July 22, 2011
Counterpunch.org

An Economy Destroyed: The Enemy is Washington

by Paul Craig Roberts

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase. The downgrade threat is not credible, and neither is the default threat. Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

If the rating agencies downgraded Treasuries, the company executives would be arrested for the fraudulent ratings that they gave to the junk that Wall Street peddled to the rest of the world. The companies would be destroyed and their ratings discredited. The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury's debt. If Goldman Sachs is too big to fail, then so is the US government.

There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70 per cent - 75 per cent of the federal budget deficit.

In contrast, Social Security is solvent. Medicare expenditures are coming close to exceeding the 2.3 per cent payroll tax that funds Medicare, but it is dishonest for politicians and pundits to blame the US budget deficit on "entitlement programs."

Entitlements are funded with a payroll tax. Wars are not funded. The criminal Bush regime lied to Americans and claimed that the Iraq war would only cost $70 billion at the most and would be paid for with Iraq oil revenues. When Bush's chief economic advisor, Larry Lindsay, said the Iraq invasion would cost $200 billion, Bush fired him. In fact, Lindsay was off by a factor of 20. Economic and budget experts have calculated that the Iraq and Afghanistan wars have consumed $4,000 billion in out-of-pocket and already incurred future costs. In other words, the ongoing wars and occupations have already eaten up the $4 trillion by which Obama hopes to cut federal spending over the next ten years. Bomb now, pay later. . . .

Washington's response to this dilemma is to increase the austerity! Cutting back Medicare, Medicaid, and Social Security, forcing down wages by destroying unions and offshoring jobs (which results in a labor surplus and lower wages), and driving up the prices of food and energy by depreciating the dollar further erodes consumer purchasing power. The Federal Reserve can print money to rescue the crooked financial institutions, but it cannot rescue the American consumer.

As a final point, confront the fact that you are even lied to about "deficit reduction." Even if Obama gets his $4 trillion "deficit reduction" over the next decade, it does not mean that the current national debt will be $4 trillion less than it currently is. The "reduction" merely means that the growth in the national debt will be $4 trillion less than otherwise. Regardless of any "deficit reduction," the national debt ten years from now will be much higher than it presently is.

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Paul Craig Roberts was Assistant Secretary of the US Treasury, Associate Editor of the Wall Street Journal, and professor of economics in six universities. His latest book, HOW THE ECONOMY WAS LOST, was published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

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[The economy's failure to recover was despite the largest fiscal and monetary stimulus in the country's history. There was a $700 billion bank bailout, a $700 billion stimulus program, a couple of trillion in "quantitative easing," that is, in debt monetization or the printing of money to finance the government's expenditures. In addition the Federal Reserve's balance sheet had expanded by trillions of dollars as the Fed purchased troubled mortgage bonds and derivatives in its effort to keep the financial system solvent and functioning. According to the Government Accountability Office's audit of the Federal Reserve released by Senator Bernie Sanders, the Federal Reserve provided secret loans to US and foreign banks totaling $16.1 trillion, a sum larger than US Gross Domestic Product (GDP).--Paul Craig Roberts, "More War! The Road to Armageddon," counterpunch.org, August 1, 2011]

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[The decision by Standard & Poor's to push America into the second division, when it comes to trustworthiness about paying its bills, puts the USA below the UK, Germany, France, Singapore, Finland and 14 other countries.--Mark Mardell, "How Washington's politicians downgraded America," BBC News, August 6, 2011]

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At the center of Berman's argument is his assertion that hustling, materialism, and the pursuit of personal gain without regard for its effects on others have been powerful forces in American culture since the Pilgrims landed. He shows that even before the American Revolution, naked self-interest had replaced the common good as the primary social value in the colonies and that the creative power and destructive force of this idea gained irresistible momentum in the decades following the ratification of the Constitution. As invention proliferated and industry expanded, railroads, steamships, and telegraph wires quickened the frenetic pace of progress - or, as Berman calls it, the illusion of progress. An explosion of manufacturing whetted the nation's ravenous appetite for goods of all kinds and gave the hustling life its purpose - to acquire as many objects as possible prior to death--Morris Berman, "Why America Failed: The Roots of Imperial Decline," John Wiley and Sons; 1st edition (November 1, 2011)

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[The idea of distributing free money to end deep recessions has been promoted theoretically by serious economists since the 1930s, . . . More recently, as conventional policies to revive growth have faltered, with widespread disappointment about the impact of zero interest rates and quantitative easing, proposals for distributing money directly to citizens have been quietly gaining traction among critics of orthodox central banks.--Anatole Kaletsky, "A breakthrough speech on monetary policy," ft.com, February 7, 2013]

[Money today is simply a legal agreement between parties. Nothing backs it but "the full faith and credit of the United States". The United States could issue its credit directly to fund its own budget, just as our forebears did in the American colonies and as Abraham Lincoln did in the Civil War.--Ellen Brown, "US can fix budget woes," atimes.com, February 15, 2013]

[Indeed, absent Wilson's crusade there would have been no allied victory, no punitive peace, and no war reparations; nor would there have been a Leninist coup in Petrograd or Stalin's barbaric regime.

Likewise, there would have been no Hitler, no Nazi dystopia, no Munich, no Sudetenland and Danzig corridor crises, no British war to save Poland, no final solution and holocaust, no global war against Germany and Japan and no incineration of 200,000 civilians at Hiroshima and Nagasaki.

Nor would there have followed a Cold War with the Soviets or CIA sponsored coups and assassinations in Iran, Guatemala, Indonesia, Brazil, Chile and the Congo, to name a few.

. . . there is no fiscal governance - just an inexorable drift toward monetary catastrophe. In the interim, our senseless and dangerous trillion dollar Warfare State rolls on.--David A. Stockman, "Keynesian Myths, Monetary Central Planning and The Triumph of The Warfare State," davidstockmanscontracorner.com, February 17, 2014]

[Neoclassical economics, he says, is a "just-world theory," one that posits that not only do good people get what they deserve but those who suffer deserve to suffer. He says this model is "a warrant for inflicting pain."--Chris Hedges, "Suffering? Well, You Deserve It," truthdig.com, March 2, 2014]

The China Hustle, 2018

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[The collusion (or coordination) that the U.S. central bank (the Federal Reserve) forged with other major central banks to fabricate money in the wake of the 2008 financial crisis. . . .

They did all of this in order to subsidize private banks at the expense of everyday people everywhere.--Nomi Prins, "Collusion: How Central Bankers Rigged the World," dailyreckoning.com, May 7, 2018]

Richard D. Wolff, "Economic Update: The Great American Purge," democracyatwork.info, December 10, 2018

Ellen Brown, "Facebook May Pose a Greater Danger Than Wall Street," truthdig.com, June 25, 2019

[trillions of taxpayers' dollars were spent to develop and procure new generation military aircraft that were not needed because our existing warplanes were perfectly capable of performing the required missions well into the future.--Ronald Enzweiler, "About the Weapons Trump Showed Off on the 4th of July," antiwar.com, July 8, 2019]\

How is Money Created? Everything You Need to Know, ColdFusion, June 8, 2020

Jake Tran, Why Haven’t We Seen Hyperinflation?, January 28, 2021

"The consulting industry has infantilised government" - Mariana Mazzucato on taking back control, March 17, 2023

End of the Road: How Money Became Worthless, June 29, 2023