Share on Google Plus Share on Twitter Share on Facebook 3 Share on LinkedIn Share on PInterest Share on Fark! Share on Reddit Share on StumbleUpon Tell A Friend 3 (6 Shares)  
Printer Friendly Page Save As Favorite View Favorites View Stats   25 comments

OpEdNews Op Eds

The Real Crisis Is Not The Government Shutdown

By (about the author)     Permalink       (Page 1 of 2 pages)
Related Topic(s): ; ; ; ; ; , Add Tags Add to My Group(s)

Must Read 14   Well Said 10   Valuable 9  
View Ratings | Rate It Headlined to H2 10/2/13

Become a Fan
  (383 fans)
Source: Paul Craig Roberts

The inability of the media and politicians to focus on the real issues never ceases to amaze.

The real crisis is not the "debt ceiling crisis." The government shutdown is merely a result of the Republicans using the debt limit ceiling to attempt to block the implementation of Obamacare. If the shutdown persists and becomes a problem, Obama has enough power under the various "war on terror" rulings to declare a national emergency and raise the debt ceiling by executive order. An executive branch that has the power to inter citizens indefinitely and to murder them without due process of law, can certainly set aside a ceiling on debt that jeopardizes the government.

The real crisis is that jobs offshoring by US corporations has permanently lowered US tax revenues by shifting what would have been consumer income, US GDP, and tax base to China, India, and other countries where wages and the cost of living are relatively low. On the spending side, 12 years of wars have inflated annual expenditures. The consequence is a wide deficit gap between revenues and expenditures.

Under the present circumstances, the deficit is too large to be closed. The Federal Reserve covers the deficit by printing $1,000 billion annually with which to purchase Treasury debt and mortgage-backed financial instruments. The use of the printing press on such a large scale undermines the US dollar's role as reserve currency, the basis for US power. Raising the debt limit simply allows the real crisis to continue. More money will be printed with which to purchase more new debt issues needed to close the gap between revenues and expenditures.

The supply of dollars or dollar denominated assets in foreign hands is vast. (The Social Security system's large surplus accumulated over a quarter century was borrowed by the Treasury and spent. In its place are non-marketable Treasury IOUs. Consequently, Social Security is one of the largest creditors to the US government.)

If foreigners lose confidence in the dollar, the drop in the dollar's exchange value would mean high inflation and the Federal Reserve's loss of control over interest rates. It is possible that a drop in the dollar's exchange value could initiate hyperinflation in the US.

The real crisis is the absence of intelligence among economists and policymakers who told us for 20 years not to worry about the offshoring of US jobs, because we were going to have a "New Economy" with better jobs.

As I report each month, not a single one of these "New Economy" jobs has appeared in the payroll jobs statistics or in the Labor Department's projections of future jobs. Economists and policymakers simply gave away a good chunk of the US economy in order to enhance corporate profits. One result has been to create in the US the worst distribution of income of all developed countries and of many undeveloped ones.

In the scheme of things, the enhanced profits are a short-run thing, because by halting the growth in consumer income, jobs offshoring has destroyed the US consumer market. As I noted in a recent column, on September 19 the New York Times reported what I have reported for years: that US median family income has not increased for a quarter of a century. The lack of consumer income growth is why five years of massive monetary and fiscal stimulus have not brought economic recovery.

The real crisis cannot be addressed unless the jobs are brought back home and the wars are stopped. As powerful organized interests oppose any such measures, Congress will pass a new debt ceiling and the real crisis will continue.

Do you hear any mention of the real crisis in the media? Today I was on an international TV program for 25 minutes with the chief financial editor of one of England's major newspapers. Little doubt but that he was a good-hearted and intelligent fellow, but he had no capability of thinking outside the box. He was unable to comprehend my explanations, and resorted to regurgitations of the media's ignorance or subservience to Washington's propaganda.

Among his regurgitations was the "solution" of cutting Social Security. The chief financial editor of a major UK newspaper did not know that for the past quarter of a century Social Security revenues exceeded Social Security payments, and that the Treasury spent the surplus to fund the annual operating expenses of the government, issuing non-marketable IOUs to the Social Security Trust Funds.

The chief financial editor also did not comprehend that cutting Social Security payments also cuts consumer spending or aggregate demand, and sends the economy down further, thus magnifying the deficit/debt problem.

Because of the serious decline in the US economy caused by jobs offshoring and financial deregulation, Social Security no longer adds to its surplus. Social Security payments need the supplement to the annual payroll revenues of repayments by the Treasury of the borrowed funds.

The only reasons that Social Security is in trouble is that jobs offshoring and wars have constrained the US Treasury's ability to make good on its debts except by having the Federal Reserve print money. Every job that is sent abroad does not contribute payroll taxes to Social Security and Medicare.

Insouciant American economists say that manufacturing is an outmoded source of employment, but Chinese manufacturing employment is almost equal to the total US labor force in all occupations, including waitresses and bartenders and hospital orderlies. China's economy is growing at a rate of 7.5% in real terms, while Western economies cannot move forward and some are regressing.

Next Page  1  |  2

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available here. His latest book,  How America Was Lost, has just been released and can be ordered here.

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

Go To Commenting

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact Author Contact Editor View Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Libya - The DC/NATO Agenda And The Next Great War

The Road to Armageddon

American Job Loss Is Permanent

A Story...The Last Whistleblower

Pakistan TV Report Contradicts US Claim of Bin Laden's Death


The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
18 people are discussing this page, with 25 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

To say nothing of the Trans-Pacific Partnership (T... by mrk * on Wednesday, Oct 2, 2013 at 7:49:55 PM
The crushing debt of the Federal Government calls ... by Lance Ciepiela on Wednesday, Oct 2, 2013 at 8:42:43 PM
The solution -- except, Lincoln did it and was kil... by Dennis Kaiser on Thursday, Oct 3, 2013 at 6:13:06 AM
I did a lot of research on JFK and Vietnam years a... by Michael David Morrissey on Friday, Oct 4, 2013 at 6:29:11 AM
China is moving ahead at 7.5% whereas we're probab... by Ernie Messerschmidt on Wednesday, Oct 2, 2013 at 10:47:57 PM
Americans need to accept reality.  The jobs t... by Doc McCoy on Wednesday, Oct 2, 2013 at 11:33:50 PM
Agreed, but with caveats. The important differenc... by Paul Repstock on Thursday, Oct 3, 2013 at 12:19:11 AM
Quality of life will have many different definitio... by Doc McCoy on Thursday, Oct 3, 2013 at 2:05:38 AM
Not all Jobs,Doc, we don't need all the jobs to re... by Davey Jones on Thursday, Oct 3, 2013 at 11:51:55 AM
Doc is correct, because the only way to return man... by Paul Repstock on Thursday, Oct 3, 2013 at 10:09:39 PM
No, America does not have to decrease its standard... by Rudy Avizius on Thursday, Oct 3, 2013 at 5:48:45 PM
Government shut down? What shut down? Supposedly i... by Bill Johnson on Thursday, Oct 3, 2013 at 9:47:54 AM
Some of the problem here lies in the attitudes of ... by anna kakol on Thursday, Oct 3, 2013 at 10:54:02 AM
People in these industries also bought into the id... by anna kakol on Thursday, Oct 3, 2013 at 11:27:52 AM
PCR is absolutely correct when he says, "The exter... by Alan MacDonald on Thursday, Oct 3, 2013 at 10:54:05 AM
THE REAL PROBLEM IS the destruction of public educ... by Susan Lee Schwartz on Thursday, Oct 3, 2013 at 11:32:18 AM
I think I mentioned this on another feed; but I do... by anna kakol on Thursday, Oct 3, 2013 at 12:12:55 PM
 Madam,  Who is to blame that "the Ameri... by Ad Du on Thursday, Oct 3, 2013 at 1:28:58 PM
I honestly don't know why you insist on generalizi... by anna kakol on Thursday, Oct 3, 2013 at 2:12:07 PM
I totally agree with you. We should revamp and exp... by Ceric on Thursday, Oct 3, 2013 at 10:36:33 PM
I don't understand why PCR doesn't criticize the p... by Joseph Danison on Thursday, Oct 3, 2013 at 7:17:54 PM
Thanks for identifying in just one paragraph the e... by michael payne on Thursday, Oct 3, 2013 at 7:51:09 PM
Remember; the only way to accomplish thee items, i... by Paul Repstock on Thursday, Oct 3, 2013 at 10:29:32 PM
It is outrageous that few people understand how th... by Jim Kavanagh on Friday, Oct 4, 2013 at 11:19:25 PM
Paul is right that the "Real Crisis is not Governm... by Alan MacDonald on Sunday, Oct 6, 2013 at 12:57:13 PM