Allison Kilkenny: Unreported

The end is nigh…unless it’s not

Posted in corporations, Economy, Republicans, wealth divide, world by allisonkilkenny on June 30, 2010

The hysterical debt Armageddonists have been screaming about the need to adopt all sorts of insane austerity policies because if we don’t, China is going to invade and enslave our children…or something. This irrational frenzy is, of course, bipartisan. Both sides of the aisle, for example, recently voted against extending unemployment benefits.

Tea Party sweetheart, Sharron Angle, specifically said citizens are “spoiled” by jobless benefits, and the US should cut unemployment benefits in order to motivate people to find work. Because – as we all know – unemployed people are just too lazy to toil, and there are millions of jobs in some secret industry sector only teabaggers know about, waiting for capable employees to fill them.

No matter how loudly Krugman tries to tell these idiots that cuts are the very worst possible thing they could do right now — what does he know? He only won a Nobel Prize in economics — Republicans refuse to listen. Actually, the world doesn’t seem to be listening, either.

As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.

Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.

“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”

Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.

But these are desperate times, and desperate times call for austerity measures, right? If the US doesn’t cut spending, awful things will happen. Fire will rain from the heavens! Cerberus will emerge from Hades to eat the weak!

Or not.

Here’s a shocking chart from the Congressional Budget Office’s latest long term budget outlook showing that unless Congress acts decisively, our debt situation will be totally fine:

The (more or less) flat line is what happens under current law. O..kay. So why the big hurry to totally cripple welfare programs?

Well, for starters, the rich have always hated and resented these benefits, and during times of panic and crisis, they use the chaos as an opportunity to gut social programs. And the simple reason they do this is to make more money. If less tax dollars have to go toward feeding poor people, then they get to hoard more of their wealth.

It seems like a crazy level of nefarious viciousness, but that really is the short version of why they do it. Many delude themselves while doing this by saying out loud that rich people simply work harder, or unemployed people are too picky when looking for jobs, but that callous indifference is a thin shell resting atop a core of classist hostility.

Jonathan Schwarz has written an excellent piece about the assassination of the welfare programs, and the nature of the entire economic system. (via)

[M]uch of the world’s elite understand exactly what they’re doing: i.e., use the economic catastrophe they themselves created as a pretext to kill the welfare state they’ve despised for 65 years. Nonetheless, a significant chunk of them actually believe they’re doing the right thing for everyone.

How is this possible? The best explanation I’ve seen appears in a 1994 book by John Ralston Saul called The Doubter’s Companion. It’s a kind of dictionary—the whole book is just him defining and discussing a bunch of words. And one thing he defines is “debt, unsustainable levels of.” Everything you need to understand about our current attempt to obliterate ourselves can be found within it. His most important point is that money is not real. Yet somehow we’ve decided it’s a great idea to stop feeding real food to real people and cease educating real children in order to demonstrate fealty to an abstract concept.

Read the full list, but here are a couple of highlights:

A nation cannot make debts sustainable by cutting costs. Cuts may produce marginal savings, but savings are not cash flow. This is another example of the alchemist’s temptation…

Civilizations which become obsessed by sustaining unsustainable debt-loads have forgotten the basic nature of money. Money is not real. It is a conscious agreement on measuring abstract value. Unhealthy societies often become mesmerized by money and treat it as if it were something concrete. The effect is to destroy the currency’s practical value.

Citizens have grown so accustomed to playing by the elite’s rules that it’s sometimes difficult to remember that rich people wrote the playbook, and rigged the rules in their favor so they always win, even if they’re the ones who wreck the economy. They get to play dangerous games with taxpayer money, and then when their mad little experiments blow up in their faces, they use taxpayer money to bail themselves out. Oh, and then they get fat bonuses. It’s a totally awesome system, as long as the poor people never realize they get screwed in the game.

These corporate welfare programs: corporate tax breaks, bailouts, the Bush tax cuts, etc. never face the chopping blocks during austerity talks, of course. The cuts only come from the bottom – from the poor and unemployed.

Americans have been awaiting the shiny new financial regulation bill to come out of Congress, and it seems some people were genuinely surprised when Democrats capitulated to Scott Brown, and dropped $19 billion in taxes from the banks.

But that makes perfect sense. Yes, the huge financial institutions have to make a few meager compromises because they brought the world to the brink of destruction, so they made concessions here and there. For example, most derivative trading now has to be publicly traded…except some of it that can still be dealt OTC, which is insane considering this toxic stuff sent the US spiraling into a depression, but again – the rich play by a separate set of rules.

For the most part, Wall Street has returned to business as usual, and the job market is flourishing once again for the banksters. Goldman Sachs just admitted to lying and now confesses it used its own money to bet against the US housing market, but no one seems to care. After all, politicians have food stamp programs to cut!

The wealthy are so rarely subjected to the rule of law that journalists (good journalists I might add – journalists I read all the time, and really like) seem amazed and genuinely pleased that watered down stuff like ratings agency reform, SEC and systemic risk regulation, survived at all. But no CEOs or hedge fund managers have gone to jail, and the system that brought the US economy to its knees is pretty much still in place.

Not only that, now that this crisis has happened, the austerity hawks are using the opportunity to gut the only thing that prevented a full-blown societal collapse — the welfare state. Look, you can keep knocking the little guy off his tightrope as long as there’s a net beneath him, but if you remove that net, it’s simply murder.

4 Responses

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  1. Doug said, on June 30, 2010 at 4:27 pm

    I have encountered a Heterodox Economics department at the University of Missouri – Kansas City (UMKC). I signed up to get the Heterodox Economics newsletter shared among all Heterodox Economics departments across the world:

    Through my contacts at UMKC I have encountered people like, William K. Black:

    and heard about people like, Dean Baker:
    How the Wealthy Use the Government to Stay Rich and Get Richer

    Other than the very rare appearance of Dean Baker on the PBS News Hour, there is not much criticism of popular corporate economics.

    All this makes me think that Media Reform is an important prerequisite to any kind of meaningful change on these issues. What do you think?

  2. Doug said, on June 30, 2010 at 10:08 pm

    I forwarded a link to this post along with this message to my local Free-thought Meetup email list:

    I like this blog. I believe that skeptics/free-thinkers need to question strongly held economic beliefs which can be shown to be inconsistent with reality.

    Note on UMKC: We have a Heterodox Economics department here at UMKC. Here’s the Heterodox Economics Newsletter for all economics departments across the world:

    Here’s a rant from one of the people on the list:

    When finally everyone is either “not working” for the government or taking some kind of government hand out morons like you and Krugman might understand, when the shelves at the store are empty like they are in the Soviet Union, that someone has to actually “work” to produce the goods and services that are the produce of the “productive private sector”. The valuable goods and services that we enjoy are produced by the private sector to a large extent in spite of all the barriers erected by all this evil, corrupt government. The Nobel prize in economics should be awarded to someone who espouses socialist tactics like paying people not to work since it is an historical fact that it has never worked at any time or any place in the world or in history ever. If you doubt this simple concept just sit down on your stupid ass and see how much wealth gets created. That is an experiment even a moron like you could understand.

    I responded:

    I realize that the blog post that I linked to in my original post is ah … strong… but I don’t see how a sane person can see it as a Communist Manifesto.

    It’s the attitude of Market Fundamentalist Nuts that I am trying to expose to the light of day….

    Other people on the list voiced messages of support for my call for debate. I’m not going to let some guy stop me from bringing these subjects up in the Free-thought/Skeptics Community in Kansas City. Self-described Skeptics and especially self-described free-thinkers must be able to discuss these topics civilly.

  3. Ignatius Crumwald said, on July 1, 2010 at 1:06 am

    I’ve long held the belief that the welfare issue is a strawman. Especially considering that the reason for the welfare state is to act as a hedge against revolt. I say cut the military budget, but that doesn’t solve the problem of our unsustainable velocity.
    For the most part, the welfare state is funded by banks and financial institutions who lend the government the money, through the purchase of bonds. For example, some of those bonds are paid back at double the purchase price upon full maturity. For instance the 30 year US treasury bond doubles in, well, 30 years. With a doubling time of 30 years that works out to 2.33% yearly compounded interest from a “company” that produces nothing to another company that makes nothing bought with money they either printed out of thin air or leveraged at 100 to 1 from the savings of some dirty saver. Now you might say “That Sounds good, the government is spending money into the economy”, but ultimately this is what has handed the financial institutions of this country so much power – The simple fact that in our current system the government can’t “spend” money into the economy without first borrowing through bond sales.
    Then there’s the underlying issue that the economy is based on an over sold instrument that basically deigns the economy must double every 30 years in a nation who’s population only doubles every 60 – both unsustainable, by the way.
    Larger corporations have many different methods of faking this growth from downsizing and outsourcing to out-right synthetic financial instruments – the former cannibalizes future production capacity to post short term gains and the latter pretends the future production is still on track by selling it to investors on the false premise afforded by the former. So basically they have virtual placeholders for all of their employees and make ridiculous claims of making more with less then set the clock forward a second or two a little at a time to leverage tomorrow’s goods a today’s prices – goods that at this point are a complete impossibility as you may as well put two TVs in a room and hope they make babies. The effect of that is a financial sector that essentially produces nothing holding and spending money (money being a virtual representation of properly allocated resource) that shouldn’t be accumulated for another 30 years on the goods of today borrowed on what goods we think might exist tomorrow based on retarded exceptionalism, wishful thinking, and complete and utter lies.
    Think of all the houses that sit empty built with resources that didn’t need to be used yet which were bought with money that shouldn’t even exist all made possible by people who never made anything in their lives.

    So, unfortunately the austerity hawks are half-right in that the current situation is on a mathematically unsustainable path, but they ultimately seek to prune the wrong end of the debt tree – the roots aren’t what needs cutting. I think we need to take a closer look at who the real welfare recipient is.

  4. Publius said, on July 3, 2010 at 11:43 pm

    Ignatius Crumwald reminds me of something that came to my mind when reading again about Peter G. Peterson and the deficit hawks who are committed to destroying Social Security. During the late 19th and early 20th Centuries there were various political philosophies proposed as alternatives to the existing order. Anarchism and socialism particularly terrified the wealthy classes. After the October Revolution the U.S. joined with several other countries in sending troops to Russiia partly to restore the Tsar (they used “guarding the munition stores” at Archangel as the excuse, but did engage in some combat against Red forces. The Bolsheviks hoped, and the ruling classes in the West feared, that “revolution is exportable.” In fact, a purely native Communist government did establish itself in Hungary before being savagely repressed, and there was considerable unrest in Germany and the Baltic States.

    Since the collapse of the Soviet Union, everybody has adopted the attitude that “Socialism is discredited.” This is unfortunate. The ruling classes have become too complacent. Having nearly destroyed the unions and manufacturing jobs, they don’t consider the working class important. We really need a new economic theory that combines idealism and compassion with a believable analysis of how things work.

    Frankly, I do not understand why well-off people are so anxious to destroy the social safety net and gratuitously cause additional suffering for those less fortunate than themselves, in the name of an obviously wrong understanding of what a government deficit is or what government debt is.

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