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General News    H2'ed 9/9/11

International Policy: Its Relationship to the Domestic Economy

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Tonight I wish to speak to this Congress and to my fellow Americans about international policy and its relation to the domestic economy. I will advocate a new direction America must take in the world so that we can meet the needs of our people here at home. 
For the past decade we have relied on the force of our arms to make America secure while our economy has rotted from within. America has lost its focus. America has spent more time concentrating on reshaping the world than on reshaping our economy.
We have created hundreds of thousands of jobs for military contractors all over the world, while we just learned that we created zero jobs here in the United States in the month of August as unemployment continues to stay above 9%. 
Come home America. We must begin to focus on things here at home and stop roaming the world looking for dragons to slay. We have a right and an obligation to defend our nation. That includes working for peace abroad and seeking peaceful resolution of conflict, a capacity that, at our peril, we have not fully developed: I call it strength through peace. It involves the pursuit of what President Franklin Roosevelt called the "Science of Human Relations," actually engaging those with whom we disagree most to attempt to find a way to co-exist peacefully. As Dr. Martin Luther King said at a commencement address at Oberlin College in 1965:
"We must find some alternative to war and bloodshed... I do not wish to minimize the complexity of the problems to be faced in achieving disarmament and peace. But we shall not have the courage, the insight, to deal with such matters unless we are prepared to undergo a mental and spiritual change. It is not enough to say we must not wage war. We must love peace and sacrifice for it. We must fix our visions not merely on the negative expulsion of war, but upon the positive affirmation of peace. We must see that peace represents a sweeter music, far superior to the discords of war." 
I believe the American people have the capacity to 'undergo a mental and spiritual change' that Dr. King spoke about. People are about that work in their own private lives everyday. The question is, does our government and those who lead it have that capacity? Are we willing to look, recognize that the path we are on leads only to destruction and poverty and are we willing to embark courageously on a new path? To those who say that this is naïve, I ask; has the strategy of military intervention which took us and keeps us in Iraq, Afghanistan and Libya made us any safer? The muscle-bound "with us or against us" mindset which passes for statecraft has placed us on a march of folly that in the past decade has left America with thousands of dead young soldiers, over a million dead innocents in Iraq, Afghanistan, Pakistan and the surrounding region, a new generation of terrorists and trillions upon trillions of dollars in debt. As poverty and war are twins, so are peace and prosperity.
Mindful of the disaster of spreading war and being an eyewitness as to how easily our country seems to be drawn into conflict, I traveled to Syria this year, to personally urge their leader to stop the violence, respect human rights, and begin a transition toward a democratic state. 
I traveled to Lebanon afterwards to hear the concerns of leaders who also believe that the violence in Syria must stop and are concerned that if radical fundamentalism results in the overthrow of the government of Syria, the same fires will consume their own nation which developed a fragile political and social consensus after years of civil war. 
I opposed the war in Libya, not only because it was unconstitutional, but it was and is unconscionable for America to precipitate or take sides in a civil war, spending perhaps billions in an ongoing war while we have so many pressing needs here at home. We went in because we were told a massacre could occur, yet civilian casualties in Libya mounted after the U.S. and NATO attacked. In order to please the West, Libya cooperated with the CIA, got rid of its WMD program in 2004 and privatized its economy, resulting in massive unemployment. It was moving through to reform even as the West moved to bomb it and, inexplicably, the West moved to take up the cause of elements of Al Qaeda spurring the rebels. 
We learn today from CNN that the rebels and fighters aligned with them are looting weapons warehouses across Libya, where as many as 20,000 surface-to-air missiles had previously been kept under lock and key. Western officials, perhaps the same geniuses who knowingly helped Libyan rebels with ties to Al Qaeda overthrow the Libyan government, are now worried the surface to air missiles and other weapons will get into the wrong hands.
This lawless interventionism spurred on by an unaccountable NATO which violates United Nations Security Council resolutions with impunity, this attempt to use force to bring others to subjection in the name of democracy, actually has become a device for control over the wealth of other nations, the squandering of our own wealth, and the spreading of poverty here at home. Did our government just wake up one day and discover that 14 million Americans are out of work and that we need a massive program to put them back to work? No. It has known that for some time. War has become our great distraction. It has given those who have little or no ability to construct a fair economy an opportunity to pretend to leader at the expense of those brave men and women who serve and at the expense of the American economy and the expense of the American taxpayers. We can no longer afford participating in this wargame of nations. 
I opposed the war in Afghanistan, and have brought Congress to confront it several times because the U.S. has spent one half a trillion dollars trying to democratize a tribal nation while failing to spend sufficient resources to protect our democracy here at home. 
The latest report is that we may be in Afghanistan through 2024, at the request of the Afghanistan government. This will cost us hundreds of billions, even trillions more. Doesn't it make more sense for America to come home, at the request of and for the benefit of the American people?
I led opposition in this Congress to the war in Iraq. Nine years ago I warned this Congress that there was no reason to go to war against Iraq. I was asked at that time whose side I was on: America's or the murderous dictator Saddam Hussein? Opposing that intervention was seen by some as coddling a murderous dictator. No matter that Hussein had opposed Al Qaeda. No matter that there was no proof that Iraq had anything to do with 9/11 or Al Qaeda's role in 9/11; no matter that Iraq did not have the intention or capability of attacking the United States and that no one had been able to show that Iraq had weapons of mass destruction. I wasn't "for" Saddam Hussein. I was for the truth. And for peace. 
America pursued the war anyway. America put the lives of its sons and daughters on the line. America will spend over three trillion dollars for this war that was based on lies. And even today we find our government will not bring the troops home as promised, but instead will continue to spend billions on this stupid and corrupt war in Iraq while our own nation is falling apart. Money for war, but no money for jobs? 
Am I advocating isolationism? Certainly not. We need to strengthen the United Nation's peacekeeping ability and blunt NATO's warmaking capability. We must stop NATO from going rogue. We need a counter-terrorism strategy which brings people to justice, not which dispenses justice from 10,000 ft., with the help of Predator Drones. It is the predatory interventionism which must stop. We must stop intervening for the benefit of oil companies or other corrupt corporate interests.
We cannot be the policeman of the world and lay off police and firemen in our own nation. We cannot continue to bomb bridges in other countries and say we do not have the money to build bridges here in America. We must stop pretending that America can solve all the problems in the world when we can't solve our own problems here at home. How can we bring democracy to other nations when we are losing it at home? We cannot tell other people how to live when we have people here at home who are having difficulty living. We should look to the wisdom of Proverbs where it was written: "He who troubleth his own house shall inherit the wind" (Proverbs 11:29) and we must work to set our own house in order. 
There were no weapons of Mass Destruction in Iraq. But there are weapons of mass destruction here in America. Unemployment is a Weapon of Mass Destruction. Poverty is a Weapon of Mass Destruction. Homelessness is a Weapon of Mass Destruction. Inadequate education is a Weapon of Mass Destruction. Lost pension benefits are Weapons of Mass Destruction. Poor health care is a Weapon of Mass Destruction. 
Yet despite the obvious needs domestically, the Pentagon budget now consumes over 50% of our discretionary spending. And the Pentagon budget has grown alongside the war budget. Just this year the wars and the Pentagon budget will consume close to $1 trillion in taxpayers' money. A trillion dollars! Do you have any idea how many jobs a trillion dollars can create? Stop the wars, trim the bloated Pentagon budget and use the savings to put America back to work. The American people want work not warfare.
Can we see any clearer example of the danger of endless war? We are supposed to be impressed with the strength of our leaders who, in the name of America wield awesome weapons against states a fraction of our size while when it comes to the economy and jobs, the same leaders lack the ability to confront Wall Street, which is destroying jobs on Main Street.
While spending trillions for unnecessary wars, the government bailed out the banks for $700 billion, refusing to link the bailout to mortgage modification which would have helped millions of Americans stay in their homes. 
The Fed, which infamously looked the other way as the financial crisis was building and failed to properly monitor the overexposure of top banks, created $1.2 trillion out of nothing and gave secret emergency loans to some of the largest banks who helped to cause the financial collapse through reckless investments. This secret money created out of nothing, but backed by the full faith and credit of the U.S., is going to fuel an international financial system which siphons wealth out of the U.S., avoids paying taxes, takes American jobs and moves them to low-wage climates.
According to Bloomberg News the "$1.2 trillion peak on December 5, 2008 ... was almost three times the size of the U.S. federal budget deficit that year and approximates the amount of money, $1.27 trillion that is due in unpaid principal on 6.5 million homes that are in or facing foreclosure."
Secret loans went to:
Morgan Stanley 107.3 Billion
Citigroup $99.5 billion
Bank of America $91.4 billion
Goldman Sachs  $69 billion
and to Foreign Borrowers:
Banks of Scotland $84.5 billion
Zurich based UBS AG 77.2 billion
How is it possible that banks too big to fail still exist? We all know that the banks will fail again. The taxpayers will be asked bail them out again; to preserve the wealth of shareholders, bondholders and executives, again. The destruction of the middle class has been accelerated by the Wall Street manipulators who brought about the collapse of the housing market destroyed trillions of wealth built into American homes. Risk, like taxes, is a yoke unfairly placed upon the shoulders of the middle class.
As income and resulting wealth is being redistributed upward at a pace not seen since the 1920s, the purchasing power of the middle class has been seriously eroded. Americans have less equity in homes to fuel home equity loans to keep their consumer spending up. A third of all Americans owe more than their home is worth. 
How is it possible that 120 million Americans literally have no wealth, just debts: How did it happen that 150 million Americans have less wealth than the top 400 individuals? How did it come to pass that the top 13,400 households, according to David Cay Johnston, have more yearly income than the bottom 96 million Americans? Who created this economy where welfare for the wealthy creates a system where a person earning $4 billion a year managing a hedge fund pays a lower tax rate on most of his income than a person who drives a truck? 
In a report just released, the Pew Charitable Trust wrote: "The idea that children will grow up to be better off than their parents is a central component of the American Dream and sustains American optimism. However. . . a middle class upbringing does not guarantee the same status over the course of a lifetime. A third of Americans raised in the middle class ...fall out of the middle as adults."
The implications are this report are chilling. America's middle class is being destroyed. America is headed toward a two class society. Just as America could not survive half free and half slave, America cannot survive half rich and half poor.
"What happens to a dream deferred?" wrote Langston Hughes.
"Does it dry up,
Like a raisin in the sun?
Or fester like a sore - -
And then run?
Does it stink like rotten meat?
Or crust and sugar over
Like a syrupy sweet?
Maybe it just sags 
Like a heavy load.
Or does it explode?"
It is democracy itself which at risk here. An economic democracy is a precondition of a political democracy. With endless wars, without solid jobs to sustain a middle class, a new national security state armed with the Patriot Act, will exist primarily to provide surveillance of a growing, bristling poverty class. 
America knew this forty-four years ago, when on February 29, 1968, The Report of the National Advisory Commission on Civil Disorders or Kerner Report pronounced: "Our nation is moving toward two societies, one black, one white--separate and unequal." Then the inequalities were in lack of access to opportunities for jobs, housing, education and social services. In 1998, thirty years after the Kerner Report, Senator Fred Harris, said, "there is more poverty in America, it is deeper, blacker and browner than before, and it is more concentrated in the cities, which have become America's poorhouses." The inequalities exist today. Just since January of 2009, unemployment has skyrocketed among African Americans from 12.7% to 16.7%. Among, Hispanics the unemployment rate is currently 11.3%
While intensifying among people of color, poverty today is colorblind. Foreclosures have spread through all American neighborhoods as a wildfire, consuming with it the hopes and dreams of millions. We had a moral urgency to address unemployment in the inner cities, but we failed as a society to do that. 
We have learned that writ large, the fate of people who live in our cities has been the fate of those who live in the suburbs, because the same massive economic machinery that for generations was crushing the hopes of millions of inner city Americans - - banks who disinvested, insurance companies who redlined, businesses which pulled out, this same plague is now visited throughout America. The official unemployment figure of 9.1% conceals a much larger, more devastating picture in America. According to a recent study by Youngstown State University: the de facto unemployment rate, as conceived and computed by their center for Working Class Studies, is 26.37% This figure includes individuals who are no longer looking for work (discouraged), underemployed and those who are marginally employed.
Corporations are sitting on trillions of dollars and not hiring because of "uncertainty," insinuating that small changes in federal regulations or tax policy are killing jobs. Yet we know that massive changes in federal tax policy and government regulations have taken place at periods of great economic growth in the United States. Our economy has not hit a rough spot in the road; it has hit a wall. 
The greatest losers in today's economic system are the young. They have been fleeced. They were promised good jobs with good pay if they got a good education. Millions have done that only to discover that the jobs we promised were not there. Millions of young people have moved in with their family and friends, barely scraping by, dreading student loans that they have to repay. The dread when those loans come due. 
The major fault in the domestic economy is the failure to provide well paying jobs for Americans. The reasons for the high unemployment and low paying jobs are many, but two major reasons stand out: lack of consumer demand and stagnant wages accompanying low union participation. There is a lack of consumer demand in an economy that is 70% dependent on consumer spending. 
There are those who say we can spur demand with more tax cuts for businesses. This fails the test of experience. Business received tax cuts. We still have high unemployment. Business profits are greater than ever. Investment is less. We have learned from the past few years that businesses will not invest while economy is in bad shape.
Since World War II, America has come out of every recession in less than a year, but this time we have had a false recovery. The economic numbers improved briefly, while stimulus was injected. Today we are back in recession, a double dip recession that is destroying people's lives and setting back our nation. 
We did not have enough stimulus to begin with. As the stimulus runs out things are getting worse. The recession is feeding on itself. In 1937, a second round of depression surfaced as stimulus was withdrawn, requiring another effort by the government to stabilize the economy. The parallel between 1937 and 2011 is obvious. We need a second stimulus. It has to be strong enough to put millions of Americans back to work.
State and local governments are forced to lay off people by the hundreds of thousands. These layoffs are not introducing efficiency. They undermine service and reduce the necessary role of government in the life of a community. Massive aid is needed to all areas of government, not because governments have spent recklessly, but because revenues are down. Income tax revenue is down. Sales tax revenue is down. Property tax revenue is down due to foreclosures.
We can stimulate the economy by providing revenue to rehire state and local government employees. That is the easiest way to put hundreds of thousands back to work. This is an obvious way to stimulate the economy on a significant scale. State, local government, public schools, public and private college would all have an enhanced ability to restore service. Such a stimulus would create an economic climate where businesses will expand their investment, utilizing their own profit.
The same thing is true in the housing area. The government must immediately implement a new housing program. More and more properties are becoming vacant and vandalized, while people are doubling up. We need a full-scale program where economically troubled homeowners are given the right to rent, at a market rate, property in foreclosure. The government would provide a rent subsidy while the homeowners seek work. 
The American people want work, not welfare. There should be work for those who are able to work. Government must become the employer of last resort. The private sector is not providing the jobs. When the private sector fails to provide the jobs, the government has a moral responsibility and a practical responsibility to step forward to put the country back to work.
As with FDR and the New Deal, the government must now put millions of Americans back to work rebuilding our infrastructure. The American Society of Civil Engineers issued a report that $2.2 trillion in infrastructure rebuilding must take place to move the commerce of America.
It is not enough to describe the situation and to make a few suggestions as to what could be done to take us in a new direction. There comes a time when we need to look at some dramatic change that needs to be done to restructure our economy. This month I am going to be introducing a bill which will be aimed at addressing our structural economic problems directly. It is called the National Employment Economic Defense act - - the NEED Act. America needs millions of jobs. How can we create millions of jobs in a time of annual deficits, long-term debt and contracting budgets? 
Here's how: The Federal Reserve creates money out of nothing and it has given it to banks. The Fed has assumed that power through an Act of Congress.  The Federal Reserve has used all of its standard monetary policy tools. But the American economy is not getting better. Whatever the Fed is doing, it is not working. 
The reason why is perhaps best explained by the Fed itself: "The Fed can't control inflation or influence output and employment."
The Fed has been buying Treasury and other securities to put downward pressure on interest rates. The idea is to lower finance costs, encourage more borrowing and nudge investors into riskier investments. This provides breathing space but little else.
Consumers are already over their heads in debt and they aren't going to borrow more. Neither will producers, when sales are slack. Higher default rates are widening spreads. Many investors will still prefer to make a small gain on government securities rather than risk taking losses. 
Reality beats theory. The reality is that not enough people have enough money. Why is this? Where does our money come from? Why isn't it coming?
The Fed doesn't create money we use in our bank accounts. The banks do. Most of this money is created when banks make loans. This is why the Fed can't control inflation or influence output and employment. 
Output and employment depend on demand. Demand depends on how much money people have, or can borrow. Because banks create this money, they control demand. If banks aren't lending or borrowers aren't borrowing, new money isn't being created to replace the money removed when bank loans are paid, so the money supply shrinks.
The Fed can only put more money into the economy by buying assets from non-banks. No money goes into the economy when the Fed buys their assets. It's just a swap of one asset for another, called reserves. Banks can't lend reserves into the economy.
The non-bank sellers of assets are mainly large institutional investors. They don't spend much of the money they receive, they reinvest it in other assets - - that is their business. But this churning of assets up in the stratosphere doesn't "trickle down" to earth. The real economy of families, shops and small businesses of roads and schools is bypassed. We know this.
The money is not getting to where it is needed. Until it does, things can only get worse. None of the current policies work because of the way the current system is set up. 
Here is how we fix it. We have to reclaim our Constitutional power to issue money into the economy, unburdened by debt. Last Congress I introduced legislation to do just that, and I am reintroducing it next week. Here is what the legislation does:
1. It ends the Fed's unaccountability by putting it under Treasury. 
2. It ends fractional reserve banking, ending banks' ability to control demand in our economy. 
3. It empowers our nation to issue money directly into the economy to create jobs to rebuild our crumbling infrastructure, unhindered by debt and interest payments - - creating millions of new, well-paying jobs. It gets the money to where it is needed the most. It gets the economy going and keeps it going. It avoids debt and deficits. It primes the pump of the economy. It enables us to regain control of our destiny as a nation. 
This plan would not create inflation because it would reduce infrastructure costs. Lower costs means prices can go down. Lower prices do not define inflation. Real wealth will be created with the new money. Infrastructure is enduring wealth, unlike the "financial wealth" of the stock market. 
If government borrows money created by banks for infrastructure it is an interest bearing debt, paid for over a long time. But if government creates money for infrastructure and spends it into circulation, there's no debt or interest costs. The same amount of money is created in either case, adding to the money supply by exactly the same amount. 
This is also a way to save the free enterprise system from self-destruction. The American people know what is going on in our economy. It is run by Wall Street for Wall Street. It is run by banks for banks. Unless we look at serious structural reforms we are headed for a two class society.
The ability to coin or create money is an inherent power under Article I, Section 8 of the United States Constitution. The NEED Act would enable the government to invest in America.
This coming Sunday we will observe the 10th anniversary of a terrible blow to our nation's sense of security and confidence. We will never forget September 11, 2011. But we also need to remember the enduring capacity of our nation to bounce back from tragedy. We need to remember what this country is made of. America is made of vision and courage: the courage and vision of Washington, Jefferson and Adams to put lives, fortune, sacred honor on the line for the purpose of freedom and independence.
We are the country of FDR and the New Deal, of John F. Kennedy and the New Frontier, of LBJ and the Great Society. We are a nation of charismatic leaders like Ronald Reagan and Bill Clinton, who, agree with them or not, inspired a sense of optimism and confidence in America. 
We need to remember who we are. And in the act of remembering we will regain our confidence, we will regain our economic strength, we will put people back to work, we will help millions save their homes, we will protect the retirement security of elderly Americans, we will ensure that our children will be able to obtain a college education and a job when they graduate.  We will restore our public institutions and the services they provide.
We can do all of this and more. But we must ask that those who operate the engines of finance to abandon their recklessness, their selfishness and pledge allegiance to our nation and its people. We must demand that corporations pay a fair share of the taxes. We must end the off-shoring of jobs and profits. 
While some our leaders, with trembling hands and nervous eyes have focused abroad, our country is falling apart from within. America was never meant for decline. America was always meant for an upward, uplit path. We now must correct our course. We must move away from trying to determine the fate of nations around the globe and focus on the fate on the one nation that must matter to us more than all others -- The United States of America!
This speech was delivered to Congress on September 7, 2011. See video of the address here.
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Dennis Kucinich is former US Congressman and two-time presidential candidate from Ohio who served 16 years in the U.S. House of Representatives. 

Visit his website at  KucinichAction

Follow him on Twitter at @Dennis_Kucinich
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