Francis McLoughlin on U.S. Government Debt.
On March 23, José Sócrates, the Prime Minister of Portugal, submitted his resignation to the President. Having just caught wind of this piece of news, and given the recent bouts of horrific brutality being carried out in some parts of the world, while in others overblown frivolity, one might have been forgiven for asking any number of the following questions. Was he embroiled in an underage bunga bunga sex scandal? Was he exposed for corruption; for embezzling funds? Did he issue commands to his soldiers to fire on civilian apartment buildings; at women and children? No, nothing of the kind. Sócrates stepped down because the budget he proposed in parliament, along with its cringe-worthy austerity measures, was rejected.
This should be hardly surprising. In the majority of democratic countries in Europe and Asia, the Prime Minister prepares a government budget and holds it up to the wary eye of parliament, who then votes on it. Should parliament reject it, they have presumably lost confidence in the government. That being the case: the axe falls, the government bids its citizens farewell, everyone moves on. This happens to be the standard procedure in functioning parliamentary-democracies worldwide. This is not the way things work, however, in the United States.
In the U.S., the budget is something which now must be treated responsibly and with the utmost care in bipartisan negotiations; not something to be rejected willy-nilly, hence the present drama. This is due in large part to the peculiar situation in which the U.S. finds itself, a situation that U.S. Secretary of Treasury Timothy Geithner illustrated in his January 6 letter to Congress. Before we delve into that, however, we ought to turn our attention to Congress, where the debt ceiling is currently placed at $14.3 trillion. Congress, of course, holds the purse, controlling the annual surplus or deficit by deciding what the taxation and spending levels will be. Geithner begins his letter by observing that ‘Never in [U.S.] history has Congress failed to increase the debt limit when necessary’. He continues:
Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. Failure to increase the limit would be deeply irresponsible. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent.
At the time of his writing in January, $13.95 trillion had already been spent, leaving only $335 billion to go. Geithner emphasized that changing the debt limit does not alter or increase U.S. obligations. It only permits the Treasury to fund what has already been established.
To be blunt, as Truthdig journalist Robert Scheer puts it, the current debate on debt has become a false one, which is to say the analogy proffered by the GOP and ‘conservative’ think tanks—that the state, being something akin to a household, must refrain from spending ‘beyond its means’ or else find itself in trouble at a later date—is an egregious sham of a false equivalency. These same ideologues, especially on the Tea Partisan side of the GOP, which calls for reduced state intervention in the economy, may very well have publicly expressed its wish to see ailing corporations during the recent financial crisis ‘go under’, sticking to their ideological guns as strict adherents to free market principles. After all, is it any concern of theirs, as civil servants, if the human cost in jobs and livelihoods resulting from such a course of action would have reached devastating proportions? As it invariably turns out, however, in the last instance, the only thing that matters, to their way of thinking, is the further enrichment of millionaires.
Returning now to the budget’s effects on partisan scuffles, should the U.S. political system have shutdown on the 8th April at midnight there would have been a number of ramifications for the U.S. population. For one thing, hundreds of thousands of federal workers would have been sent packing. In terms of national defence, the likelihood is that soldiers would have stopped receiving their pay. The chances are that, likewise, benefits for veterans and clinical trials at the National Institutes of Health would have been put on hold.
There are various features of the U.S. political system that make the prospect of this kind of stalemate more likely to occur: for example, a potent executive branch holding veto-power; as well as what has by now become a well-known phenomenon: the Senate filibuster. At a glance, reduced spending would spell less need for taxation, and the GOP effectively demand that the super-rich receive further tax-breaks, this being obviously the only way for a ‘democratic’ country like the U.S. to perhaps eventually create new jobs for those poor slobs—that is, the majority of the U.S. population, who are now either unemployed, facing the looming threat of unemployment, or seeing their wages stagnate—by means of which the new investments corporations would only then be free to make, having been freed from the smothering grasp of ‘Big Government’.
All this is demanded at a time when U.S. businesses are witnessing the fastest rate of growth in over 60 years, with profits having risen 29.2% as of October 2010 (since the fourth quarter). In 2010, the annual median income for those at the head of the 200 leading companies was on the order of $9.6 million. Capital One and Goldman Sachs—firms that survived the recent financial crisis by means of the taxpayer-funded bailout package given them by their conservative nanny-state—are currently seeing the income of their CEOs once again on the rise.
Since the US political system did not shutdown, the aforementioned calamities were averted—at least, more or less. The price that had to be paid for the heroic, last-minute aversion was nevertheless considerable, and Democrats were more than willing to make large concessions. According to a Senate Appropriations Committee review, most of the $2 billion in cuts in the one-week bill comprised lopping $1.5 billion off the Federal Railroad Administration’s High Speed and Intercity Passenger Rail program. ‘Conservative’ think tanks around the world (who have a well-known aversion to public transport) would have doubtless jumped for joy. To whomever it may concern, there were also major cuts in research into making air travel ‘safer and more efficient’. The most disgusting blow to the U.S. people, however, took the form of $220 million being syphoned out of the Department of Housing and Urban Development’s Community Development Fund. Ironic, is it not? A former community organiser in Chicago was reduced to the figurehead overseer of these spineless compromises.
It is estimated that 10 million U.S. families will have lost their homes by the end of the year, with $5.6 trillion having already been wiped from the real property value of houses (home equity). Yet the debate still stands adamantly against the well-being of the U.S. population. Paul Ryan wishes to reduce the deficit by $4.4 trillion over the next ten years. How does he intend to do this? Repealing health care reform strikes his fancies. Into the mix he also throws proposals to reform Medicare and Medicaid. The choice being proffered to the U.S. people has long been one between reckless spending and “socialism” on one hand, and libertarian principles and market outcomes on the other. The real choice, however, is one between the human cost in jobs and livelihoods that will result from the U.S. defaulting on its obligations, as opposed to the further enriching of millionaires in the hope that some benefits might at some stage trickle down to the people.