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by Paul Craig Roberts

Source:  Counterpunch

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.

As taxing the rich is not part of the political solution, the focus is on
rewarding the insurance companies by privatizing Medicare at some future
date with government subsidized insurance premiums, by capping Medicaid,
and by loading the diminishing middle class with additional Social Security

Washington’s priorities and those of its presstitutes could not be clearer.
President Obama, like George W. Bush before him, both parties in Congress,
the print and TV media, and National Public Radio have made it clear that war
is a far more important priority than health care and old age pensions for

The American people and their wants and needs are not represented in
Washington. Washington serves powerful interest groups, such as the
military/security complex, Wall Street and the banksters, agribusiness, the oil
companies, the insurance companies, pharmaceuticals, and the mining and
timber industries.  Washington endows these interests with excess profits
by committing war crimes and terrorizing foreign populations with bombs,
drones, and invasions, by deregulating the financial sector and bailing it out
of its greed-driven mistakes after it has stolen Americans’ pensions, homes,
and jobs, by refusing to protect the land, air, water, oceans and wildlife from
polluters and despoilers, and by constructing a health care system with the
highest costs and highest profits in the world.

The way to reduce health care costs is to take out gobs of costs and profits
with a single payer system.  A private health care system can continue to
operate alongside for those who can afford it.

The way to get the budget under control is to stop the gratuitous hegemonic
wars, wars that will end in a nuclear confrontation.

The US economy is in a deepening recession from which recovery is not
possible, because American middle class jobs in manufacturing and
professional services have been offshored and given to foreigners.  US
GDP, consumer purchasing power, and tax base have been handed over to
China, India, and Indonesia in order that Wall Street, shareholders, and
corporate CEOs can earn more.

When the goods and services produced offshore come back into America,
they arrive as imports. The trade balance worsens, the US dollar declines
further in exchange value, and prices rise for Americans, whose incomes are
stagnant or falling.

This is economic destruction. It always occurs when an oligarchy seizes
control of a government. The short-run profits of the powerful are maximized
at the expense of the viability of the economy.

The US economy is driven by consumer demand, but with 22.3 per cent
unemployment, stagnant and declining wages and salaries, and consumer
debt burdens so high that consumers cannot borrow to spend, there is
nothing to drive the economy.

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.

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.