In my last column I suggested that an unintended
outcome of the debt ceiling impasse could be Congress' loss of the power of the
purse. In this column I suggest an intended outcome that the ongoing political
theater might be designed to produce.
President Obama has said that he will not resort to
the various powers open to him to keep the government running should Congress
fail to deliver a debt ceiling increase. This is a suspicious statement, as it
is not credible that a president would leave troops at war unpaid and without
supplies, Social Security checks unsent and stand aside while the US dollar
collapses and the credit rating of the US government is destroyed.
There are national security directives and executive
orders already on the books, as well as the 14th Amendment, that Obama can
invoke to set aside the debt ceiling. Congress would sigh with relief that
Obama had prevented the lawmakers from destroying the country.
So what might be going on?
One possibility is that the political theater is
operating to bring about otherwise politically impossible cuts in the social
safety net. If the drama continues to the absolute deadline without a deal,
Obama, who perhaps favors cutting the safety net as much as do the Republicans,
would have to accept the Republican package in order that the troops are not cut
off from supplies, Social Security checks can continue to go out, and the dollar
be saved. Having opposed the Republicans to the last minute, Obama can say that
he had no other recourse.
What American wants the troops deserted on the field
of battle and the elderly without groceries? Who other than the rich can stand
the higher prices from dollar devaluation?
It would be a perfectly orchestrated scenario for
getting rid of the New Deal and the Great Society that use up money that could
be spent on wars and bailouts and tax cuts for the rich.
If the American public is not sufficiently softened
up by August 2, the political theater can continue with temporary debt ceiling
increases until things really begin to crack. On July 15 S&P put all
AAA-rated insurance companies on CreditWatch citing ties to the US sovereign
credit rating. On July 25, the US dollar fell to a new low against the Swiss
franc, and gold reached a new high. Some more of this, and the public will see
benefit cuts as preferable to economic Armageddon.
If Bush and Cheney were still in office, they would
use the debt ceiling impasse to seize more power from Congress. Obama, however,
might be so well aligned with financial interests that the opportunity he sees
is to cut Social Security, Medicare and education loose from the federal budget.
Then Wall Street can privatize them.
Whatever emerges from the debt ceiling impasse, it
will not be in the interest of the American people.
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 books, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available (more...)