Empire Building, the Debt Ceiling the Budget Deficit and the Samson Solution

 

Empire Building, the Debt Ceiling the Budget Deficit and the Samson Solution

By James Petras99GetSmart

Introduction

US and world political and economic leaders are faced with what they describe as a ‘systemic catastrophe’:  the inability to pay global creditors, including domestic and foreign banks, investors and governments, who hold $16.7 trillion in US Treasury notes.  There is a related crisis: the government cannot secure passage of a budget to finance its military and civilian agencies and activities, including large-scale payments to military contractors, the financing of business, agriculture and banking operations and social programs.  The raising of the debt-ceiling is central to the functioning of the financial ruling class as it extracts hundreds of billions of tax dollars in interest payments from the US Treasury.  Raising the debt ceiling allows the State to keep borrowing and pay its billionaire creditors.  In turn, as long as the US Treasury has liquidity, it remains a ‘safe haven’ for investors thus providing guaranteed profits.  In addition, as long as the dollar remains the principle currency for global transactions, it allows the US Treasury to print money at will and to borrow at a lower cost – at the expense of its competitors and adversaries.

Financing the budget deficit requires borrowing, which involves the sale hundreds of billions of dollars worth of US government bonds through Wall Street – but at a cost to the taxpayer.  The common denominator is that the entire edifice of finance capital and all of its support structures depend on debt financing by the State.  By borrowing and then taxing its citizens the Treasury extracts wealth from the vast majority of Americans.

To understand the fight to raise the debt ceiling and to pass a deficit budget it is necessary to analyze the long-term, large-scale sources of State debt.

Imperial Wars, the Ascendancy of Finance Capital and the Debt Crisis

The ever-increasing debt and the constant raising of the debt ceiling is a result of long-term, large-scale military spending to build the US Empire.  The imperial enterprise has generated a huge deficit:  the cost/benefit ratio has been overwhelmingly negative.  Contrary to militarist propaganda, the empire has not been ‘self-financing’:  Wars and occupation in Iraq, Afghanistan and elsewhere have cost the US taxpayers trillions of dollars, not off-set by incoming imperial plunder or domestic economic expansion.

Parallel to the cost of wars and occupations, the rise of finance capital has largely resulted from the pillage of the US Treasury.  Huge bailouts, low interest loans, large-scale interest payments on bonds, subsidies and tax exemptions have created a financial ruling class based on maintaining a debt-laden, interest-paying State, which meets its obligations to the creditors while it privatizes (and eliminates) social programs.  The result is a ‘poor indebted State’ and a rich and prosperous Wall Street.  Wall Street stands to gain trillions with the privatization of the multi-billion dollar health (Medicare) and retirement plans (Social Security): this will form an integral component of the “Grand Bargain” to raise the debt ceiling.

Who are the Beneficiaries of Raising the Debt Ceiling?

The principle and immediate beneficiaries of increasing the debt ceiling are the wealthy, bond-holders and the medium and long-term beneficiaries are the military-intelligence-empire-builders who can continue to secure over $700 billion in annual budget allocations.  The principle strategic losers from raising the debt ceiling will be the hundreds of millions of beneficiaries of social programs like Social Security, Medicare and Medicaid and their family members.  As part of the ‘Grand Bargain’ struck by the Democratic President and Republican Congress – between $1.3 trillion and $1.4 trillion in social cuts will take effect over the next ten years, according to the Congressional Budget Office.  The cuts in Social Security will occur by raising the age of eligibility for full benefits to 70 years, resulting in a loss of $120 billion, as many older retired workers would be expected to die before drawing a single payment while millions of Americans  will be forced to delay retirement and work an extra five years.

Secondly, the earliest age of eligibility for partial benefits will increase from 62 to 64 years – resulting in an additional loss of $144 billion dollars from workers.

Thirdly, the cost of living index would be reduced – a ten- year loss of $112 billion dollars.

Fourthly, the calculation for initial benefits would discard the wage-based method for a so-called “price-index”, resulting in American workers losing another $137 billion dollars over 10 years.  In sum, workers’ social security benefits would be reduced by more than half a trillion dollars – an enormous transfer of wealth to the billionaire creditors, investors and empire builders – all in the name of ‘debt reduction’.

The cuts in MEDICARE and MEDICAID would result in an even more retrograde class polarization.  The ‘Grand Bargain’ could lead to additional losses of over $419 billion dollars.

The biggest cost to the workers will come in the form of an increase in their  monthly premium  for physician services (MEDICARE Part B) from the current 25%  to 35%, resulting in a loss of $241 billion dollars.  The second biggest loss to workers will result from raising the age of eligibility for MEDICARE from 65 to 67 years costing workers an additional S125 billion dollars.  The third loss for workers will be a $53 billion hit  from restricting the use of MEDIGAP insurance – supplementary policies that cover MEDICARE cost sharing requirements.

Further cuts of $187 billion in MEDICAID– the medical plan for the poor and disabled– would result when the federal government shifts its direct funding to block grants to the states that would severely cut services for the poor – a plan first proposed during the Clinton Administration with regard to welfare funding.

Once these reactionary cuts in basic social programs are in place, the beneficiaries, who are able, will be forced to buy alternative supplementary private medical insurance and private retirement plans, while the poor will go without.  The running down of public social services by Wall Street has been a deliberate, cynical strategy to cause popular discontent paving the way for the gradual privatization of services: adding costs, eliminating options and limiting medical treatment, surgery and procedures, especially for the elderly.  The privatization of Social Security, MEDICARE and MEDICAID, will maximize insecurity while minimizing services and lead to untreated and under-treated illness, greater suffering and economic distress.  Bi-partisan Congressional –White House agreements via the “Great Bargain” to raise the debt ceiling will widen and deepen inequalities in the United States.

In sum, “the Grand Bargain” will cause American workers to lose over $1.119 trillion dollars over the next 10 years, leading to a sharp decline in life expectancy, access to health care, living standards and quality of life.

The Samson Solution

Given the harsh terms, which accompany the “Grand Bargain” to raise the debt ceiling, it would be better if no agreement were reached.  The financial elite is counting on the ‘Grand Bargain’ to leverage their debt collection over the lives and welfare of hundreds of millions of Americans.  It would be better to shake the pillars and pull down this Temple of Mammon (the ‘Samson Solution’) making them pay a price!

The ‘shock and awe’ induced by default would shake the very foundations of the financial pillage of the US Treasury and the taxpayers; default would seriously undermine the financial basis for imperial wars, spying, torture and death squads.  The entire empire building project would crumble.

True, in the short-run, the workers and middle class would also suffer from a default.  But the discredit of the ruling political parties, the political elite and Wall Street, could lead to a new political alignment, which would fund social programs by, in David Stockman’s phrase, “soaking the rich” – raising corporate taxes by 50%, imposing a financial transaction tax of 5%, uncapping the social security tax and collecting taxes on overseas US multi-nationals’ profits.  Additional billions would be saved by ending imperial wars, closing bases and canceling military contracts.  Tax reform, imperial dismantlement and increased domestic investment in productive activity would generate domestic growth leading to a budget surplus, extending MEDICARE to all Americans, reducing the age of retirement to 62 and providing a living wage for all workers!

  • http://www.byebyedemocracy.org/ kokanee

    US and world political and economic leaders are faced with what they describe as a ‘systemic catastrophe’: the inability to pay global creditors, including domestic and foreign banks, investors and governments, who hold $16.7 trillion in US Treasury notes.

    The US doesn’t really run out of money. Whatever US Treasuries don’t get bought up by private industry gets bought up by the Fed. All in secret, of course. This is already happening to the tune of $1b/year. In effect, the Fed. is monetizing the debt. The Fed and the banks behind the Fed don’t really have a choice. They can choose to the the system collapse but that would take them down as well. On the other hand, the Fed is fast running out of tricks.

    The analogy is a monster drowning in the ocean which has to work harder and harder to stay afloat. However, it’s only a matter of time before the beast drowns.

    I saw the lecture, “Why Societies Collapse—and What it Means for US” by Dr. Joseph A. Tainter:

    • http://mosquitocloud.net/ aprescoup

      K,

      use the link to BBD, instead… I plan to watch it this evening.

      10 minutes of this Michael Hudson interview is about as good as it gets in terms of painting an accessible picture of a vicious class war being waged against all working stiffs, no matter their partisan, or merely left-right conceits:

      http://mosquitocloud.net/michael-hudsons-antidote-to-neo-liberal-economists-and-austerians-deadly-daily-poison

      • http://www.byebyedemocracy.org/ kokanee

        Okay.

      • Liberius Cato

        It is a class war, but one that’s a little more complex than the picture often painted by many groups. It isn’t just “elite industrialists vs. the toiling masses”, as the simple picture we’ve often seen…

        What we’re dealing with is an incestuous alliance between a segment of politicians, industry, and banking to subvert the rule of law and enrich themselves at the expense of everyone else… whether that’s rival corporations, small business, foreign governments, the middle class, the poor, or anyone who disagrees with them in general.

        Not every rich man is one of the bad guys, and not every poor person is on our side. What this is about isn’t “class” so much as rich and poor, but “class” in terms of “ruling class” vs. “underclass”. Wealth and rulership often go hand in hand, but many of those pushing for the changes that’ll put them on top aren’t uber-wealthy yet… or uber-wealthy enough to be sated… but would love to be the ones in charge of redistribution.

        • http://mosquitocloud.net/ aprescoup

          I had a conversation with kokanee about the conflicting and contradictory terms/labels the left and right have been acclimatized to use to describe the same political reality.

          The “ruling class” is composed of rent seekers, the (s)elected ruling elites, and a vast, compartmentalized bureaucracy, guaranteeing unaccountability and plausible deniability to the agents of this monstrous enterprise called the state.

          The poor are the most vulnerable, near invisible, first victims of this arrangement, which sustains as long as their number does not bite too deeply into the rank of make do(on credit over the past decade or so) middle-class.

          I could imagine that debunking and replacing the “ruling” labels and frames with ones that would serve the 8-5 wage earners and small business owners to identify themselves as part of the same socio-economic cohort, of more or less privileged serfs, could prove worth while, if not indispensable, to mounting a broad-based, post-partisan, push back against the ruling class.

          If by “socialism” the Right means central state control of major industrial (TBTF) corporate entities, and hence the economy, then that prevents a real discussion of socialism, and the left won’t have it, even as it agrees with the analysis. They would likely re-state the case as “laissez faire” corporate control of government, rather than vice versa…

          If we were to defy the nomenklaturas’ word-smithed labels and definitions, and chose, instead, to call the system a “psychocracy,” “sociopathocracy,” or something less exotic but brutally revealing and resonant with the public on both sides of the duopoly wrought spectrum, our “oppressors” would likely madly rush for their Lear jets…

          Instead, the MBM/MSM punditocracy is leading us around by our nose rings, day in and out.

          • Liberius Cato

            Good post, and largely right. And a lot on the right do shorten a state control of the economy to “socialism” because that’s generally the most familiar form of state control to them. While not 100% accurate, the world that our would-be masters wants to build would end up resembling Stalinism in a lot of ways, so it’s not 100% inaccurate either. You may think of it as a form of intellectual laziness, but we all do this, left or right. Certain things become familiar and useful handles, and we start accepting them at face value.

            A noteworthy Russian named Kalashnikov once said something to the effect of “The complex isn’t useful, simple is useful.” Whatever language we use to describe the problem (preferably in as few words as possible) has to be something that everyone, on both sides of the spectrum, can point to and go “yeah, that” without falling into the usual trap of partisan squabbling because it fits one ideology’s trappings more than the other’s. About the best I can come up with is Totalitarian, because that’s what it’s going to amount to, no matter what name we hang on the structure of it.

            • http://mosquitocloud.net/ aprescoup

              Inverted totalitarianism is a term coined by political philosopher Sheldon Wolin to describe the emerging form of government of the United States. Wolin believes that the United States is increasingly turning into an illiberal democracy, and he uses the term “inverted totalitarianism” to illustrate the similarities and differences between the United States governmental system and totalitarian regimes such as Nazi Germany and the Stalinist Soviet Union.http://en.wikipedia.org/wiki/Inverted_totalitarianism

              Still, for the sake of broadly useful simplicity, and to forestall useless finger pointing, I will start attaching the term Totalitarian, on both left and right-wing blogs, to describe this criminally corrupt system of governance we are told to meekly accept and shaddup.

              –––––––––––––––––––––––––––––––––––––––––––––––––––

              I’m glad to see your insightful fonts in these threads, and feel free to put them into essays, or even as little as three paragraph long “notes to yourself.”

              The intent of MC is to help find help eek out unity from where division is the current coin of this near-neofeudal realm.

              If division were a natural state of human existence rulers would not be working 24/7 to keep us divided.

              Pathocracy does a nice job of describing the spectral characteristics behind totalitarian rule, I think:

              1. suppression of individualism and creativity.
              2. impoverishment of artistic values.
              3. impoverishment of moral values; a social structure based on self-interest and one-upmanship, rather than altruism.
              4. fanatical ideology; often a corrupted form of a valid viable ‘trojan’ ideology which is perverted into a pathological form, bearing little resemblance to the substance of the original.
              5. intolerance and suspicion of anyone who is different, or who disagrees with the state.
              6. centralized control.
              7. widespread corruption.
              8. secret activities within government, but surveillance of the general population. (In contrast, a healthy society would have transparent government processes, and respect for privacy of the individual citizen).
              9. paranoid and reactionary government.
              10. excessive, arbitrary, unfair and inflexible legislation; the power of decision making is reduced/removed from the citizens’ everyday lives.
              11. an attitude of hypocrisy and contempt demonstrated by the actions of the ruling class, towards the ideals they claim to follow, and towards the citizens they claim to represent.
              12. controlled media, dominated by propaganda.
              13. extreme inequality between the richest and poorest.
              14. endemic use of corrupted psychological reasoning such as paramoralisms, conversive thinking and doubletalk.
              15. rule by force and/or fear of force.
              16. people are considered as a ‘resource’ to be exploited (hence the term “human resources”), rather than as individuals with intrinsic human worth.
              17. spiritual life is restricted to inflexible and indoctrinare schemes. Anyone attempting to go beyond these boundaries is considered a heretic or insane, and therefore dangerous.
              18. arbitrary divisions in the population (class, ethnicity, creed) are inflamed into conflict with one another.
              19. suppression of free speech – public debate, demonstration, protest.
              20. violation of basic human rights, for example: restriction or denial of basic life necessities such as food, water, shelter; detainment without charge; torture and abuse; slave labour.
              http://pathocracy.wordpress.com/definition/

              • Liberius Cato

                That’s pretty good, but I’d call #1 on that list “Subversion of individuality & creativity.” These things still exist, but people are taught to express themselves in ways that conform to a number of pre-made molds. For the clearest example of that, any high school anywhere. You’ve got the jock, the geek, the goth, the stoner, etc… If you try to rise above the arbitrary divisions, you don’t get the protection of the group and are a vehicle for everyone that feels bad about themselves (in any given room full of teenagers, that’s just about everyone) to feel better about themselves at your expense.

                A football player who can build computers is heresy, as I found out. The arbitrary, pseudo-tribal definitions trump all reason and channel your individuality and creativity into (for the elite) comfortable and predictable channels. Me? I kept my athleticism and my geekery through and beyond my high school years, because screw that noise. I may have blundered onto the path of the Iconoclast by accident, but I liked it, and it’s grown into a calling.

  • Liberius Cato

    We already spend vastly more on social programs than on the military, and they haven’t gotten us one step closer to eradicating poverty in all the time we’ve been running them.

    Those of us on the Tea Party Right look at that and see it as evidence that both the Neocons’ Imperialist mindset and the Nanny State have to go. Neither of them is a good return on investment, and for the same reason. The common denominator is that they’re run by a large and inefficient bureaucracy (the Federal Government) that is distant from and sees itself as superior to the voter.

    The poor would be better served by community-level programs to create shelters and soup kitchens for area homeless, government backed emergency lending programs (that you have to pay back), grants, and clinics than by the current hodgepodge of one size fits none programs from our Federal Leviathan. Local governments could do a better job of meeting local needs, and have the benefit of being easier to disband or replace when they don’t work than national programs. The programs we have tend to get people locked onto the dole for life, instead of helping them out of tight places, which should be the goal of any welfare system.

    By making things like welfare programs into State & Local programs, you’d see thousands of variations all across the country. That kind of experimentation might be what some people call chaos, but just like starting a business, if you try enough times, you’ll find something that works eventually. Thousands of localities trying policies will result in lots of failures and some successes, and the successes will be emulated when others replace failed policies. Instead of trying one thing (that’s failing) and keeping at it until it works (it never will), we could be trying dozens or hundreds of things at a time, and possibly find a far better way of doing things.

    Your “Samson Solution” sounds a lot like what we on the right call “Let it Burn” – only I’ve been telling people that it’s going to burn whether we let it or not, regardless of our opinion on whether it should or not. What can’t go on forever never does.

    When our current kleptocratic oligarchy expires, we’ll still have a nation of diverse opinions in sore need of governance. It’s my hope that we can start figuring out how to live with each other now before it all falls down around our ears.

    • http://mosquitocloud.net/ aprescoup

      We already spend vastly more on social programs than on the military, and they haven’t gotten us one step closer to eradicating poverty in all the time we’ve been running them.

      News to me, unless you count deferred wages “social programs.”

      Militarism and Wall Street are true power centers. Social spending is the bulwark against the working-stiffs which the one percent has been willing to forgo as profit.

      Since easy 3% profit is becoming increasingly elusive, self maintenance of the system requires draining the moats and punching holes in those social spending generated protective walls.

      You know that this site’s aim is geared towards finding common language between the right and left that would help unpack some of the cradle to grave socio-political brainwashing and conditioning or, at least, help construct a cognitive framework that would elicit a palm to forehead response from majorities, left and right.

      What you refer to as states rights has been sold as a taboo to Democrats/liberals/progressives, and the mere notion is like a cross before a Vampire to them, even though gay rights, MJ legalization and healthcare socialization efforts(Vermont,) are pushing their way through the States, and are being, simultaneously, cheered.

      Anyway, if you’d like to share, challenge, propose, anchor articles/vids of interest, or just vent; by subscribing to MC you will be ascribed a authoring role…

      cheers.

      • Liberius Cato

        Went ahead and registered for it. Busy week at work, sorry for the lack of attention.

        • http://mosquitocloud.net/ aprescoup

          Welcome aboard. You have been ascribed authoring “privileges” ;)

      • CorneliusFB

        I think that language is a major obstacle in building this much needed outsiders coalition. If we can build an alliance vocabulary that more accurately names the real enemy, we might stand a chance of moving Obamapologists and Baracklynchers out of the way. Localism is a good word that libertarians should adopt in place of states’ rights. State cronyism is a term we on the left might use when libertarians and cultural conservatives mislabel it “socialism.” Anyway, we do need to beat the corporate propagandists at their own game.