Natural Law jurisprudence in exchange for Legal Pragmatism. See footnote # 5 for details.
[9] See my blog post “The Problem with Gay Marriage Bans” HERE.... For additional background on Traditional Marriage contrasted with Gay “Marriage see THIS....
Legal Stringency vs. Legal Laxity:
Not everything that is immoral is illegal in the West. There would be insufficient numbers of police and prosecuting attorney’s to process all of the crimes were that to be the case. As a result, some behaviors which are clearly immoral based on tradition moral precepts[1] are not made criminal e.g. adultery, homosexual activity, fornication etc (in Muslim countries which observe Sharia law however, many of these immoral behaviors are considered crimes and punished severely meaning their societies are legally stringent). The degree to which immoral behavior is not made criminal is a measure of the legal laxity of a society. For a detailed discussion of the relationship of the "Common Good" to Civil Law and human virtue see: Thomas Aquinas. Summa Theologiae, I-II, 96, 1-6 HERE...
Not all Immoral Acts are Illegal and Vice-Versa:
On the other hand, most things that are illegal are immoral, e.g. murder, rape, theft etc. Clearly there are some minor crimes e.g. failure to pay a parking ticket in a timely fashion which are either morally neutral or of minimal significance compared to major criminal activity. For all intents and purposes then, there exist few crimes which are not immoral as well. If too many clearly moral acts were punishable by law, not only would enforcement be impossible but justice would be unattainable as the civil law would be capricious and confidence in it would be destroyed.
The Correct Balance of Civil Laws and Moral Code:
The ideal balance in society is for major immoral actions/behaviors to be punishable by law as well. However, as a society loses its traditional moral integrity, it becomes necessary to substitute increasingly more and more stringent laws to serve as a substitute for the moral restraint which was once practiced by the populace. Taken to the extreme, a “police-state” will be required in cases where there has been a significant repudiation of traditional morality in practice. Such societal moral depravity simply cannot be controlled by stringent police-state tactics. There is no effective substitute for individual and societal moral restraint since it is impossible to place a police officer in every home, on every street corner and so forth.
Inverse Relationship between Morality and Civil Law:
For ease of handling, one might think of morality and civil laws then as being inversely proportional to one another. Where there is a high degree of morality in a population, there is less need for prohibitive laws and large numbers of police to enforce them. Where there is moral depravity, more and more legal impediments must be erected to control human behavior and a larger number of police and prosecutors are required to enforce them. This of course assumes that it is possible to determine right and wrong in the first instance which many Post-Modernists/Utilitarian’s/Hedonist’s/Moral Relativist’s often deny. [Not only do they argue that there is no truth (an epistemological claim) but that there is no fixed morality (a moral philosophical claim)]. Most proponents of post-modernism adopt some sort of Moral Relativism or Utilitarianism in which determinations of right and wrong become reflections of what is socially acceptable at a given time. Needless to say, that is a prescription for moral anarchy but unfortunately describes quite well the current situation in the “developed” West.
The Need for a Fixed Moral Code:
In any case, despite the claims of self-professed nihilists and other non-traditional moralist’s everyone behaves in their interpersonal relations as if a fixed moral code exists. For example, we all appeal to fairness if we believe that we are being treated inequitably. To say that we must be accorded fair treatment is to imply that a standard exists by which to determine fairness. That standard might be thought of loosely as the Natural (moral) law, what for example C.S. Lewis termed the Tau in his Mere Christianity, (San Francisco: Harper, 1952).
[2] In order for there to be a standard by which all can be equally judged, there must be a universal reality to which all may appeal. That reality can be thought of as our human nature or anthropology which is fixed by virtue of our being members of the human race. In a certain sense it is specific to our DNA although not simply an epiphenomenon of it. That fixed human nature or “being” then which exists in every person is the standard or template the “is” from which all behavior or “ought’s” must be derived.
It is pointless to argue that human nature or “being” is fluid and not fixed. Quite apart from the ontological implications which have been debated ad nauseum in the biological realm, if we do not assume a fixed human anthropology, it is impossible to devise a workable moral code to which all human beings can be held. The result is to render meaningless such statements as: “All human beings are entitled to life, liberty and the pursuit of happiness” or “all human beings should be treated equally” or “it is always and everywhere wrong to intentionally kill an innocent human being.” Under such a rubric (fluidity of human nature) it is impossible to derive any human rights at all since they become nothing more than claims which certain people advance from time to time against the ruling authority, which ultimately have no basis in fact or reality.
Their existence is as impermanent as the political power possessed at a given moment by the reference group or individual in question. That is to say even if a given human right is granted temporarily there is no basis upon which to believe that it will remain so. Moreover, when it is impossible to determine right from wrong because it is constantly changing we induce a societal form of cognitive dissonance. People assume a sort of “every man for himself” mentality. The result is selfishness, greed and often all encompassing hedonistic pursuits instead of selflessness, generosity and the seeking of the “common good.”
Human Rights must be based on a Fixed Human Nature:
What we have then is the truth that human rights must be tied to the fixed reality of human "being" or nature. If we assume instead that human anthropology is fluid, that human nature is not fixed or is indeterminate; we have moral anarchy due to the lack of a suitable universal referent. Tragically that is pretty much the case currently in the “developed” West and is also the main reason that much of the so-called third world a large percentage of which is Muslim finds us to be morally repugnant.
Quite apart from what we may see as the repressive nature of fundamentalist Islamic mores’, the actual moral code (as separated from the sanctions which enforce it) is much more compatible with traditional (Aristotelian/Thomistic) morality than that which is practiced in the West since it is based upon a more accurate assessment of human nature.[3] The Islamic moral code is simply closer to traditional (what was once termed Judeo-Christian) morality than is the Moral Relativism and Utilitarianism which has overtaken us.[4]
Where Christianity is different is that it proposes a complete or total spiritual conversion of the individual (through the power of the atoning death of Jesus Christ on the Cross) as the deterent against evil rather than the severe system of corporal punishment which is associated with Islamic Sharia law. In the former it is the positive transformation of the human person into an entirely "new creature in Christ" in the latter the negative reinforcement of physical injury or death. The Christian emphasis is on conversion and mercy while still maintaining a strict moral code, the Islamic emphasis is on an Old Testament form of severe retributive attempt at justice.
Historically over the past 50 years traditional (Aristotelian/Thomistic) morality has been progressively replaced in the United States and much of the West by a combination of Utilitarianism and Moral Relativism. This has been combined with a marked change in the judicial system from what was primarily Natural Law based jurisprudence to one of Legal Positivism or Pragmatism.[5] With the loss of traditional moral precepts there has been the expected increase in immoral behavior which to wit has been associated with a marked increase in law-breaking on the part of individuals and powerful group entities (such as major corporations, the Congress and the Executive branch of the US government).
Societal Moral Depravity Promotes Advent of Police State:
Some in the research community contend that Neo-fascist tactics are the result primarily of authoritarian personalities who periodically come to power and that fascist governments represent the occasional outlier or idiosyncratic development. Little recognized perhaps is the fact that when traditional morality is abandoned by a society, it becomes much easier for nefarious forces to introduce police-state tactics.
For example, in the wake of the 911 terrorist attacks, fascist neo-Nazi tactics were quite easily adopted e.g. USA Patriot Act, attempted suspension of Habeas Corpus, Torture of Prisoners, and Rendition etc. In part this was due to the fear which gripped the nation. The fact however that for decade’s traditional morality had been degraded adds to the ease with which heretofore unimaginable infringements were made on human rights. We had in a sense become accustomed to the need for prohibitive laws which took the place of traditional moral behavior in the aggregate. The corporate media was enlisted to convince[6] average Americans that we must even surrender certain of our basic human rights and liberty in order to ensure our national and individual security. Of course that would be unnecessary if as neighbors we trusted each other to do right and to be virtuous. The fact that we don’t should tell us something profound about our moral climate currently.
In the absence of a return to traditional morality as a nation, we will find it increasingly necessary to adopt more and more draconian laws by which to control human behavior. That is simply an inevitable outcome which results from the existence of the Natural (moral) law. If human beings will not voluntarily submit to the precepts of the Natural Law, then they will be forced to do so at the point of a gun or from behind prison walls.
The only other option is complete societal dissolution/anarchy where all positive civil law is suspended and where violence and a “might makes right” vigilantism is in force. The latter development is unlikely as long as our current oligarch’s maintain authoritarian control through progressively more stringent laws and prohibitions. The institution of Marshal-Law would be the logical next step or end-result of a further degradation in societal morality.
911 and a Constitutional Coup d'état Facilitated Police-State:
Professor Francis A Boyle a leading light in the area of constitutional and international law maintains that the US constitution has already been subjected to a Coup d'état in the wake of the 9/11 attacks and the signing of the USA Patriot Act, attempted suspension of Habeas Corpus and the practice of Torture and Rendition.[7] If he is correct than we are further along the path outlined above than I would have hoped. Boyle of course sees the problem as our not being willing to abide by international law and the treaties we have signed which have made them a part of US domestic law. He is certainly correct as far as it goes. The more fundamental underlying reason in this writer’s estimation however is the increasing moral depravity of the ruling elites which has now percolated down to the level of the average American. The “ruling class” should be very nervous now that the so-called “common man” has adopted their immoral code and jettisoned traditional morality. Historically, this is when “the natives get restless” and the Oligarchical regime is most potentially threatened by the masses who are no longer governed by a desire for justice rather than vengeance or a love of the common good.
To put a finer point on this concept; people often assume that is, take-on the morality of the civil law in which they reside. When the oligarchical regime intentionally adulterates the traditional morality of a society by moving it in the direction of Hedonism/Utilitarianism/Moral Relativism through the legislative process and the courts, the new “moral code” is eventually embraced by the masses. If something is made legal which previously was not, it is assumed to be moral and vice-versa. For example, after abortion was legalized in 1974; many Americans insufficiently grounded in traditional moral precepts decided it must be moral. This was made easier due to the fact that the political class and special interest groups engaged in a form of rank sophistry[8] rather than a probative analysis and debate regarding the actual biological, philosophical and religious implications involved. That sadly is still the case today.
Another example is the issue of gay “marriage” which while illegal in a majority of states and previously thought to be immoral by a majority of Americans, is rapidly becoming acceptable and is in the process of being legalized throughout the United States. The national trajectory is now in the direction of the legalization of gay “marriage” and along with it the assumption that gay “marriage must be morally licit.[9] The point is that the ruling elite’s who have abandoned traditional morality are able through their control of the political process and the media to normalize virtually any aberrant or immoral behavior. As they do so, they must enact increasingly more stringent laws to control the choices (many of which are largely immoral from the perspective of traditional morality) which the populace wishes to make and act upon.
Conclusion:
As a nation we have abandoned traditional morality in favor of a hodge-podge of non-moral philosophical theories including Utilitarianism, Moral Relativism and Hedonism all of which ultimately translate to personal selfishness. We no longer care about the “common good.” This has made it necessary and easy to establish a more and more stringent “police-state” domestically in order to control our now unbridled passions. Such things as “hate-crime” legislation are a good example of the result where the law now attempts to ascertain the moral intention of a given perpetrator of a crime. Needless to say this is not only legally improper but is unlikely to be effective. The proper place to consider “intention” is at the level of the moral analysis which should take place prior to the performance of a given act.
Just as in the case of gay “marriage” bans, the problem is not a legal one it is a moral one in this case the repudiation of traditional morality at the level of nation-state. In the history of the world, there is no precedent at the nation state level for reversing the current situation in which the common morality has been so seriously adulterated. Moral depravity of a nation predisposes to its self destruction from within and the foolhardy overextension of empire from without. For more see THIS... and THIS... That reality (US moral depravity) means that the survival of the American experiment (barring a fundamental change in national morality and or Divine intervention) is in doubt.
NOTES:
[1] When I refer to “traditional morality” or traditional moral precepts I mean Aristotelian/Thomistic moral philosophical principles, what some have called the Judeo-Christian ethic in the past although technically, the latter is less precise than the former in terms of performing a proper moral analysis of a given moral question. Some have utilized the phrase “golden-rule” ethic to summarize what they mean by traditional morality which is also less concise than the Aristotelian/Thomistic Synthesis. Human actions which are immoral from the perspective of traditional morality are not arbitrarily so characterized. The determination is made on the basis of what it means to be human or have a human nature and how a given human being is best able to actualize the attainment of the ultimate goal which is the Sumum Bonum or supreme good.
[2] Lewis made a variant of the so-called Moral argument for the existence of God and demonstrated that it was this that in large part was responsible for his conversion from atheism first to pantheism and then to Christianity. Today we have the interesting development that a notorious atheist philosopher has converted to Theism based primarily on the Design argument reworked in light of contemporary Astrophysics data which demonstrate that the physical constants of the universe are incredibly “fine-tuned.”
[3] This is to be expected since the Muslim philosopher’s were aware of the work of Aristotle’s metaphysics, philosophy of nature and his Ethics. In fact it is they who preserved his teaching throughout the Dark Ages prior to the time of Albert Magnus (St. Albert the Great) and Thomas Aquinas who combined Aristotelian philosophy with Christianity. For an excellent treatment of the Philosophy of Nature see William A. Wallace O.P. THE MODELING OF NATURE: PHILOSOPHY OF SCIENCE AND PHILOSOPHY OF NATURE IN SYNTHESIS.(The Catholic University of America Press, Washington, D.C. 20064, 1996). Click HERE...for a short video by Professor Wallace.
[4] The irony here is that the Neoconservative/Neo-Nazi political right which has taken over the Republican Party and the Neo-liberal left the Democratic Party are both further away from traditional morality than Muslim morality based as it is in Aristotle’s metaphysics and ethical theory. In Islamic societies in which there is no Radical Jihadism and absent Sharia, the moral climate is much closer to traditional morality than is the current immoral one found in the United States. Moreover, the Neoconservatives and Neoliberals largely embrace the Neo-Nazi moral philosophy of the Radical Zionist’s who now control modern Israel e.g. all accept the immoral “Bush Doctrine” of preventive war.
[5] John P. Hubert, “The “Fruits” of Legal Positivism: Utilitarianism in Action”, Intellectual Conservative, 09 December 2005, HERE....
[6] The FCM have taken on the role of the ancient Greek Sophists in manipulating public opinion on behalf of the ruling oligarch’s.
[7] Francis A. Boyle. Tackling America’s Toughest Questions, (Atlanta Ga: Clarity Press, 2009), pp. 39-47.
[8] Rather than asking if abortion intentionally kills an innocent human being (which is always and everywhere wrong according to traditional morality), proponents framed the issue as one of a women’s “right” to control her reproductive process. Such a “right” however does not exist in traditional morality based as it is on a fixed human anthropology. The USSC has said that such a “right” exists in the Constitution of the US (a debatable issue in itself) even though no such moral “right” could be found unless the court abandoned Natural Law jurisprudence in exchange for Legal Pragmatism. See footnote # 5 for details.
[9] See my blog post “The Problem with Gay Marriage Bans” HERE.... For additional background on Traditional Marriage contrasted with Gay “Marriage see THIS....
Saturday, August 14, 2010
Economists: We Need Another Major Stimulus to Avoid Double-Dip Recession
Party Like Its 1929
By Mike Whitney
August 12, 2010 "Information Clearing House" -- On Tuesday, the Fed announced that it will reinvest the proceeds from maturing mortgage-backed securities (MBS) into US Treasuries. The process is called Quantitative Easing. In theory, Q.E. increases inflation expectations so that consumers spend more and rev up the economy. That's the theory. But adding to bank reserves when the banks are already loaded to the gills, achieves nothing. It doesn't put money in the hands of people who will spend it, generate more economic activity or increase growth. It's a big zero. Oddly enough, the Fed even admits this. According to an article in Bloomberg News, "The Central Bank posted a paper co-written by Seth Carpenter, associate director of the Fed’s monetary-affairs division, finding that the “quantity of reserve balances itself is not likely to trigger a rapid increase in lending.” No "increase in lending" means no credit expansion and no rebound. Thus, QE will have no real impact.
From the FOMC Statement:
"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.....
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability."
There's not a glimmer of light in the Fed's statement, and yet, "the Committee anticipates a gradual return to higher levels of resource utilization". But how? And on what is the Fed basing its prediction? Certainly not the data. Maybe tea leaves? The truth is the economy is in very bad shape and getting worse. This is from Wednesday's New York Times:
"The government’s preliminary estimate for economic growth in the second quarter is likely to be revised substantially lower...."Combining the bigger-than-expected trade deficit with other weak data suggests that Q2 growth was only 1.2 percent rather than the 2.4 percent originally estimated, placing the economy on even shakier ground than it seemed,” wrote Nigel Gault, chief United States economist at IHS Global Insight." (New York Times)
The Fed has dramatically revised its growth forecast downward since its last meeting. The fiscal stimulus is petering out and inventory restocking is nearly over. Now the economy will have to stand on its own without the support of fiscal and monetary aid. But is it strong enough? Households are still patching their balance sheets, credit is tight, and businesses have no incentive to invest due to flagging demand. So where's the growth going to come from? If the government does not provide more stimulus, asset prices will tumble, unemployment will rise, and the economy will contract. This is from Wednesday's Wall Street Journal:
"A Wall Street Journal survey found that by a two-to-one margin Wall Street economists see deflation as a bigger threat to the U.S. economy over the next three years than inflation."
“Deflation is dangerously close,” said David Resler of Nomura Securities, one of 53 economists surveyed by the Wall Street Journal. Among economists who answered the question, nearly two-thirds said that deflation poses the bigger risk to the economy over the next three years; the remainder said inflation is the bigger threat. That compares to an April survey, when the economists were split 50/50 over whether inflation or disinflation posed the bigger risk over the next year." ("WSJ Survey: Risks of Deflation on the Rise, Fed on Hold Longer", Phil Izzo, Wall Street Journal)
The looming risk of deflation is what makes the future so "unusually uncertain". (Bernanke words) But investors don't like uncertainty, which is why they pulling their money out of equities and moving it into bonds. That's also why the flight to safety has continued for more than 2 years since the crisis began. No one knows what the policy is or what the rules are. It's catch-as-catch-can. At the same time, falling bond yields are a referendum on Bernanke's performance. Historic low yields on Treasuries indicate that the Fed has been unable to restore confidence or allay investor fears. Recent surveys of small business owners (National Federation of Independent Business) and CEO's show that confidence continues to plunge. Consumer confidence is in the dumps, too. Bottom line: No one has faith in the Fed's approach.
Bernanke hoped that restarting his bond purchasing program would convince Wall Street that he was prepared to provide as much liquidity as needed. But traders saw through the ruse. The bond market cast its ballot immediately, driving yields into the ground. Investor pessimism pushed the 10-year below 3% while 2 year Treasuries slumped to historic lows. Investors are betting that the economy is headed into another vicious cycle of debt-liquidation and depression. They don't believe the Fed can stop the freefall, so they are shifting into risk-free liquid assets.
It took the stock market a bit longer to grasp what was going on, but 24 hours later, the rout on Wall Street began. Shares plunged throughout the session pushing down the Dow Jones 265 points by the end of the day. The other indexes were battered as well. The dollar strengthened on fears of deflation while bond yields on short-term notes fell sharply. Bernanke thinks the economy can muddle through on its own, but Wall Street isn't buying it. They want more monetary stimulus, and they want it now.
____________
PARTY LIKE ITS 1929
This is from David Rosenberg's "Breakfast with Dave":
"I know this sounds a bit dire, but little has changed from where we were a year ago......we had a huge bounce off the lows, but we had a similar bounce off the lows in 1930. The equity market was up something like 50% in the opening months of 1930, and while I am sure there was euphoria at the time that the worst of the recession and the contraction in credit was over, it’s interesting to see today that nobody talks about the great run-up of 1930 even though it must have hurt not to have participated in that wonderful rally. Instead, when we talk about 1930 today, the images that are conjured up are hardly very joyous. I’m not saying that we are into something that is entirely like the 1930s. But at the same time, we’re not in Kansas any more." ("Not in Kansas Anymore", David Rosenberg, Gluskin Schef)
The economy is on the rocks and another round of quantitative easing won't help. The Obama administration will have to toughen up and push through another fiscal stimulus program. It's the only way. QE, low interest loans, zero rates, consumer subsidies, tax cuts or more bank reserves will not do the trick. Private sector deleveraging is beginning to accelerate, which means that economic contraction is unavoidable unless government spending increases substantially for an extended period of time. The budget deficits are going to balloon. Get used to it. That's what it will take to get back on track. Obama's stimulus was never big enough. Experts like Paul Krugman, Joseph Stiglitz and Obama's-own Christiana Romer figured it would take roughly $1.4 trillion to suck up the excess capacity in the system and really put a dent in unemployment. $787 billion is a pittance compared to the $6 trillion in home equity and $4 trillion in retirement funds that were lost in the housing bubble flameout. When that much money vanishes from the system, it takes time to regroup. It blows a hole in personal balance sheets and forces people to cut back on spending. That's why the personal savings rate has skyrocketed to 6.4% in a matter of months. People are strapped and trying to pull themselves out of the red. It's government's job to give them a hand.
Here's an excerpt from a report by Goldman Sachs:
"The economic landscape has changed significantly during the last two months. The macroeconomic data that seemed to indicate improvement in April and May deteriorated sharply in June and early July. Cutting our 2011 EPS estimate to $89 represents a reversal for us and reflects the more challenging economic environment we now face compared with the backdrop just a few months ago."
Bernanke maintains the recovery is on track and that the economy is slowly improving, but as economist Dean Baker points out, demand has been weak throughout the crisis and is showing no signs of a rebound. Here's Baker:
"Growth has been boosted over the last 4 quarters by an inventory cycle as firms went from depleting to building their inventories. This cycle has now ended. Inventory growth is unlikely to accelerate further in the quarters ahead. This means that GDP growth will be close to final demand growth. Final demand growth has averaged 1.2 percent in the last four quarters and was 1.3 percent in the most recent quarter. There is no obvious reason to expect that the rate will increase in the near future." (Dean Baker, CEPR)
Bernanke's no-jobs, no-growth recovery has run aground. Now we need a real solution, a fiscal solution; a solution that will lower unemployment, put the country back to work and restore public confidence in government. And there's not much time to act either. As pessimism spreads and economic atrophy sets in, the prospect of a general fall in the price level becomes more likely. That will lead to more layoffs, more excess capacity, more plummeting asset prices, more debt-liquidation, more defaults and more bankruptcies. It's up to Obama and Co. to get this thing right and change course fast. Otherwise, we'll be back in the soup.
By Mike Whitney
August 12, 2010 "Information Clearing House" -- On Tuesday, the Fed announced that it will reinvest the proceeds from maturing mortgage-backed securities (MBS) into US Treasuries. The process is called Quantitative Easing. In theory, Q.E. increases inflation expectations so that consumers spend more and rev up the economy. That's the theory. But adding to bank reserves when the banks are already loaded to the gills, achieves nothing. It doesn't put money in the hands of people who will spend it, generate more economic activity or increase growth. It's a big zero. Oddly enough, the Fed even admits this. According to an article in Bloomberg News, "The Central Bank posted a paper co-written by Seth Carpenter, associate director of the Fed’s monetary-affairs division, finding that the “quantity of reserve balances itself is not likely to trigger a rapid increase in lending.” No "increase in lending" means no credit expansion and no rebound. Thus, QE will have no real impact.
From the FOMC Statement:
"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.....
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability."
There's not a glimmer of light in the Fed's statement, and yet, "the Committee anticipates a gradual return to higher levels of resource utilization". But how? And on what is the Fed basing its prediction? Certainly not the data. Maybe tea leaves? The truth is the economy is in very bad shape and getting worse. This is from Wednesday's New York Times:
"The government’s preliminary estimate for economic growth in the second quarter is likely to be revised substantially lower...."Combining the bigger-than-expected trade deficit with other weak data suggests that Q2 growth was only 1.2 percent rather than the 2.4 percent originally estimated, placing the economy on even shakier ground than it seemed,” wrote Nigel Gault, chief United States economist at IHS Global Insight." (New York Times)
The Fed has dramatically revised its growth forecast downward since its last meeting. The fiscal stimulus is petering out and inventory restocking is nearly over. Now the economy will have to stand on its own without the support of fiscal and monetary aid. But is it strong enough? Households are still patching their balance sheets, credit is tight, and businesses have no incentive to invest due to flagging demand. So where's the growth going to come from? If the government does not provide more stimulus, asset prices will tumble, unemployment will rise, and the economy will contract. This is from Wednesday's Wall Street Journal:
"A Wall Street Journal survey found that by a two-to-one margin Wall Street economists see deflation as a bigger threat to the U.S. economy over the next three years than inflation."
“Deflation is dangerously close,” said David Resler of Nomura Securities, one of 53 economists surveyed by the Wall Street Journal. Among economists who answered the question, nearly two-thirds said that deflation poses the bigger risk to the economy over the next three years; the remainder said inflation is the bigger threat. That compares to an April survey, when the economists were split 50/50 over whether inflation or disinflation posed the bigger risk over the next year." ("WSJ Survey: Risks of Deflation on the Rise, Fed on Hold Longer", Phil Izzo, Wall Street Journal)
The looming risk of deflation is what makes the future so "unusually uncertain". (Bernanke words) But investors don't like uncertainty, which is why they pulling their money out of equities and moving it into bonds. That's also why the flight to safety has continued for more than 2 years since the crisis began. No one knows what the policy is or what the rules are. It's catch-as-catch-can. At the same time, falling bond yields are a referendum on Bernanke's performance. Historic low yields on Treasuries indicate that the Fed has been unable to restore confidence or allay investor fears. Recent surveys of small business owners (National Federation of Independent Business) and CEO's show that confidence continues to plunge. Consumer confidence is in the dumps, too. Bottom line: No one has faith in the Fed's approach.
Bernanke hoped that restarting his bond purchasing program would convince Wall Street that he was prepared to provide as much liquidity as needed. But traders saw through the ruse. The bond market cast its ballot immediately, driving yields into the ground. Investor pessimism pushed the 10-year below 3% while 2 year Treasuries slumped to historic lows. Investors are betting that the economy is headed into another vicious cycle of debt-liquidation and depression. They don't believe the Fed can stop the freefall, so they are shifting into risk-free liquid assets.
It took the stock market a bit longer to grasp what was going on, but 24 hours later, the rout on Wall Street began. Shares plunged throughout the session pushing down the Dow Jones 265 points by the end of the day. The other indexes were battered as well. The dollar strengthened on fears of deflation while bond yields on short-term notes fell sharply. Bernanke thinks the economy can muddle through on its own, but Wall Street isn't buying it. They want more monetary stimulus, and they want it now.
____________
PARTY LIKE ITS 1929
This is from David Rosenberg's "Breakfast with Dave":
"I know this sounds a bit dire, but little has changed from where we were a year ago......we had a huge bounce off the lows, but we had a similar bounce off the lows in 1930. The equity market was up something like 50% in the opening months of 1930, and while I am sure there was euphoria at the time that the worst of the recession and the contraction in credit was over, it’s interesting to see today that nobody talks about the great run-up of 1930 even though it must have hurt not to have participated in that wonderful rally. Instead, when we talk about 1930 today, the images that are conjured up are hardly very joyous. I’m not saying that we are into something that is entirely like the 1930s. But at the same time, we’re not in Kansas any more." ("Not in Kansas Anymore", David Rosenberg, Gluskin Schef)
The economy is on the rocks and another round of quantitative easing won't help. The Obama administration will have to toughen up and push through another fiscal stimulus program. It's the only way. QE, low interest loans, zero rates, consumer subsidies, tax cuts or more bank reserves will not do the trick. Private sector deleveraging is beginning to accelerate, which means that economic contraction is unavoidable unless government spending increases substantially for an extended period of time. The budget deficits are going to balloon. Get used to it. That's what it will take to get back on track. Obama's stimulus was never big enough. Experts like Paul Krugman, Joseph Stiglitz and Obama's-own Christiana Romer figured it would take roughly $1.4 trillion to suck up the excess capacity in the system and really put a dent in unemployment. $787 billion is a pittance compared to the $6 trillion in home equity and $4 trillion in retirement funds that were lost in the housing bubble flameout. When that much money vanishes from the system, it takes time to regroup. It blows a hole in personal balance sheets and forces people to cut back on spending. That's why the personal savings rate has skyrocketed to 6.4% in a matter of months. People are strapped and trying to pull themselves out of the red. It's government's job to give them a hand.
Here's an excerpt from a report by Goldman Sachs:
"The economic landscape has changed significantly during the last two months. The macroeconomic data that seemed to indicate improvement in April and May deteriorated sharply in June and early July. Cutting our 2011 EPS estimate to $89 represents a reversal for us and reflects the more challenging economic environment we now face compared with the backdrop just a few months ago."
Bernanke maintains the recovery is on track and that the economy is slowly improving, but as economist Dean Baker points out, demand has been weak throughout the crisis and is showing no signs of a rebound. Here's Baker:
"Growth has been boosted over the last 4 quarters by an inventory cycle as firms went from depleting to building their inventories. This cycle has now ended. Inventory growth is unlikely to accelerate further in the quarters ahead. This means that GDP growth will be close to final demand growth. Final demand growth has averaged 1.2 percent in the last four quarters and was 1.3 percent in the most recent quarter. There is no obvious reason to expect that the rate will increase in the near future." (Dean Baker, CEPR)
Bernanke's no-jobs, no-growth recovery has run aground. Now we need a real solution, a fiscal solution; a solution that will lower unemployment, put the country back to work and restore public confidence in government. And there's not much time to act either. As pessimism spreads and economic atrophy sets in, the prospect of a general fall in the price level becomes more likely. That will lead to more layoffs, more excess capacity, more plummeting asset prices, more debt-liquidation, more defaults and more bankruptcies. It's up to Obama and Co. to get this thing right and change course fast. Otherwise, we'll be back in the soup.
Thursday, August 12, 2010
The Emperor Has no Clothes: America is Close to Bankrupt
U.S. Is Bankrupt and We Don't Even Know
By Laurence Kotlikoff
August 11, 2010 "Bloomberg" -- Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
‘Unofficial’ Liabilities
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous? Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.
Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
Laurence J. Kotlikoff is a professor of economics at Boston University and author of “Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking.” The opinions expressed are his own.)
To contact the writer of this column: Laurence Kotlikoff at kotlikoff@bu.edu
____________
Reagan insider: 'GOP destroyed U.S. economy'
Paul B. Farrell
MarketWatch
Aug. 10, 2010
ARROYO GRANDE, Calif. (MarketWatch) -- "How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman, President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece, "Four Deformations of the Apocalypse."
Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."
Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider -- someone so close to the development of the Reaganomics ideology -- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.
But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?
We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.
Please listen with an open mind, no matter your party affiliation: This makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy. Listen closely:
Reagan Republican: the GOP should file for bankruptcy
Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."
In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts -- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."
No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.
Stockman's indictment warns that the Republican party's "new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one:"
Stage 1. Nixon irresponsible, dumps gold, U.S starts spending binge
Richard Nixon's gold policies get Stockman's first assault, for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."
Remember Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors."
And without discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice.
Stage 2. Crushing debts from domestic excesses, war mongering
Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970." Who's to blame? Not big-spending Dems, says Stockman, but "from the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
Back "in 1981, traditional Republicans supported tax cuts," but Stockman makes clear, they had to be "matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."
OK, stop a minute. As you absorb Stockman's indictment of how his Republican party has "destroyed the U.S. economy," you're probably asking yourself why anyone should believe a traitor to the Reagan legacy. I believe party affiliation is irrelevant here. This is a crucial subject that must be explored because it further exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.
Yes, the GOP does have a welfare-warfare state: Stockman says "the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."
When Fed chief Paul Volcker "crushed inflation" in the '80s we got a "solid economic rebound." But then "the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s. Still today they're irrationally demanding an extension of those "unaffordable Bush tax cuts [that] would amount to a bankruptcy filing."
Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush also gave in "on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy." Takes two to tango.
Stage 3. Wall Street's deadly 'vast, unproductive expansion'
Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.
They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."
Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."
Stage 4. New American Revolution class-warfare coming soon
Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."
As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. Soon. The trigger will be the growing gap between economic classes: No wonder "that during the last bubble (from 2002 to 2006) the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy -- got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."
Get it? The decaying fruit of the GOP's bad economic policies is destroying our economy.
Warning: this black swan won't be pretty, will shock, soon
His bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."
Wrong: There are far bigger things to "pity."
First, that most Americans, 300 million, are helpless, will do nothing, sit in the bleachers passively watching this deadly partisan game like it's just another TV reality show.
Second, that, unfortunately, politicians are so deep-in-the-pockets of the Wall Street conspiracy that controls Washington they are helpless and blind.
And third, there's a depressing sense that Stockman will be dismissed as a traitor, his message lost in the 24/7 news cycle ... until the final apocalyptic event, an unpredictable black swan triggers another, bigger global meltdown, followed by a long Great Depression II and a historic class war.
So be prepared, it will hit soon, when you least expect.
By Laurence Kotlikoff
August 11, 2010 "Bloomberg" -- Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Such a tax hike would leave the U.S. running a surplus equal to 5 percent of GDP this year, rather than a 9 percent deficit. So the IMF is really saying the U.S. needs to run a huge surplus now and for many years to come to pay for the spending that is scheduled. It’s also saying the longer the country waits to make tough fiscal adjustments, the more painful they will be.
Is the IMF bonkers?
No. It has done its homework. So has the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.
‘Unofficial’ Liabilities
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.
The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.
$4 Trillion Bill
How can the fiscal gap be so enormous? Simple. We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
This is what happens when you run a massive Ponzi scheme for six decades straight, taking ever larger resources from the young and giving them to the old while promising the young their eventual turn at passing the generational buck.
Herb Stein, chairman of the Council of Economic Advisers under U.S. President Richard Nixon, coined an oft-repeated phrase: “Something that can’t go on, will stop.” True enough. Uncle Sam’s Ponzi scheme will stop. But it will stop too late.
And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Worse Than Greece
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Some doctrinaire Keynesian economists would say any stimulus over the next few years won’t affect our ability to deal with deficits in the long run.
This is wrong as a simple matter of arithmetic. The fiscal gap is the government’s credit-card bill and each year’s 14 percent of GDP is the interest on that bill. If it doesn’t pay this year’s interest, it will be added to the balance.
Demand-siders say forgoing this year’s 14 percent fiscal tightening, and spending even more, will pay for itself, in present value, by expanding the economy and tax revenue.
My reaction? Get real, or go hang out with equally deluded supply-siders. Our country is broke and can no longer afford no- pain, all-gain “solutions.”
Laurence J. Kotlikoff is a professor of economics at Boston University and author of “Jimmy Stewart Is Dead: Ending the World’s Ongoing Financial Plague with Limited Purpose Banking.” The opinions expressed are his own.)
To contact the writer of this column: Laurence Kotlikoff at kotlikoff@bu.edu
____________
Reagan insider: 'GOP destroyed U.S. economy'
Paul B. Farrell
MarketWatch
Aug. 10, 2010
ARROYO GRANDE, Calif. (MarketWatch) -- "How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman, President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece, "Four Deformations of the Apocalypse."
Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."
Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider -- someone so close to the development of the Reaganomics ideology -- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.
But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?
We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.
Please listen with an open mind, no matter your party affiliation: This makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy. Listen closely:
Reagan Republican: the GOP should file for bankruptcy
Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."
In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts -- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."
No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.
Stockman's indictment warns that the Republican party's "new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one:"
Stage 1. Nixon irresponsible, dumps gold, U.S starts spending binge
Richard Nixon's gold policies get Stockman's first assault, for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."
Remember Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors."
And without discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice.
Stage 2. Crushing debts from domestic excesses, war mongering
Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970." Who's to blame? Not big-spending Dems, says Stockman, but "from the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
Back "in 1981, traditional Republicans supported tax cuts," but Stockman makes clear, they had to be "matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."
OK, stop a minute. As you absorb Stockman's indictment of how his Republican party has "destroyed the U.S. economy," you're probably asking yourself why anyone should believe a traitor to the Reagan legacy. I believe party affiliation is irrelevant here. This is a crucial subject that must be explored because it further exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.
Yes, the GOP does have a welfare-warfare state: Stockman says "the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."
When Fed chief Paul Volcker "crushed inflation" in the '80s we got a "solid economic rebound." But then "the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s. Still today they're irrationally demanding an extension of those "unaffordable Bush tax cuts [that] would amount to a bankruptcy filing."
Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush also gave in "on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy." Takes two to tango.
Stage 3. Wall Street's deadly 'vast, unproductive expansion'
Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.
They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."
Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."
Stage 4. New American Revolution class-warfare coming soon
Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."
As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. Soon. The trigger will be the growing gap between economic classes: No wonder "that during the last bubble (from 2002 to 2006) the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy -- got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."
Get it? The decaying fruit of the GOP's bad economic policies is destroying our economy.
Warning: this black swan won't be pretty, will shock, soon
His bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."
Wrong: There are far bigger things to "pity."
First, that most Americans, 300 million, are helpless, will do nothing, sit in the bleachers passively watching this deadly partisan game like it's just another TV reality show.
Second, that, unfortunately, politicians are so deep-in-the-pockets of the Wall Street conspiracy that controls Washington they are helpless and blind.
And third, there's a depressing sense that Stockman will be dismissed as a traitor, his message lost in the 24/7 news cycle ... until the final apocalyptic event, an unpredictable black swan triggers another, bigger global meltdown, followed by a long Great Depression II and a historic class war.
So be prepared, it will hit soon, when you least expect.
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