The President Surrenders

By PAUL KRUGMAN

August 01, 2011 "NY Times" -- A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.


Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.

Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?


In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.

At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.

Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.

It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.

In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.

The US Constitution Makes Default Illegal: What a Real President Would Do on August 1, 2011

Webster G. Tarpley, Ph.D.
TARPLEY.net
July 27, 2011

Editor's NOTE:

This fictional speech that Webster G. Tarpley has suggested President Obama make is
fascinating.

--Dr. J. P. Hubert


My fellow Americans:

I speak to you tonight in an hour of grave danger to our nation. As you know, within the next few hours our government is in danger of failing to make payments of interest and principal which the United States Treasury has contracted to make. In technical terms, we are not far away from beginning to default on payments associated with those US Treasury securities which represent the public debt of the United States. As part of the same crisis, there is now a threat to over 70 million checks which your government issues every month — payments which go to recipients of Social Security, to providers of health services under the Medicare program, to Medicaid beneficiaries, to our active-duty and retired military personnel, to our defense contractors, to our government employees — in short, to everyone who receives a benefit from the federal government, who works for the federal government, or who does business with the federal government.

Default Means National Bankruptcy and World Chaos

A default of this kind means nothing less than national bankruptcy. Default is the essence of chaos and anarchy. It is a peril which we have successfully avoided during our entire existence as a nation, through a terrible civil war and the two world wars of the past century.

The United States dollar continues to play the role of the world reserve currency. This means that the central banks on every continent have chosen to maintain large portions of their reserves in the form of US Treasury securities. This role has been slightly diminished in recent years, but it is substantially intact. For the US government to default on payments through the US Treasury would therefore provoke a radical devaluation of the central bank reserves of the entire globe, wiping out some central banks and leaving others critically weakened. This might lead to massive dumping of US Treasury securities, leading to a general world panic to which no asset class would remain immune. We might see a dramatic decline of the dollar. This would represent the disintegration of the current world financial system, and a breakdown crisis of economic activity of unthinkable proportions. This might happen immediately, or it might require months or even years to explode in its full fury. In any case, it would put the United States on the road to national decline.

If you recall how financial markets seized up and ceased to function in the terrible days of September and October 2008, you have some inkling of the kind of catastrophic market climate that would be unleashed by the national bankruptcy of the United States. Borrowing, credit, mortgages, car financing, credit cards, and the like would not just require astronomical interest rates; many kinds of lending would disappear altogether. Millions more jobs would be lost.

The Public Credit is an Asset for All Americans and for the World

The United States Treasury securities market, with its $1 trillion per day of turnover, represents a unique national asset for our country. It is a signal achievement of the American System of Political Economy founded by Alexander Hamilton. It is the broadest, deepest, and most liquid market in the world. It is capable of absorbing trillions of dollars of securities and turning them into cash within a few hours – a capability unique on this planet. Despite how indignant we all are about the abuses of Wall Street, it would be extremely unwise to permit the Treasury securities market to be wrecked by ideological fanatics. All the more so since the Treasury market is unique in the world, and its extinction would leave no currency whatsoever in a position to function as the reserve medium of the world. This would have terrible implications for world trade and investment.

In short, our Treasury securities are the bedrock of all economic activity in this planet, and the common interest of humanity is well served by avoiding their chaotic insolvency.

The “Tea Party Caucus”: Right-wing Anarchists Funded by Malefactors of Great Wealth

Why, many Americans may wonder, should this crisis exist today? Here it is useless to talk in euphemisms in order to appear conciliatory; it is now necessary to call things by their names. As a result of the current world economic and financial depression which began in 2007-2008, the extreme right wing of the Republican Party, now calling itself the Tea Party, has been energized and revitalized. They have also begun to receive large amounts of political funding, including from a sinister individual who is reported to be the richest man in New York City. These are the malefactors of great wealth about whom presidents of both parties have been warning you for over a century. The goal of these opulent backers of the so-called Tea Party is to eliminate taxation and regulation upon themselves and their private business interests, many of which are in direct conflict with the public good. The impact of this Tea Party on public opinion has been magnified out of all proportion by the collusion of corrupt media cartels; in reality, the supporters of the so-called Tea Party do not exceed about 15% of our population.

Neo-Feudalism

Thanks to the economic royalists who support them, a Tea Party contingent numbering almost 90 members has entered the House of Representatives. Many are political novices. Many of them sincerely believe in the strange and un-American foreign doctrines of the Austrian school, according to which government is an unnecessary evil which needs to be abolished. It is entirely proper to see them as a species of right wing anarchist. The market, by contrast, they fetishize as infallible, and deserving of unbridled free reign over all the human affairs. They want a market without a government, something which has not existed in human affairs since the transition from the Old Stone Age to the Neolithic age, when the state emerged. The free market with no role whatsoever for government went out with Alley Oop the cave man, and it is not likely to return.

And all too often, the market of which they speak turns out not to be free, but rather dominated by predatory cartels, monopolies, and oligopolies. They are devoted to the causes of deregulation, privatization, the abolition of trade unions, more privileges for the wealthy, and a race to the bottom among the states. The world for which they are striving resembles perhaps nothing so much as feudalism as seen in Europe after the fall of the Roman Empire – and, like that anarchic chaos, it can only be described as A New Dark Age.

Most especially, these right wing anarchists of the Tea Party hate the social safety net which incorporates the precious economic rights for which the struggles of the American people won recognition during the New Deal and the Great Society. I am referring of course to Social Security, Medicare, Medicaid, unemployment insurance, the Head Start Program, the WIC program of high-protein meals for expectant mothers and infants, and many more. I am also referring to the right to collective bargaining for wage earners in the public and private sectors alike, and other features of a humane modern society.

Their reasons for this view read like a catalogue of the seven deadly sins, with pride, greed, rage, and envy in the lead. To these we must add class hatred, and also racism, since many of them are obsessed with the idea that their taxes are being spent to help minority groups.

New Deal America Repudiates the Tea Party

The problem faced by the Tea Party Republicans is that two thirds to three quarters of the American people warmly support the social safety net created by the New Deal and the Great Society. A recent poll has also shown that fully 80% of Americans want tax rates on the super-rich to be increased. Despite so many years of radio ranting, venal professors, and merciless sloganeering by politicians, the American people continue to repudiate the ideological platform of the so-called Tea Party. There is no hope their program could ever get passed.

Out of their despair that their ideological goals could ever be met through the democratic process, these wealthy individuals and their anarchist following have evolved a diabolical strategy. Their strategy is extortion. It is an attempt to place the United States government under duress. It is an attempt to mutilate, alter, and denature our Constitution through unconstitutional means.

It is nothing short of an illegal coup d’etat.

The Tea Party cloaks themselves in public as the greatest admirers of the U.S. Constitution. But in one concrete instance after another, we find that the Tea Party is at war with the Constitution.

The Tea Party Hates the Constitution in Practice

Our Constitution speaks not once but twice about the general welfare. To the Tea Party, this is anathema, since they believe that government should serve the wealthy few.

In terms of the issue at hand, Article I, Section 8 of the Constitution specifies that the Congress shall have the power “To borrow money on the credit of the United States.”

This is once again anathema to the Tea Party. In such a fundamental provision as this, enacted in response to the bitter lessons of ungovernability taught by the Articles of Confederation interlude, the Tea Party faction sets itself above the wisdom of the founders. The Tea Party would rewrite this provision to read that the Congress shall NOT have the power to borrow money on the credit of the United States, and the framers be damned.

This is what they admit when they demand their so-called balanced budget amendment. Such an amendment would destroy the finely wrought mechanism of the separation of powers and its accompanying checks and balances, which have served us so well over the centuries. But it is also a subterfuge, since the Tea Party knows very well that this amendment has no chance of being approved by the Congress, nor by the states. Rather, it has included in their litany of cut, cap, and balance purely as a deal-breaker, to make absolutely sure that no possible settlement can be forthcoming in the time available. They are determined to make all negotiations fail.

The Tea Party Goal is to Bankrupt the United States

The goal of the Tea Party faction of Congress is nothing less than the national bankruptcy of the United States, procured by forcing our default on the contractual and legal obligations of this government. They regard default and bankruptcy as positive goods, and indeed as indispensable steps on the path to the free market utopia they fondly imagine. Their reasoning is that, once the United States has gone bankrupt, it will henceforth be either prohibitively expensive or totally impossible for the Treasury to sell its bonds on the world financial markets. Therefore, payments on Social Security, Medicare, Medicaid, and other programs will have to be cut – not by law, but by the brute force of having no money.

This they do in wartime, with some 160,000 troops in the field, many of them fighting determined enemies on the other side of the world.

They claim they want predictabilty to allow businesses to create jobs, yet they court the greatest chaos and instability our nation has ever faced in our financial affairs – insolvency.

These same Tea Party ideologues, still feigning a concern about the American people, have already sponsored legislation which would give foreign creditors — the Chinese, the Japanese, the Saudis, and others — top priority in payments made by the federal government, ahead of our military personnel. According to these bills, we can be sure that Americans whose lives depend on Social Security, Medicare, and Medicaid will be dead last when disbursements are made. We can perhaps now see the real dimensions of the sinister plan with which we are confronted. By driving this government into bankruptcy, the Tea Party hopes to roll back the Constitution by wrecking the Congressional ability to borrow money as a practical matter, while at the same time destroying the entitlement programs which the most extreme Republicans have hated since the time of Franklin D. Roosevelt.

And not just Tea Party fanatics endorse this strategy. Indeed, it has the sympathy of rich elitists of all political stripes, including the academic and foundation left, who welcome the effort to strip away the economic rights of the American people.

Default Spells Genocide Against the American People

This is a policy which threatens the very lives of millions of Americans. It raises the specter of genocide against our own people. And I have not become President of the United States to preside over genocide against Americans.

I am not motivated by any ambition for the aggrandizement of the powers of the presidency. I have negotiated in good faith for months. The other side has not. I have offered reasonable concessions. Indeed, I have waited until now, when the clock reads five minutes to twelve, constantly hoping that the legislative process in Congress would yield an acceptable result. But now, with the specter of national bankruptcy in full view, and no reasonable outcome forthcoming, it is my responsibility to act. Since I sit in the seat that belonged to Washington and Lincoln and Roosevelt, it is my hope that my actions may be worthy of their heritage.

In a Conflict Among Statutes, the Constitution Decides

I am faced first of all with a conflict among statutes passed by Congress. On the one hand there is the debt ceiling law, which states that the Total Public Debt Outstanding of the United States of America shall not exceed $14.294 trillion. Since our public debt reached that level on May 16, this statute could be interpreted as barring any further auctions of United States treasury bills, notes, and bonds. And if we cannot borrow money in this way, since our current income is inadequate to meet all our obligations, we are headed for default, bankruptcy, and, worst of all, social chaos.

But this is not the only statute in the US Code. There are also other statutes to which I must pay attention. All public expenditure of the United States government, as you know, is carried out by law — by a law called the federal budget, which specifies what amounts are to be spent and on what. Every expenditure has to go through the Congress not once but twice — it must be authorized, and then it must be appropriated, and each of these requires the consent of the two houses of Congress and the signature of the president. I am now confronted with a series of expenditures which the current Fiscal Year 2011 budget, passed by Congress and signed into law by me, requires me to make. This includes the entire vast array of social safety net, defense, transportation, health, regulation, inspection, government employment, and other activities which I outlined above. I am under legal compulsion to make these expenditures.

Concerning Treasury securities outstanding, each one of these is an explicit contract that the United States government will pay specific sums of interest and principal at specified dates. Respect from the sanctity of contracts also requires me to make every one of these payments, without exception.

This is therefore my situation: on the one hand, the debt ceiling forbids me to borrow. On the other hand, the federal budget and the implied contracts represented by entitlements and Treasury securities require me to pay. Since tax revenue, partly because of recent and misguided legislation, is not adequate to make all of these payments, something has to give.

It is obvious that, when two or more statutes conflict, we need to look to the Constitution itself for guidance as to which one will apply. Given the extraordinary attention which the Constitution gives the concept of the general welfare, this guiding principle needs always to be kept in mind. Beyond this, our founding document contains two especially relevant provisions. On the one hand, we find that it is Congress which has the power to borrow money. But on the other hand we also have the 14th amendment, section 4 which states:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

In other words, this country is not allowed to default. Default is unconstitutional. Default is illegal. Default is a federal crime.

This is not an option which I can choose to exercise or ignore. It is not something I can invoke or not invoke. This is the Constitution talking. This provision binds me, and ought to bind the opposition in Congress, since they too have sworn to uphold the Constitution.

The Debt Ceiling is Unconstitutional and Must Be Disregarded

This provision places upon the President the responsibility to guarantee the timely payment of all United States debt obligations, regardless of attempts to the contrary that might come from other organs of government, including Congress or, for that matter, the courts. These words make me the ultimate guarantor of the solvency of the United States, especially under emergency conditions in which other branches of government have failed to do this. I am the last backstop. The buck stops here.

By contrast, the Constitution nowhere makes any reference to a debt limit. In fact, the first debt limit was instituted in 1917, less than a hundred years ago. Somehow we got through our first century and a quarter of national life, conquered the frontier, won the Civil War, and created the world’s greatest industrial power without any need for a debt ceiling.

In my considered judgment, and in the light of Amendment 14, Section 4, of the U.S. Constitution, a statutory debt ceiling is therefore unconstitutional. And all competent constitutional jurisprudence agrees that the president must not be bound by legislation which the courts are likely to find unconstitutional. This is all the more true in the present acute crisis.

Accordingly, I have issued an executive order directing the Secretary of the Treasury to resume Treasury auctions today, August 1, 2011, with a view to maintaining the uninterrupted ability of the United States to meet all of its financial obligations, budget and debt, foreign and domestic, without exception. The full faith and credit of our country will be maintained.

I cordially invite the Congress to approve and validate this decision ex post facto.

If your child is in Head Start, it will remain open. If you rely on Social Security, this means you will get your check. If your life depends on Medicare, you can rest assured that your doctors and hospitals will be paid on time so that they can continue their useful activity. If you are living in a nursing home and require Medicaid, those payments will also be available. If you are a member of the military, or a government employee of any kind, you will receive your salary on time. If you are a private firm doing business as a contractor with the government of the United States, you will be able to meet your payroll. If you are carrying out medical research or other scientific research funded by a US government grant, you can be assured that this support will not be interrupted. If you are a person or institution or government anywhere in the world who has purchased United States Treasury securities, you will be paid every penny, on time. If you want to buy a United States Savings Bond or cash one in, you can go ahead and do it.

Those intent on bankrupting the government of the United States and pitching our country into chaos may attempt to reverse this decision in the courts. I have directed the Solicitor General of the United States to prepare to refute their arguments. Since our constitutional position is strong, I have no doubt that we will prevail.

Some will say that the debt ceiling has been around for almost a century, and that so many precedents should not be overturned. That kind of thinking would leave us in bondage to judicial monstrosities like Plessy v. Ferguson, which validated racial segregation, or the infamous Dred Scott decision, which said that skin color was the basis for denying people rights given by God and natural law, and recognized by the Constitution. It will not be the first time we have fixed what turned out to be a terrible mistake.

Others in the House of Representatives bent on driving our nation into default have already announced their intention of impeaching me over this issue. I welcome their attack and the opportunity it will give to further clarify these great issues of the American public.

They will try to impeach me for what I am doing to save the public credit of the United States. In my view, I would truly deserve impeachment were I to refrain from taking this timely action. The President must take care that the laws be faithfully enforced, and this includes the federal budget and the commitments embodied in our entitlements programs and in the solvency of our Treasury securities.

I look forward to next year’s elections, which I expect will be largely fought over this issue and the larger questions which it raises.

Some have raised the question of the debt ratings agencies, and of their future evaluation of the United States public debt in the light of these events. I take this opportunity to announce that the Attorney General, the Department of Justice, and the FBI, acting under my direction, have initiated a comprehensive investigation of corruption and malfeasance which has been alleged against these ratings agencies in connection with their failure to provide timely warning to investors who had purchased certain toxic derivative securities in 2007-2008. We are also studying the legal means of depriving these ratings agencies of the extraordinary and quasi-governmental authority they exercise because of laws and regulations which limit certain forms of public and private investment to securities which have received favorable ratings from these agencies. To this end, we are cooperating with the authorities in Italy and other countries who have also undertaken aggressive investigations of the corruption of these ratings agencies.

The Department of Justice is also investigating reports that members of Congress have entered into criminal conspiracies with bankers and hedge fund operators for the purpose of selling Treasury securities short in the context of the current crisis, and linked this to the votes they cast. The Attorney General has promised to report on this issue at the earliest possible date.

For my part, I do not intend to sell America short. Historically, those who have bet against the United States have not prevailed, nor will they prevail today.

My great predecessor, Franklin D. Roosevelt, delivered his first inaugural address on a morning in March 1933 when every bank in our country had been forced to close its doors because of panic runs, and the economic heart of the nation had stopped beating. In the face of that emergency, the defiant rallying figure of FDR promised action with these words:

It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.

Roosevelt spoke these words at a time when a new Congress had failed for almost three months to do anything meaningful to fight the Great Depression and the banking panic which were ravaging the land in those years. Some at that time had concluded that our form of government was unworkable in a modern crisis, and they were looking abroad for new models of totalitarianism. We must always realize that any system of government which cannot solve the most urgent, life and death problems of the everyday life of the people is not long for this world. It risks being swept aside. If democracy brings chaos, that may be the end of democracy. In this sense, the future our democratic representative government depends on our solvency.

It is in this spirit that I am dealing with the current crisis. I remind you all that, while avoiding national bankruptcy and default in the short-term is absolutely indispensable, this will not by itself solve the majority of our economic problems. The world will remain gripped by an economic and financial depression of incalculable proportions. We will still have some 30 million unemployed in our country. We will still witness American families thrown on the street by fraudulent foreclosures. We will require a comprehensive economic recovery program, supplemented by significant domestic reforms, and capped by a new world monetary system, to put the current world depression behind us.

It is, however, my hope that, by rebuffing those political forces seeking to drive our country into bankruptcy and chaos, we have gained the time necessary to address these issues of economic recovery and financial reform free from the climate of blackmail, extortion, and shakedown.

In the meantime, America will be open for business, today, tomorrow, and every day. Equally important, we can be confident in the ability of our constitutional system to protect the general welfare and the public interest from the machinations of small cliques of fanatics, wealthy though they may be.

I ask for your support. Thank you.

Gang of Six takes from poor, gives to rich: There Will be Major Cuts in Social Security

July 22, 2011 ------- If there was ever a time in the modern history of America that the American people should become engaged in what's going on here in Washington, now is that time. Decisions are being made that will impact not only our generation but the lives of our children and our grandchildren for decades to come, and I fear very much that the decisions being contemplated are not good decisions, are not fair decisions.


There is increased understanding that defaulting for the first time in our history on our debts would be a disaster for the American economy and for the world's economy. We should not do that.

There also is increased discussion about long-term deficit reduction and how we address the crisis which we face today of a record-breaking deficit of $1.4 trillion and a $14 trillion-plus national debt.

One of the long-term deficit reduction plans came from the so-called Gang of Six. We do not know all of the details of that proposal. In fact, we never will know because a lot of the decisions are booted to committees to work out the details.

It is fair to say, however, that Senators Coburn, Senator Crapo and Chambliss deserve congratulations. Clearly, they have won this debate in a very significant way. My guess is that they will probably get 80 percent or 90 percent of what they wanted. In this town, that is quite an achievement, but they have stood firm in their desire to represent the wealthy and the powerful and multinational corporations. They have threatened. They have been smart. They have been determined. And at the end of the day, they will get almost all of what they want. That is their victory, and I congratulate them.

Unfortunately, their victory will be a disaster for working families in this country, for the elderly, for the sick, for the children and for low-income people.

Based on the limited information that we have, I think it is important to highlight some of what is in this so-called Gang of Six proposal that the corporate media, among others, are enthralled about.

Some may remember that for a number of years, leading Democrats said that we will do everything that we can to protect Social Security, that Social Security has been an extraordinary success in our country, that for 75 years, with such volatility in the economy, Social Security has paid out every nickel owed to every eligible American. I heard Democrats say that Social Security has nothing to do with the deficit. That is right because Social Security is funded by the payroll tax, not by the U.S. Treasury. Social Security has a $2.6 trillion surplus today. It can pay out every benefit owed to every eligible American for the next 25 years. It is an enormously popular program. Poll after poll from the American people says doesn't cut Social Security. Two and a half years ago when Barack Obama, then a senator from Illinois, ran for president of the United States, he made it very clear if you voted for him there would be no cuts in Social Security.

What Senators Coburn, Crapo and Chambliss have managed to do in the Gang of Six is reach an agreement where there will be major cuts in Social Security. Don't let anybody kid you about this being some minor thing. It is not. What we are talking about is that Social Security cuts would go into effect virtually immediately. Ten years from now, the typical 75-year-old person will see their Social Security benefits cut by $560 a year. The average 85-year-old will see a cut of $1,000 a year. Now, for some people here in Washington, maybe the big lobbyists who make hundreds of thousands a year, $560 a year or $1,000 a year may not seem like a lot of money, but if you are a senior trying to get by on $14,000, $15,000, $18,000 a year and you're 85 years old, the end of your life, you're totally vulnerable, you're sick -- a $1,000 per year cut in what you otherwise would have received is a major, major blow.

So I congratulate Senator Coburn, Senator Crapo, Senator Chambliss for doing what president Obama said would not happen under his watch, what the Democrats have said would not happen under their watch.

But it's not just Social Security. We have 50 million Americans today who have no health insurance at all. Under the Gang of Six proposals, there will be cuts in Medicare over a 10-year period of almost $300 billion. There will be massive cuts in Medicaid and other health care programs. There will be caps on spending, which mean that there will be major cuts in education. If you are a working-class family, hoping that you're going to be able to send your kid to college and thinking that you will be eligible for a Pell grant, think twice about that. Pell grants may not be there. If you're a senior who relies on a nutrition program, that nutrition program may not be there. If you think it's a good idea that we enforce clean air and clean water provisions so that our kids can be healthy, those provisions may not be there because there will be major cuts in environmental protection.

Some people think that's not so good, but at least our Republican friends are saying we need revenue and we're going to get $1 trillion in revenue. But wait a minute,. If you read the proposal, there are very, very clear provisions making sure that we are going to make massive cuts in programs for working families, for the elderly, for the children. Those cuts are written in black and white. What about the revenue? Well, it's kind of vague. The projection is that we would rise over a 10-year period $100 billion in revenue. Where is that going to come? Is it necessarily going to come from the wealthiest people in this economy? Is it going to come from large corporations who are enjoying huge tax breaks? That is not clear at all. I want middle-class families to understand that when we talk about increased revenues, do you know where that comes from? It may come from cutbacks in the home mortgage interest deduction program, which is so very important to millions and millions of families. It may mean that if you have a health care program today, that health care program may be taxed. That's a way to raise revenue. It may be that there will be increased taxes on your retirement programs, your I.R.A.'s, your 401(k)'s. But we don't have the details for that. All we have is some kind of vague promise that we're going to raise $1 trillion over the next 10 years, no enforcement mechanism and no clarity as to where that revenue will come from.

That is why it is so terribly important that the American people become engaged in this debate which will have a huge impact on them, on their parents and on their children. The American people must fight for a fair deal. At a time when the wealthiest people in this country are doing phenomenally well and their effective tax rate is the lowest on record, at a time when the top 400 individuals in this country own more wealth than 150 million Americans, at a time when corporate profits are soaring and in many instances corporations, these same corporations pay nothing in taxes, at a time when we have tripled military spending since 1997, there are fair ways to move toward deficit reduction which do not slash programs that working families and children and the elderly desperately depend upon.

This senator is going to fight back. I was not elected to the United States Senate to make devastating cuts in Social Security, in Medicare, in Medicaid, in children's programs while lowering tax rates for the wealthiest people in this country.

Bernie Sanders, an Independent, is Vermont's junior senator

____________________________________________________

Gang of Six takes from poor, gives to rich

By: The Institute for Southern Studies

Under the Senate's so-called "Gang of Six"* debt plan unveiled this week, percent of deficit reduction that comes through spending cuts to social programs including health care, education and environmental protection: 100%

Amount by which the plan cuts Medicare, the health care program for seniors, over a decade: at least $298 billion

Amount by which it would cut military benefit programs, such as health plans for soldiers and veterans: $80 billion

Portion of the immediate deficit reduction savings outlined in the proposal that would come from reducing Social Security benefits: 1/5

Under the plan, amount less per year the average Social Security recipient would receive at age 75: $560

At age 85: $1,000

Current top marginal income tax rate for the wealthiest Americans and most profitable corporations: 35%

Lowest rate to which that would be reduced by the Gang of Six proposal: 23%

Estimated amount in profits being held offshore by U.S. companies, which under the plan would see an end to taxation of most of their overseas profits: $1 trillion

Amount by which the Gang of Six plan claims to reduce deficits over the next decade: almost $4 trillion

Amount by which the plan would actually reduce revenue by 2021, compared to the Congressional Budget Office's current law baseline: $1.5 trillion

Number of weeks left to reach a deal before the U.S. could begin to default on its debt obligations: less than 2

The Inevitability of Global Economic Collapse

Election 2012, Time for Some Bitter Medicine

By: Dr. J. P. Hubert

US Debt is Result of Excessive Military/Security Spending

The United States is smothering under a mountain of debt. By far the largest contributor to that negative ink is the cost of maintaining a veritable global empire.[1]  Rather than a so-called Defense Department, the US has developed a “War Department” or what might better be termed a military/security (M/S) complex which when all of the related and supporting expenses are included costs at least $1.2 trillion/year. At just short of 30% of the annual US budget, this sum represents the largest category by percent of total federal spending, exceeding the costs of Medicare and Social Security respectively.

US Military/Security Spending is Irrational

Moreover, US yearly defense spending alone exceeds the total of the next 17 largest military budgets in the world. By any reasonable metric, this degree of military spending is excessive. When American national security including intelligence spending are added to direct military spending the total surpasses the military/security budgets of all the developed nations on Earth combined. Such an outlay is completely irrational even if the main goal of the United States is to remain the pre-eminent global superpower.

Attempting to continue this degree of M/S spending can only result in total economic collapse of the United States, an outcome which is clearly incompatible with the desire to remain the supreme global hegemonic force. It is clear from a consideration of the mathematics involved that no amount of austerity with regard to Medicare, Medicaid or other entitlement programs + markedly increasing taxes[2] on the wealthy, and or elimination of corporate (welfare) tax subsidies will come close to reducing our national debt and budget deficit problems without a drastic reduction in M/S spending.[3]

Excessive M/S Spending Makes US Less Competitive Globally

It is crucial to recognize that money spent on the military/security complex is lost forever to the national economy in the aggregate. While individuals and corporations may benefit greatly as a result of M/S spending, the vast majority of Americans are poorer for it since money spent in this way is unavailable for improvements in infrastructure, education, transportation, technology, research and development etc., things that other nations with much lower expenses in M/S are able to surpass us in.

The question which begs to be asked then is why does this insanity continue? If doing so can only lead to economic collapse, why do we not change it? Surely it must be obvious to those in power that the status quo cannot continue. Does the corporate/governmental complex or conglomerate not realize that our current course will sooner rather than later end in default? Of course they do. But they can afford literally not to care.

Multinational Corporations Eschew Nation States

The reason is that the ruling elite, the new Plutocrats have become true global citizens who need no national boundaries, citizenship or localized base of operations. It matters little to them whether they live in the United States or somewhere else. Their companies are multi or inter-national, perhaps better termed supra-national and their markets are global. They roam the Earth in search of the cheapest labor forces possible while availing themselves of “free-markets” a euphemism for the privilege of not being charged a tax or tariff for selling their products to consumers many of whom lost their jobs to the slave labor the multinational corporations avail themselves of.[4]

These companies find the geographical locations which advertise the cheapest labor and the lowest corporate taxes where they manufacture their products and sell them worldwide; demanding unfettered that is, unregulated markets. They literally demand not to be penalized for assembling their goods utilizing immoral and (in the US) illegal labor practices.

Free-Trade is Rigged (Unjust) Trade

These so-called free-trader’s or marketeers are advocates of unfair or unjust trade in which they alone benefit while the vast majority of those to whom they sell their goods lose their jobs, experience a reduced standard of living and become unable to take advantage of the lower prices that allegedly occur as a result of off-shoring of production and out-sourcing of labor—the original argument utilized to justify the practice. It is a total sham, a rigged game which benefits only the select few Plutocrats who now control the United States and much of the West. What this really means is that the American Empire exists to make this unjust and immoral arrangement more palatable (whether through persuasion or threat of armed aggression) to those who would otherwise object.

Excessive Military/Security Spending Benefits Plutocracy[5]

Thus, we do not alter our insane M/S budget because it insures that our ruling Plutocrats will be able to continue for a bit longer solidifying their incredible wealth. When the United States finally implodes, they will simply move elsewhere with their foreign factories, work forces and non-US markets intact. By then, their business in Brazil, China, India, and elsewhere will have matured to the point that they will be able to survive nicely without those which once existed in America.

Britain serves as a case in point when a nation decides to dismantle its empire in a controlled fashion rather than allow it to completely implode. On the other hand imperial Rome demonstrates what happens when instead of ending its Militarism and gross over-reach, an empire continues with the status quo until it falls. It would be much better if we could emulate Great Britain rather than ancient Rome.

Quick Summary:

1) Multinational Corporations are not limited to nation states, they are not interested in or for the most part affected by patriotic sentiments, geographical locations, fixed work forces, local customs, traditions or politics.

2) Multinational Corporations are larger than ever and now control the 6 largest industries in the United States including; Energy, Banking/Wall Street, Health Care/Pharmaceutical, Agriculture, Military/Security, Media/Entertainment.

3) Multinational Corporations now control the American political process including the Legislative and Executive branches due in part to the Citizens United case decided recently by the USSC in favor of unlimited corporate political donations without the need to provide complete transparency of contributions.

4) Because of number 1-3 above, the American constitutional representative democratic republic brought into being in 1789 has been replaced by a kind of Plutocracy which unites the largest multinational corporations and the government. It exists for the benefit of the very few at the expense of the many. It could legitimately be termed a Fascist state.

Recommendations:


1) Reduce Defense/Security Spending by >50%.

2) End Clandestine Operations portion of CIA, DIA, and NSA etc. and return the CIA to its original purpose of providing only intelligence information gathering to be used by President and Cabinet. President Kennedy wanted to do this and in part was killed for it.

3) Immediately end all US wars including occupations of Iraq, Afghanistan, drone attacks in Pakistan and support of NATO in Libya and any other similar activities which do not represent legitimate defensive response to unjust offensive attacks by nation states. Handle foreign based terrorism as a police action and end the intellectually/factually baseless global war on terror. All of these will make the risk of serious terrorist attack on the United States much less likely. Eliminate the Department of Homeland Security as it will be unnecessary once we end the foreign wars and begin treating the Palestinians fairly.

4) Raise income taxes for those American's with an annual income of >$250K and place at least a 50% tax on all individual earned and unearned income exceeding $5 million dollars per annum.

5) End all unfair trade agreements which allow the goods manufactured by multinational corporations assembled by slave laborers to be imported to the US without punitive tariffs. Decrease the power of large corporations and increase necessary regulation of key banking, energy companies. End "to big to fail banks."

6) End the Federal Reserve and begin the practice of printing US legal tender directly thus avoiding the paying of interest to a private entity. Consider returning to a precious mineral based currency such as the gold standard eliminated by President Nixon.

7) End corporate welfare for well-established industries such as those based upon fossil fuels. Federally subsidize the creation of an alternative energy industry in the United States through use of natural gas and wind power as suggested by T. Boone Pickens.

8) Create a National Health Care System which guarantees affordable care to all Americans. End the health care monopoly that the private insurance industry currently enjoys. Strongly consider a single payer system in which monies are payed to actual providers of care not to needless "middlemen" and eliminate wasteful and unnecessary medico-legally related defensive medical practices through reform of medical malpractice laws.

9) Link Israeli foreign aid to their observing the internationally recognized 1967 boundaries as outlined by the UN. Insist that Israel ends its occupation of Arab Palestinian Land. This has the added effect of lessening the likelihood that the USA will be subjected to foreign terrorist attacks.

10) Replace anyone in Congress and the White House who does not accept the above. Strongly consider a third party Independent Ticket challenge to President Obama and the Republican nominee.

NOTES:

[1] At last count we have over 900 foreign military bases of various sizes that require ongoing support.
[2] A tax increase back to Clinton administration era levels for those Americans with an annual income >250K would help as would a special tax for multimillionaires and billionaires of >50% on all annual income exceeding $5 million including capital gains. It would not however, alone or in combination with cuts to Medicare and Social Security be sufficient to eliminate future budget deficits or end the national debt completely by a time certain e.g. 2030.
[3] The ridiculously small amount recommended by Defense Secretary Robert Gates of roughly $40 billion is ludicrous and fails to address the main issue which is that the US can no longer afford a global empire.
[4] While in isolation this behavior might see economically wise, it is morally repugnant and violates the first two principle of the Natural Moral Law; Do good/avoid evil and treat your neighbor fairly.
[5] In this context I mean a Regime controlled by the super-rich, a fascist amalgam of powerful corporations and government. In 20th century Germany it was termed National Socialism. This would be a variant.

The US Maxes Out Its Credit Card

Editor's NOTE:

Mr. Margolis is correct. The US maintains a "War Department" not a Department of Defense. It exists to ensure American and Western financial supremacy for the all-powerful multinational corporations. As such the US military is being utilized to build ever larger monopolies for the super-rich Plutocrats who now control the United States and Europe.

Bear in mind, these Plutocrats could care less about what happens to the United States or any other country for that matter. National boundaries are simply irrelevant to them. Should the US default, they will simply move elsewhere since the entire world is their oyster. They can live anywhere and their markets are global.

This means that the US military establishment actually exists for the benefit of the Plutocracy and therefore to the detriment of the poor and middle class even though it is the children of the impoverished by and large who make up the ranks of the armed forces. What a tragic irony that.

It should be obvious that in order for the United States not to default on its debt, the "War Department" must be slashed by at least 50%. It should be the absolute first order of business for the Congress. Unfortunately, the Executive and Legislative branches of government have been completely bought and paid for by the very Plutocrats who benefit most from the Empire which insures their wealth. Barring a massive populist revolt, nothing will change.

The United States must find a credible third party populist candidate who can bring this issue to the American public before it is too late. I nominate Jesse Ventura if he is willing to take on the challenge. He may be the only person with enough courage, understanding and name recognition to compete with President Obama and the Republican nominee in 2012.


The US Maxes Out Its Credit Card

By Eric Margolis

April 23, 2011 "Information Clearing House" --The US dollar sank further last week and gold hit $1,500 an ounce, frightening investors and destabilizing financial markets. A leading credit rating agency warned the US AAA rating might be downgraded.

While Rome burned, President Obama and the Republican-controlled US Congress traded childish taunts and hot air. Both parties refused to tell Americans the painful truth: government’s yawning $1.4 trillion US budget deficit had to be slashed to prevent a financial meltdown. That would mean pain for everyone.

But the two political parties are deadlocked: Obama’s Democrats want to raise taxes. Republicans demand tax cuts. They want to cut health, education and welfare, all three sacred cows to the Democrats, while increasing military spending when 40 million Americans draw government food aid.

This dishonest debate mostly ignores the 800-lb gorilla in the room: America’s bloated $750-900 billion annual military spending. Some experts put total annual US military and intelligence spending at $1.2 trillion.
Few American politicians dare suggest seriously trimming the Pentagon’s runaway spending.

The US National Priorities Project estimates that in 2011, out of one dollar of US federal spending, 27.4% is military; 21.5% health; 13.8% interest on the debt; 10.9% social security benefits; 3.5% on education; and 23% on everything else.

In 2010, US military spending exceeded by 50% the average spent in the Cold War years when America had a serious rival in the Soviet Union. Since 2000, US military spending has grown by 67% (all figures adjusted for inflation). Yet today America has no real military rival.

The US now accounts for almost 50% of world military spending. Add America’s wealthy allies in Europe and Asia, and the total rises to 80%. And yet Americans are incessantly barraged by wild claims their nation is under dire threat, the latest and most preposterous being that dirt-poor Myanmar (former Burma) is getting nuclear weapons. China, with a military budget only 1/10th the size of America’s, is the only future threat the Republicans can come up with.

Most Americans think of “defense” spending rather than calling it “military” spending. This gives the totally mistaken impression America’s shores are somehow being threatened by enemy invasion.

In reality, the Pentagon’s vast budget sustains US world military domination, with over 100 overseas bases, air and naval fleets, two wars, numerous smaller “police actions” in Africa and Asia, rented allies, and a strategic nuclear arsenal at least 75% larger than needed.

President George W. Bush waged two wars, cut taxes, and spent billions in farm and medical subsidies without funding them through tax increases or spending cuts. These costs were simply loaded on to America’s huge national debt. If American taxpayers had to actually pay for their $1.6 trillion wars in Afghanistan and Iraq, these conflicts would quickly end.

President Lyndon Johnson also financed the Vietnam War through debt. The result: a worldwide wave of inflation that took a decade to overcome. The same thing is happening today thanks to the profligate George Bush who doubled US government spending. The US has been exporting inflation around the globe by debauching the dollar and massive borrowing to finance its deficits.

Bush and now Obama’s unpaid-for wars, recklessly low US interest rates, commodity speculators, and China’s overheated economy are fueling the rising tide of world inflation.

The subject of modest cuts from the sacred cow of military spending is being timidly raised by politicians of both parties. But they are terrified of being accused of the ultimate sin in hyperpatriotic US politics, being unpatriotic and “not supporting our boys.”

Yet unless the Pentagon’s budget is cut – perhaps by as much as half or more – the US, dangerously top-heavy with debt, may capsize. History amply shows more empires done in by poor finances and debt than invasion by enemies.

Alas, America’s governing system, dominated as it is by such powerful special interests as the military-industrial complex, Wall Street, and agriculture, can’t seem to escape from the national addiction to war and debt.

As my friend Arnaud de Borchgrave writes, while the US has spent $1.5 trillion on its Afghan and Iraq Wars, China is using US interest payments to win friends and customers around the world.

Obama’s FY 2012 Budget Is A Tool Of Class War

By: Paul Craig Roberts

February 18, 2011 "Information Clearing House" ---- Obama’s new budget is a continuation of Wall Street’s class war against the poor and middle class. Wall Street wasn’t through with us when the banksters sold their fraudulent derivatives into our pension funds, wrecked Americans’ job prospects and retirement plans, secured a $700 billion bailout at taxpayers’ expense while foreclosing on the homes of millions of Americans, and loaded up the Federal Reserve’s balance sheet with several trillion dollars of junk financial paper in exchange for newly created money to shore up the banks’ balance sheets. The effect of the Federal Reserve’s “quantitative easing” on inflation, interest rates, and the dollar’s foreign exchange value are yet to hit. When they do, Americans will get a lesson in poverty.

Now the ruling oligarchies have struck again, this time through the federal budget. The U.S. government has a huge military/security budget. It is as large as the budgets of the rest of the world combined. The Pentagon, CIA, and Homeland Security budgets account for the $1.1 trillion federal deficit that the Obama administration forecasts for fiscal year 2012. This massive deficit spending serves only one purpose--the enrichment of the private companies that serve the military/security complex. These companies, along with those on Wall Street, are who elect the U.S. government.

The U.S. has no enemies except those that the U.S. creates by bombing and invading other countries and by overthrowing foreign leaders and installing American puppets in their place.

China does not conduct naval exercises off the California coast, but the U.S. conducts war games in the China Sea off China’s coast. Russia does not mass troops on Europe’s borders, but the U.S. places missiles on Russia’s borders. The U.S. is determined to create as many enemies as possible in order to continue its bleeding of the American population to feed the ravenous military/security complex.

The U.S. government actually spends $56 billion a year, that is, $56,000 million, in order that American air travelers can be porno-scanned and sexually groped so that firms represented by former Homeland Security Secretary Michael Chertoff can make large profits selling the scanning equipment.

With a perpetual budget deficit driven by the military/security complex’s desire for profits, the real cause of America’s enormous budget deficit is off-limits for discussion. The U.S. Secretary of War-Mongering, Robert Gates, declared: “We shrink from our global security responsibilities at our peril.” The military brass warns of cutting any of the billions of aid to Israel and Egypt, two functionaries for its Middle East “policy.”

But what are “our” global security responsibilities? Where did they come from? Why would America be at peril if America stopped bombing and invading other countries and interfering in their internal affairs? The perils America faces are all self-created.

The answer to this question used to be that otherwise we would be murdered in our beds by “the worldwide communist conspiracy.” Today the answer is that we will be murdered in our airplanes, train stations, and shopping centers by “Muslim terrorists” and by a newly created imaginary threat--”domestic extremists,” that is, war protesters and environmentalists.

The U.S. military/security complex is capable of creating any number of false flag events in order to make these threats seem real to a public whose intelligence is limited to TV, shopping mall experiences, and football games.

So Americans are stuck with enormous budget deficits that the Federal Reserve must finance by printing new money, money that sooner or later will destroy the purchasing power of the dollar and its role as world reserve currency. When the dollar goes, American power goes.

For the ruling oligarchies, the question is: how to save their power.


Their answer is: make the people pay.

And that is what their latest puppet, President Obama, is doing.

With the U.S. in the worst recession since the Great Depression, a great recession that John Williams and Gerald Celente, along with myself, have said is deepening, the “Obama budget” takes aim at support programs for the poor and out-of-work. The American elites are transforming themselves into idiots as they seek to replicate in America the conditions that have led to the overthrows of similarly corrupt elites in Tunisia and Egypt and mounting challenges to U.S. puppet governments elsewhere.
All we need is a few million more Americans with nothing to lose in order to bring the disturbances in the Middle East home to America.

With the U.S. military bogged down in wars abroad, an American revolution would have the best chance of success.

American politicians have to fund Israel as the money returns in campaign contributions. The U.S. government must fund the Egyptian military if there is to be any hope of turning the next Egyptian government into another American puppet that will serve Israel by continuing the blockade of the Palestinians herded into the Gaza ghetto.

These goals are far more important to the American elite than Pell Grants that enable poor Americans to obtain an education, or clean water, or community block grants, or the low income energy assistance program (cut by the amount that U.S. taxpayers are forced to give to Israel).

There are also $7,700 million of cuts in Medicaid and other health programs over the next five years.

Given the magnitude of the U.S. budget deficit, these sums are a pittance. The cuts will have no effect on U.S. Treasury financing needs. They will put no brakes on the Federal Reserve’s need to print money in order to keep the U.S. government in operation.

These cuts serve one purpose: to further the Republican Party’s myth that America is in economic trouble because of the poor: The poor are shiftless. They won’t work. The only reason unemployment is high is that the poor would rather be on welfare.

A new addition to the welfare myth is that recent middle class college graduates won’t take the jobs offered them, because their parents have too much money, and the kids like living at home without having to do anything. A spoiled generation, they come out of university refusing any job that doesn’t start out as CEO of a Fortune 500 company. The reason that engineering graduates do not get job interviews is that they do not want them.

What all this leads to is an assault on “entitlements”, which means Social Security and Medicare. The elites have programmed, through their control of the media, a large part of the population, especially those who think of themselves as conservatives, to conflate “entitlements” with welfare. America is going to hell not because of foreign wars that serve no American purpose, but because people, who have paid 15% of their payroll all their lives for old age pensions and medical care, want “handouts” in their retirement years. Why do these selfish people think that working Americans should be forced through payroll taxes to pay for the pensions and medical care of the retirees? Why didn’t the retirees consume less and prepare for their own retirement?

The elite’s line, and that of their hired spokespersons in “think tanks” and universities, is that America is in trouble because of its retirees.

Too many Americans have been brainwashed to believe that America is in trouble because of its poor and its retirees. America is in trouble because it coerces a dwindling number of taxpayers to support the military/security complex’s enormous profits, American puppet governments abroad, and Israel.

The American elite’s solution for America’s problems is not merely to foreclose on the homes of Americans whose jobs were sent offshore, but to add to the numbers of distressed Americans with nothing to lose, the sick and the dispossessed retirees, and the university graduates who cannot find jobs that have been sent to Chine and India.

Of all the countries in the world, none need a revolution as bad as the United States, a country ruled by a handful of selfish oligarchs who have more income and wealth than can be spent in a lifetime.

What Chance a U.S. Default?

By James Politi

January 14, 2011 "Financial Times" -- It was the most startling of warnings. If the U.S. does not get its finances in order “we will have a European situation on our hands, and possibly worse”, claimed Paul Ryan, the new Republican chairman of the House of Representatives budget committee.

As it stands today, the U.S. borrows about 40 cents of every dollar it spends. Curbing the budget deficit has been the stated mission of Mr. Ryan, a rising Republican star, for several years. But such calls for action have multiplied in Washington in recent months, igniting what some say is the fiercest debate over fiscal and budgetary policy in decades.

The risks are big. If the government rushes into austerity, cutting too much and too quickly, it could stunt economic recovery. But if the political system cannot forge some kind of consensus on steps to restore U.S. deficits to sustainable levels, the danger is potentially even greater: a sovereign debt crisis in the world’s largest economy.

“It’s a weak period for the economy, so I don’t think you want to do serious deficit reduction anyway, but we are playing a dangerous game and we will start to pay a price for fiscal irresponsibility,” says Ethan Harris at Bank of America Merrill Lynch.

The big fear is that if no action is taken, investors might eventually punish the US for its fiscal laxity. That would raise borrowing costs for businesses and consumers, force severe austerity measures and risk social unrest. Not only America’s triple-A credit rating could be threatened; some point to consequences in foreign affairs and defence as well. Mike Mullen, chairman of the joint chiefs of staff, last year warned that the debt pile could limit the flexibility of the US in funding its military – in his eyes the “most significant threat to our national security”.

So far, capital markets have not reacted much to the dismal long-term outlook. The 10-year Treasury yield, for instance, has been trading this week well below 3.4 per cent, close to historical lows although it has risen in recent months. Still, a growing number of voices are calling for a deal to address America’s strained public finances, even if it means tackling programs such as retirement benefits and health care for the elderly that have long been protected.

Yet whether this anti-deficit rhetoric translates into a meaningful turn towards austerity in the coming months – and leading into the 2012 presidential election – is much in doubt, for two main reasons: severe political divisions and the continuing fragility of the economic recovery.

“It’s not urgent but at some point it’s going to become more urgent,” says Phillip Swagel, who was a senior economic official in the George W. Bush administration. “Clearly the markets don’t think we’re Argentina, but we should send them a signal that they are right, that we will address the issue.”

A deal extending Bush-era tax cuts and unemployment benefits in December failed to send that message, adding $858-billion to long-term deficits without any commitment to reductions in the future, even though supporters argue that if the measures boost growth, America’s budgetary position will improve too.

But more big tests of America’s commitment to fiscal discipline are looming. On Jan. 25, President Barack Obama will lay out his legislative priorities for 2011 in his State of the Union address to Congress, and measures to reduce long-term deficits are expected to be on the agenda.

Some policies have already been flagged. In December, the president announced a two-year freeze on pay for civilian government workers, a nod to the need for budget cutting to begin at some point. The Pentagon has also been trying to get ahead of the game: last week it announced that it would trim its annual budgets of more than $500-billion by a combined $78-billion over the next five years compared with earlier projections. (Editor: No where near large enough cuts for a total budget of over 1 trillion dollars annually when all of the black-ops and war-making expenditures are included).

These measures will be incorporated into the White House’s proposed annual budget, to be presented in mid-February. Other steps could also be included, such as possible additional plans to cut discretionary spending across government agencies, start tackling social security reform and set a framework for tax reform.

Much attention will be paid to both the scope of these proposals and how specific they are, and to signs of the seriousness of the administration’s commitment to deficit reduction.

Mr. Obama’s new economic team certainly bodes well for fiscal hawks, including as it does Jack Lew as budget director and Gene Sperling as head of the National Economic Council. The two are back in the same roles they held under Bill Clinton in the 1990s, when the U.S. reduced its deficit through negotiations between a Democratic White House and a Republican Congress. Mr. Clinton left office with a budget surplus.

Few expect the administration to take the aggressive approach sought by some prominent Democrats such as John Podesta of the Center for American Progress, a think tank with close ties to the Obama White House. This would involve cuts to large programs such as Social Security and Medicare, followed swiftly by a move towards tax reform. But it is unlikely to happen, because it could expose the administration to a barrage of attacks from both its Democratic base and from Republicans.

Nevertheless, Mr. Lew maintains that the administration’s resolve on deficit reduction is clear. “We need to have a bipartisan effort, which will address the serious fiscal challenges before us while at the same time promoting an agenda that will build the foundation of the American economy in the future, which to us means continuing to invest in education and innovation even while we make reductions in other places,” he says.

But Republicans, who gained control of the House of Representatives in elections last November, partly on a message of fiscal rectitude and opposition to government spending, have other things in mind. They envisage spending cuts on a much larger scale than what is palatable to the White House or many congressional Democrats – and could resist any attempt by the administration to press ahead with new stimulus measures.

Many Republicans have shown little willingness to consider tax increases as part of any deficit reduction package – which many economists believe to be an essential component of a deal. The result could easily be gridlock, with both parties and the White House trading accusations, and investors and businesses growing increasingly nervous about America’s ability to deal with the debt problem.

Meanwhile, a deadline that will force the two parties to engage – and probably battle – on fiscal issues is close. Any time between March 31 and May 16, the Treasury estimates, U.S. debt will hit its congressionally mandated limit of nearly $14.3-trillion. If the administration and Capitol Hill cannot agree on a deal to raise that threshold, the U.S. would have to shut down the government and default on its international debt obligations – potentially triggering the debt crisis that for the moment seems so distant.

Many Republicans have insisted that a higher debt ceiling should be tied to their aggressive spending cut targets, setting the stage for a big political showdown as the date approaches.

The administration does not believe the debt limit should be used as a bargaining chip to extract concessions. “Our view is a clean debt bill is the only responsible thing to advocate – and we’re clearly going to have to engage in Congress on this,” says Mr. Lew. “We have no alternative but to raise the debt ceiling and it would be irresponsible to use the need to raise the debt limit as a way to force a crisis that could undermine the US economy and its standing in the world very severely.”

Lawmakers as well as analysts expect in general that over the next few months a limited agreement – possibly on its own, and possibly involving the enactment of some deficit reduction measures proposed by the administration plus some new ones – will be reached. But while such an accord could placate investors in U.S. debt for some time, it will probably only delay America’s reckoning with its unsustainable public finances rather than correct the course.

America’s budget deficit in the year to last September amounted to about $1.3-trillion – the second highest on record. Over the next several years, as the economic recovery advances and the impact of emergency spending measures taken during the recession start to wane, the country’s deficits are expected to shrink naturally.

But the relief will be temporary: because of the retirement of the baby-boomer generation, which starts in earnest this year, the cost of government healthcare and pension programmes is projected to soar. According to a report issued last month by an 18-member bipartisan commission on fiscal responsibility, by 2025 tax revenues will be sufficient to finance only interest payments – which are projected to soar from their current $2-trillion a year to more than $1-trillion – and entitlement programmes, with no room for anything else.

“Every other federal government activity – from national defence and homeland security to transportation and energy – will have to be paid for with borrowed money,” it warns. By 2035, rising debt could reduce gross domestic product per capita by as much as 15 per cent. That would imply a harsh reduction in Americans’ standard of living.

This gloomy picture is what could eventually cause a crisis in international capital markets. It is also what drove the commission, led by Erskine Bowles, former White House chief of staff under Mr Clinton, and Alan Simpson, former Republican senator from Wyoming, to attempt what had rarely been tried before in Washington: to craft a detailed template to solve the country’s budget woes, offering Americans and their lawmakers a concrete glimpse of what it would take to correct the problem.

The plan recommended a total of $3,900bn in deficit reduction by 2020, with a three-to-one ratio of spending cuts to tax increases. The commission proposed raising the state pension age, curbing government healthcare and limiting popular tax breaks such as the ability to deduct interest paid on mortgages. (Editor: but no massive cuts in war-making or an end fo the US empire signalling that the ruling class is not serious about reducing the budget deficit or the national debt. Presumably, these folks can simply move to another country when the American economy finally implodes).

Some potential options to cut the deficit – such as a consumption or value added tax, or a tax on carbon – were sidelined as politically infeasible. That contributed to a surprising level of agreement on the recommendations, with 11 panellists voting in favour of the package, including six sitting lawmakers. Still, this was not enough to force a vote in Congress on the measures, which would have required a 14-member majority.

The failure of the Simpson-Bowles commission to reach the required threshold is what left America’s fiscal fate in the hands of the ordinary political process, from the White House to congressional leaders such as Kent Conrad, chairman of the Senate budget committee, as well as Mr. Ryan. Turning back to Europe’s debt woes, Mr. Ryan declares: “This is not who we are, and this is not the fate that we want to have.”

However avoiding that fate – and ushering in a new era of U.S. fiscal responsibility – will require a level of political harmony that, in spite of a growing awareness of the problem, still seems elusive.

Geithner Says U.S. Insolvent

By Michael S. Rozeff

January 11, 2011 "LewRockwell" -- The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury. Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:

"Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States."

He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.

After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations. MORE...

Can Anything Save the US Economy: No Monetary Policy Answer, What about further Fiscal Stimulus?

Editor's NOTE:

I provide below a short discussion of the way in which the federal government generally looks at the issue of "regulating" the economy. Briefly, there are 2 basic approaches, one, through changes in "Fiscal Policy" and two through Monetary Policy manipulations. Thereafter I briefly outline the approaches which have already been employed and some thoughts on how to proceed from here.

Fiscal Policy:

Fiscal policy can be thought of as the relationship between federal spending and tax revenue collection which often centers primarily on income taxes, employment taxes or other value added taxes and whether or not there is a rough balance between spending and tax revenue rather than for example a contraction (federal spending less than revenue collected) or an expansion (federal spending in excess of revenue collection). The latter is also known as "deficit spending."

A fiscal policy manipulation would be to change the income tax rates, to increase the size of the federal budget by raising the rate at which existing programs grow or to provide a so-called economic stimulus where the government engineers a one-time/short term increase in federal spending. Along with "Monetary Policy", "Fiscal Policy" is part of what the Federal Government uses to control/enhance economic activity.

Monetary Policy:

“Think money” specifically the interest rates charged for borrowing money and the ease with which the federal government "prints new money" (also referred to as "quantitative easing", Quantitative easing is sometimes colloquially described as "printing money" although in reality the money is simply created by electronically adding a number to an account.

Examples of economies where this policy has been used include Japan during the early 2000s, and the United States and United Kingdom during the global financial crisis of 2008–the present) and puts it into circulation. Both have directly to do with getting actual dollars into the hands of people so they can either spend or save them. In order for the federal government to print more money it must either raise available revenue from taxes or borrow it from foreign nations through the issuing of Treasury bonds which pay interest to the bond holders. Another option is to sell fixed assets such as interstate highways, toll bridges and other valued parts of the national infrastructure to raise money.

Quantitative Easing:

The term quantitative easing (QE) describes a monetary policy used by central banks to increase the supply of money by increasing the excess reserves of the banking system. A Central bank does this by first crediting its own account with money it has created ex nihilo "out of nothing"--i.e. printing money almost at will is possible for the US because the US dollar is the reserve currency. Other nations who must trade in dollars are forced to earn them through trade since they cannot print dollars. This naturally is very dissatisfying to them.

The Central bank then purchases financial assets, including government bonds, mortgage-backed securities and corporate bonds, from other banks and financial institutions in a process referred to as "open market operations." The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus a hopeful stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system. Risks include the policy being more effective than intended, spurring hyperinflation, or the risk of not being effective enough, if banks opt simply to pocket the additional cash in order to increase their capital reserves in a climate of increasing defaults in their present loan portfolio --the current situation in the US.

"Quantitative" refers to the fact that a specific quantity of money is being created; "easing" refers to reducing the pressure on banks.
Source for Quantitative Easing: HERE...

Since the Central banks have already decreased the interest rate for borrowing money to virtually zero, and because the federal reserve has already engaged in unprecedented quantitative easing, it appears that there is little if anything more that can be done from the perspective of "Monetary Policy" despite what Federal Reserve chairman Ben Bernanke might say. This of course can be debated by any interested economists who wish to comment on this post.

Unfortunately, while raising income and other federal taxes might provide badly needed additional revenue, it is dangerous to do so during a recession (appears we have now entered the second phase of a double dip recession) and a high unemployment rate--the situation we now find ourselves in. Moreover, we have already significantly increased the budget deficit as a result of the almost $800 billion prior fiscal stimulus package enacted by President Obama and the US Congress only ~ 1/3 of which was actually stimulus in the traditional sense.

Thus, the debate we need to have is: what can be done now to help save the US economy and the millions of suffering American citizens?

Clearly, any approach which would significantly ruduce our budget deficit year to year and over the long run markedly decrease our national debt (currently almost equal to our GDP) would require a substantial reduction in government spending not simply an increase in total tax revenues. Barring a severe austerity program in which the non-discretionary portions of the budget (primarily social security and medicare/medicaid) are severely cut or curtailed we must look elsewhere.

Since the largest portion of the federal budget which is discretionary is the defense and intelligence budgets much of which is hidden, they must be radically reduced if we are to save the overall US fianancial ship of state. If we do not do so soon, foreign governments will be increasingly unwilling to lend us money (thereby markedly increasing the interest rates we will be forced to pay on our Treasury bonds). Ironically should Treasury bond interest rates begin to rise markedly, many of our foreign creditors concerned about our economic demise may begin to cash in their treasury bonds all at once creating a run on the US treasury with default of the US government as these same nations simultanesouly attempt to dethrone the dollar as the world's reserve currency. A persuasive argument can be made that the only thing stopping them from doing so now is that we are the uncontested global nuclear superpower. However, if we actually default as a nation, we will be unable to maintain our military or nuclear weapons threat.

In previous posts I have proposed the following answer to our current financial dilemma, an end to: 1) the occupations of Iraq and Afghanistan, 2) the American global empire of foreign military bases and a marked reduction in the "Defense" budget (in actual fact a "War" department budget) which in reality exceeds 1 trillion dollars per year. 3) This combined with a second short term stimulus would be capable of saving the US from financial insolvency while we work to regain our off-shored manufacturing base and out-sourced job market.

Unfortunately, the oligarchical Regime currently in power has no intention of ending the Empire, the wars or reclaiming our manufacturing/job base because the status quo is simply too financially lucrative short-term. Neither do the Democrats or the Republicans appear willing to pass another short term stimulus bill. What we have is the Hegelian dialectic in action where in this case the "synthesis" between the opposing economic approaches is to provide a lot of heat and no light that is, do nothing while "Rome burns." I invite commentary.

--Dr. J. P. Hubert

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U.S. Government Prepares for 'Crisis'

By Jeff Nielson
Thestreet.com
08/26/10

Most market reporters, commentators and politicians continue to rely upon nothing but the same short-term "snapshots" which have caused them to be "surprised" by everything. However, it is a safe conclusion that even such rampant incompetence (combined with a strong "herd mentality"), could not and does not mean that the entire U.S. government remains in an oblivious state of ignorance regarding this re-acceleration of the collapse of the U.S. economy.

This begs an obvious question. Given that at least some elements of the U.S. government have known all along that the U.S. economy was not recovering and could not recover, why is it that only now are we hearing of tentative, new plans of more "life support" for the dying U.S. economy?

The answer is also obvious. As I pointed out when I originally denounced the Obama stimulus package, it was never anything more than a bad joke. The combination of the collapse of the U.S. housing sector, massive unemployment, and the largest credit-contraction in the history of the U.S. economy had combined to subtract approximately $2 trillion per year in consumer spending from this consumer economy.

The response of the Obama regime to this scenario was a one-time injection of $780 in stimulus, spread out over more than a year. Obviously, you can't replace $2 trillion with less than $800 billion and call it stimulus.

This sets the stage for another chaotic autumn for the global economy -- and even more chaos for markets. While I have outlined what I consider the most likely scenario, we are so close to the true collapse of the sickest economies that there are many dire scenarios possible.

The one scenario which I totally reject is another commodities meltdown which would come anywhere close to 2008. There are two reasons why this part of the pattern cannot repeat itself. To begin with, there is only a tiny amount of the "leverage" which existed in the rabidly bullish commodity markets of 2008. Secondly, the hyperinflationary consequences of more banker money-printing (and debt) are far more obvious today -- after two years of massive, deficit-spending have been factored into fiscal parameters.

The U.S. economy lurches closer and closer to the "hyperinflationary depression" which John Williams (Shadowstats.com ) first predicted in 2003. The precise effect of this collapse on the global economy cannot be predicted -- only its eventual result. We are heading toward a Great Divide: a division of the global economy into winners and losers.

This is not a new phenomenon. What is new is that most of the losers will come from the "Old Guard" economies (i.e. the U.S. and Western Europe). The citizens of these "loser economies" must act now to shield their diminishing wealth from the death of Western banker-paper which is almost upon us. As always, I remind investors that (for hundreds of years) precious metals have represented the best "insurance" against the depravity of bankers (and their servants in government).

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The Backward Slide into Recession

By Mike Whitney

August 30, 2010 "Information Clearing House" -- -Ongoing deleveraging has slowed personal consumption and trimmed 2nd quarter GDP to a revised 1.6%. The economy is sliding backwards into recession. As Obama's fiscal stimulus dries up and the private sector slashes spending, demand will continue to collapse pushing more businesses and households into default. The economy is now caught in a reinforcing downward cycle in which dwindling fiscal and monetary support is shrinking the money supply triggering a slowdown in activity in the broader economy.

Far right policymakers have shrugged off increasingly ominous economic data, choosing to pursue their political aims through obstructionism. Their goal is to block countercyclical measures that will boost activity, lower unemployment and narrow the output gap. By torpedoing the recovery, GOP leaders hope to take advantage of anti-incumbent sentiment and engineer a landslide victory in the midterm elections. But the timing could not be worse. The economy is in greater peril than most realize and badly in need of government intervention. As the current account deficit continues to widen, the global system inches closer to a major currency crisis. Ballooning trade imbalances signal that a disorderly unwinding of the dollar is becoming more probable. If the dollar drops precipitously, US demand for foreign exports will fall and the world will plunge into another deep slump.

The Fed ended its bond purchasing program (quantitative easing) at the end of March, but has promised to reinvest the proceeds from maturing bonds into mortgage-backed securities to keep its balance sheet from shrinking. But the Fed's action does not increase the money supply or reverse disinflation which is progressively edging towards outright deflation. The Central Bank is committed to providing additional resources to support the markets, but the Fed's primary policy tool--short-term interest rates---is already stuck at zero making the task more difficult. Without additional monetary stimulus, asset prices will tumble leading to another round of debt-liquidation and defaults. The housing market is already in full retreat. New and existing home sales have fallen to record levels clearing the way for steep price declines. Housing cannot recover without an uptick in employment which means that businesses need to see strong demand for their products. But product demand will remain weak until wages grow and struggling consumers dig their way out of the red. With personal consumption and business investment faltering, the government must step up its spending to avoid a return to recession.

The banks are not prepared for another wave of defaults, foreclosures and write-downs. Bank lending continues to shrink and the system is still fragile. A sudden turnaround in the equities markets would expose the banks to severe losses and force the Fed to provide emergency liquidity for wobbly financial institutions. The solvency of the banking system is largely public relations hype. The faux stress tests merely obfuscated critical details about the true, mark-to-market value of their assets. The nation's biggest banks are still wards of the state.

Much of the rot at the heart of the financial system remains hidden from view. Accounting sleight-of-hand, gigantic liquidity injections, and regulatory forbearance have all helped to perpetuate the fraud. The Fed continues to divert capital into zombie institutions which provide no tangible public benefit. Low interest rates, government guarantees on bonds, interest payments on reserves, the Fed's discount window, and the myriad lending facilities are some of the perks, subsidies, inducements and corporate welfare given to the banks at taxpayer expense. In return, the banks provide nothing; not even sufficient credit to generate another expansion. In its current configuration, the banking system is a net loss to society and a significant drag on growth.

Last week, 2nd quarter GDP was revised down to 1.6%. First quarter GDP was twice the size at 3.7%, while 4th quarter 2009 was higher still at 5%. The underlying trend is reasserting itself as growth turns to stagnation.

The Fed does not have the tools to fix the ailing economy. Quantitative easing can lower rates and keep asset prices inflated, but it cannot increase demand, reduce the output gap or lower unemployment. Only fiscal stimulus can do that and policymakers have rejected that option. The US is now facing a protracted period of high unemployment and subpar economic performance punctuated by infrequent stock market rallies and predictable bursts of optimism. The recovery is over.

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Editor's NOTE:

An essay by a business leader in economic research, author and reader of this blog was submitted on this topic and presents a somewhat more contrarian view. His appeal for improvement in education particularly in the area of technology is important. His new book is: Dysfunctions of the Welfare State (Piscataway NJ; Transaction Publishing, 2010).

--Dr. J. P. Hubert

Can Anything Save the Economy:

By: Joel Clarke Gibbons Phd
Logisticresearch.com
September 1, 2010

The well known tools of stimulus are broken. Keynes is dead and the short run has run its course. To understand this it is necessary to make a clear distinction between recession and inefficiency. For “inefficiency” some would be tempted to say “poverty,” and it is very true that what is at stake is disappointment over the productivity of the American economy and the wealth of the nation, but it would not be accurate to speak of poverty. That would at this stage be more like the whining of a spoiled child, because we are rich. The problem is not poverty; the problem is just that the dreaded long run – the long run of which Keynes observed “In the long run, we’re all dead” – has arrived. He’s dead. We aren’t. But we have to do something different now.

Many measures of economic success coincide to imply that America has fallen behind in productivity over the last twenty years or so. Obviously, the trade deficit is one such indicator. We live well by consuming what we did not produce and living on the credit extended by developing nations. We exploit the reserve character of the dollar in world finance. That privileged position was the creation of American industry and of shrewd American financial management, with a big assist to the Second World War. But it is a wasting asset. It will not support a standard of living qualitatively higher than the one that the developing world enjoys today, which is what we have become used to.

It would be a mistake however to think that America is not more productive than she was when we were young. All the technological gifts of the microprocessor and the cheap access to computing have revolutionized modern life. If however we judge our prosperity by comparing us with the developing world, we see ourselves falling behind because in truth the developing world really is catching up. The microprocessor – perfected by Americans – has no nationality, and Russian and Chinese developers are working at the state of the art. In other essentially technologies – robotics, nuclear power, and railroads – we have fallen behind, but we are by no means out of the game and in any case they are not important in the economy as a whole to imply that we are behind. We’re just not confidently ahead any more. There is another aspect of development however in which we have lagged. There is a difference between prosperity of the American people and prosperity of America the nation.

The single biggest contributor to our national success has always been immigration. The periods of greatest prosperity coincide with the periods of most rapid immigration. That is just as true of the last twenty years as it was of the 1880s, although the new immigrants come from very different places than immigrants did then. Immigration is our single biggest national asset. But it also inevitably opens up a potential gap between the success of the “American people,” who at any given time are by definition the ones who were already here, and “America.” The successes of the last twenty years, and the prosperity that has rewarded them, are further evidence of the rewards the America reaps from immigration, and in things areas like the housing boom which has grown suburbia far out into the country, the profit has been shared by all. Nonetheless, the disparity between the success of recent immigrants and the stagnant prospects of the native has introduced a new sort of anxiety. It reinforces the fear that America is becoming two countries: America the Empire, with its own citizenship concentrated in North America but scattered all around the world, and America the Homeland.

The natural fear is that the really big money is with the Empire, and that as a result the demands of the citizens of the empire will take precedence over the desires of the homelanders. It is not a new insight that “Where your treasure is, there also will your heart be.” The very poor growth of personal incomes of the natives, poor performance of long standing, extending back to the days of the War in Viet Nam, through the 1970s, 80s, 90s, and so far this new century. As wages and salaries have failed to grow in real terms, investments have also stumbled after the bubble of the late 1990s. The S&P Index is no higher today than it was twelve years ago –it is actually somewhat lower – and the dividend yield over those years was only about 1½ %. On an inflation-adjusted basis, investors have lost money, and have done about as poorly as they did in the notorious 1970s. Those at the top by shocking contrast have profited tremendously, as evidenced by the incomes of the leaders of business and government. Even college and university faculty – occupations that thirty years ago paid very poorly – are now well paid, though the faculty earning those wages are disproportionately immigrants.

The point, to repeat because it bears repeating, is not resentment of immigrants. We’re all immigrants. The problem is the appearance of a two class society, in which entry to the privileged class is not open to the vast majority of the American people. The chairman of the board whose annual bonus dwarfs the wages of the work force is probably the descendent of impoverished Irish or Italian immigrants. That does nothing to relieve our anxiety that his generous salary and bonus owe far more to his warm relations with the governments of distant American allies than they do with his relations with the people of Michigan, or wherever his offices are located.

So, what can save us?

The foregoing outline attempts to identify in broad outline the sources of our problems, and the lesson it delivers is that there is no kind of Stimulus that is going to help. If it is stimulus of the traditional Keynesian sort, history has shown repeatedly that that is nothing but a sop to quiet the public, to put them back to sleep so to speak so that they will stop importuning the Congress and potentially disrupting the serious business of the Empire. The tools for raising the real productivity of the American people are available and are to a large extent well known. Education, and especially education in technical fields. The computer and the Internet and all kinds of modern technologies including robotics and nuclear power.

These tools will not however execute themselves. Technology isn’t that smart. We need a cultural revolution that empowers the American people to govern their own lives, starting perhaps with governing the schools that are supposed to serve their children. At this time they are ruled by – or rather, misruled by – a self-appointed elite not very different from the corrupt elite who have ruled Great Britain since the days of Milner. It has tried to impose a culture antithetical to the people. A culture of instant gratification. A culture of death. A culture without strong ties between men and women, ties based on the needs of men to earn the trust of women and the need of women to trust. We need, to repeat, a cultural revolution that puts the culture of America back into the hands of the American people who it is intended to serve. I can’t rightly say how stimulating this will seem; Americans are not excelled in their capacity to be absolutely trite and boring. But these are their lives and this is their country. They have a right to it.