The current debacle over the raising, or not, of the US government's debt limit, as well as the train wreck nature of the current budget negotiations in general, is just further evidence of a political and economic system that is broken and corrupt to its core. The debt limit has been raised by Congress some 80-odd times in the last 70 years. It has been done by both major parties, rather routinely, and, perhaps in recognition of the 14th amendment (section 4) prescription that US debt's legally obligated by Congress shall not be questioned, has not been the focus of substantial partisan rancor, at least until now. We largely have brain-dead, hypocritical, corporate-boot-licking Republican ideologues and their frothing tea-party accomplices, to thank for this, but with significant assistance from an absolutely rudderless and incompetent Democratic Party that is ostensibly led by none other than the President, but which in reality is effectively leaderless.
The current hysteria about the debt (and deficit) begs some questions. 1 ) When did the Republicans become so obsessed with the debt? Was it when they were running it up faster than you can say "blank check?" Apparently not, since the bulk of the current deficit largely consists of huge war and defense-related expenditures (think Iraq and Afghanistan), massive tax cuts for corporations and the wealthy (think Bush tax cuts), a huge prescription drug giveaway to pharmaceutical companies (yup, W again), and a dismal economy that has severely cut into tax revenues. Guess who we have to thank for all that? That's right, Republican administrations. Finally, was the deficit a concern to Republicans as the budget-busting Bush tax cuts were set to expire? Not in the slightest. And Obama, sadly, also seemed more than happy to accommodate this massive increase to the Federal debt.
The Bush administration, with it's deregulating, hands-off, gung-ho Capitalist cheer-leading happily watched as the financial system imploded under massive corruption and malfeasance, taking down the rest of the economy with it. Was the deficit then a concern as Hank Paulson, Bush's Treasury Secretary, floated a straw-man bill before Congress to grant him (Treasury) a multi-trillion dollar blank check with which to bail out his bankster buddies? Indeed, the deficit was irrelevant when it came to bailing out the core Republican constituency of wealthy banking fat-cats (sadly a chief Democratic constituency as well). How obscene now their desire and attempts to balance the budget by slashing social and health programs for working people, seniors and children.
One of the biggest myths about the current Republican Party is that they loathe big government. They love to say it, but talk is dirt cheap, their record of deeds indicates otherwise. Republicans love big government, as long as it's "bigness" consists of distributing public money to their wealthy corporate cronies, and restricting the political power and freedoms of working people.
No, with the Republicans now in control of the House of Representatives, a result for which we largely have President Obama to thank, they see that they can now hold the rest of the country hostage to their professed desire to see the deficit reduced. This is just a smokescreen, and an attempt to use a manufactured debt "crisis" as a cudgel that they hope to use to eviscerate programs which they have long despised, Social Security and Medicare, for example.
While we're at it let's explode another myth that mindless, lapel-flag-wearing Republicans hold dear, that their patriotism is unassailable. Patriotism? Are you kidding me? There are many adjectives one could use to describe the budget hostage-taking currently being carried out by congressional Republicans; selfish, reckless, insane, childish. I'm sure you have your own favorites, but patriotic is almost certainly not among them. Indeed, forcing such a confrontation which has the very real possibility of doing serious harm to the financial and economic security of millions of US citizens is more treasonous than patriotic. You might think at this point that the shame of it all would eventually kick in and force an about-face, but you'd be wrong, because shame is no match for ideological fundamentalism.
If all this has you thinking about Greek tragedies, then let's consider a second question, regarding the nature of the US debt. 2) Who holds the debt of the United States? And perhaps a corollary, how is it that the US government can actually be "in debt." As it turns out, a majority of the US debt in the form of US Treasury bonds is held by US citizens and institutions. Much of it is held by private US chartered banks, specifically, the Federal Reserve banks. So, in some ways the federal deficit is debt owed to ourselves. Not all of it, perhaps 35% is held by foreign institutions, say, like the governments of Japan and China. Needless to say, the majority of those holding US bonds are and/or represent wealthy, private corporate interests. Indeed, the Federal Reserve (or Fed for short) is one of those classic government double-speak terms, kind of like the Defense Department (which used to be known by the more accurate moniker, War Department), because it's not really Federal (it is privately owned, though with some very loose governmental oversight), and it's certainly not a Reserve (of, say, money!). So, if the debt is largely a debt owed to US citizens, why didn't the government tax more substantially those wealthy interests directly, rather than issuing debt which then must also be serviced with interest payments?
Another amazing fact about the Fed is that it doesn't really have the money it lends. The Federal Reserve act of 1913 established the way in which the US monetary system is organized. The Fed, indeed, private banks generally, can simply create money as bank account entries (loans) which can then be spent, but the US government (ultimately its citizens) is essentially placed in debt for this. But that's not all, for the privilege of essentially creating "money" out of whole cloth these institutions also demand the right to charge interest payments! If this sounds like the sweetest deal you've ever heard, then you'd be close to right.
So, for example, let's look at the recent economic calamity. The financial system implosion of a few years ago was largely the result of the issuing of massive amounts of fraudulent loans by private banks and financial institutions, followed by the repackaging and sale of those loans as securities, again under corrupt and fraudulent circumstances. That is, these were loans that private banks knew would or could not be paid back, and they were packaged and sold again as vastly overvalued securities. Note that such loans (money) are created in the same way that the Fed creates money, simply as new accounting entries on their balance sheets, that is, largely out of whole cloth. After the system collapsed these same private interests (and their sponsors within government) were not held responsible, rather, they contrived to have these fraudulent loans paid back dollar for dollar at the public trough. If they weren't paid off we would all face an economic armageddon, or so we were told. This was and remains, in effect, a vast shakedown scheme whereby public tax dollars, the bulk of which are now supplied by lower and middle income Americans, were and are redistributed to wealthy private interests.
The ultimate source of "money" in our present economic system is the full faith and credit of the US government, which is finally represented by the sum total of the productive capacities of it's tax-paying citizens. The government, our government, has effectively turned this credit, our credit, over to wealthy private interests (banks, financial institutions and their corporate patrons). They can issue loans at interest, often with usurious rates, backed by our blood and sweat. Yes, in effect, banks create money out of thin air, backed in the end by our productive labor, and expect interest payments in return. While there do exist some constraints on the system (the scheme of fractional reserve lending, as it is called, limits to some extent the amount of such money creation), this is essentially what the current debt "crisis" is all about. It is about whether the productive work of the vast majority of Americans will serve their own needs (the public's needs), or those of wealthy, private, corporate interests. Indeed, in the current standoff, the Republicans are attempting to extort their demands by effectively holding hostage the full faith and credit of the United States, something which is not theirs to begin with! That's what you call chutzpah!
If the Republican's succeed in enforcing massive budget cuts, and increasingly it seems that Obama and the Democrats are more than content to proceed down this road, then we will have our answer, and many Americans will be pushed further down the path to eventual indentured servitude. Needless to say, you would be hard pressed to hear any serious discussion of the above on Fox News or most other corporate media outlets.
3) So how did we get here? That's quite a long story, so I'll stay with only relatively recent events. As summarized above, after eight years of reckless Republican rule, and the economy shattered, Obama was elected with a large majority to change things. Not only did Obama have a strong electoral mandate, he also had Democratic control of both houses of Congress. But from day one he has governed almost completely in the interests of corporate America while largely ignoring the constituency that elected him. He was faced with crippling economic circumstances upon taking office, but his appointed economic team was largely representative of those who had created, or at least enabled the financial collapse. He made the banks whole but could only manage a watered-down and anemic stimulus package completely inadequate to the economic need. And as a result he has been more or less forced to accept the Republican meme that the "stimulus" didn't work, because, well, government stimulus doesn't work. Of course, it did work, to the limited extent that it could given its size. Indeed, much of the stimulus package was a further capitulation to Republican and conservative themes, with more tax cuts and less spending. The same was true with Obama's health care plan. It is largely a Republican plan (similar to that enacted by Mitt Romney while governor of Massachusetts). This is an entrenched theme of the Obama presidency; while ostensibly representing the Party in opposition to Republicans he has adopted conservative views and Republican framing on almost every issue. Because of this, Republicans know that if they just protest a little louder or longer, then they will get what they want. This is glaringly obvious in the current circumstance as Obama has swallowed whole the Republican "debt crisis" meme and has in fact offered the largest spending cuts, including cuts to ostensibly core Democratic programs such as Social Security and Medicare, programs which have not created the current deficit. Is this what he was elected to do? From day one in office Obama has not led, rather, he has simply reacted to whatever circumstances arose, and these have largely been engineered by Republican and conservative desires.
Several conclusions are possible. First, that Obama is asking for and getting exactly what he wants, that he is, in effect, more or less a conservative at heart. If true, it means that essentially his entire campaign was, at best, a massive deception, and at worst, a wholesale fabrication. Second, he would like to achieve more progressive ends, but he is completely unwilling to fight for them, which, if true, begs the question, why did he want to be President to begin with? Likely there is some truth in both. He operates within constraints imposed by our current money dominated political system, but clearly Obama seems totally unwilling to upset corporate interests that fill his and his Party's campaign coffers. He seems most comfortable in doing all he can to not rock the boat. In either case, he has shown himself to be thoroughly devoid of serious leadership skills.
Indeed, the Democratic Party has largely been decimated by Obama's "leadership." Having alienated his core of support it was no surprise then that the Republicans were able to achieve gains in the Congress during the low-turnout mid-term elections. This was also aided in no small part by Obama's complete refusal to confront Republican ideas and policies in any forceful or organized way. Again, any messaging that he has attempted has largely been framed from conservative viewpoints. This only further alienates potential supporters.
So, having ignored and alienated the majority constituency within his party, he now threatens to cut core Democratic programs as part of a desire to win "bipartisan" support for a horrible budget cutting deal that will shatter the lives of many of his ostensible base constituency, and resign the country to a future of stagnation and decline? This deal is "bipartisan" only in the sense that it is exactly what conservatives have been craving, and what Obama will apparently try and force congressional Democrats to vote for against their better instincts. In reality, this deal is a suicide pill for congressional Democrats and they would be wise to oppose it with as much vigor as they can muster. Obama seems to think that in agreeing to this fools errand he will be seen as some great conciliator that saved the country? Who does Obama think is going to vote for him come November 2012, all those people whose futures--and their children's futures--he has resigned to economic misery? If so, then he and his advisers are dangerously delusional.
So where does this leave us and our future? Any hope lies in the fact that comfortable majorities of Americans actually want to see the country move in what would be accurately termed a more progressive economic direction. This includes majority support for universal health care access and a return to more progressive taxation of the rich and corporations, among other things. The conundrum is that the necessary political organizations do not exist at present to force such changes. They do not exist largely because our political institutions are essentially under the control of a wealthy, corporate oligarchy, and the vast power that such wealth controls. The Democratic Party was at one time an avenue for the interests of the working majority to be acted upon, but this is clearly no longer the case, and indeed, if Obama "succeeds" in forcing an austerity budget on the country, then that will be the end of the Democratic Party as we have known it. It is time for progressive Democrats to confront their own leadership, and force a change. If that does not succeed, then new political organizations outside of the Democratic Party must be formed. The only alternative is a bleak future.
