The American Empire is
failing. A number of its puppet rulers are being overthrown by popular protests,
and the almighty dollar will not even buy one Swiss franc, one Canadian dollar,
or one Australian dollar. Despite the sovereign debt problem that threatens EU
members Greece, Ireland, Spain, and Portugal, it requires $1.38 dollars to buy
one euro, a new currency that was issued at parity with the US
The US dollar's value is
likely to fall further in terms of other currencies, because nothing is being
done about the US budget and trade deficits. Obama's budget, if passed, doesn't
reduce the deficit over the next 10 years by enough to cover the projected
deficit in the FY 2012 budget.
Indeed, the deficits are
likely to be substantially larger than forecast. The military/security complex,
about which President Eisenhower warned Americans a half century ago, is more
powerful than ever and shows no inclination to halt the wars for US hegemony.
The cost of these wars is
enormous. The US media, being good servants for the government, only report the
out-of-pocket or current cost of the wars, which is only about one-third of the
real cost. The current cost leaves out the cost of life-long care for the
wounded and maimed, the cost of life-long military pensions of those who fought
in the wars, the replacement costs of the destroyed equipment, the opportunity
cost of the resources wasted in war, and other costs. The true cost of America's
illegal Iraq invasion, which was based entirely on lies, fabrications and
deceptions, is at least $3,000 billion according to economist Joseph Stiglitz
and budget expert Linda Bilmes.
The same for the Afghan
war, which is ongoing. If the Afghan war lasts as long as the Pentagon says it
needs to, the cost will be a multiple of the cost of the Iraq
There is not enough
non-military discretionary spending in the budget to cover the cost of the wars
even if every dollar is cut. As long as the $1,200 billion ($1.2 trillion)
annual budget for the military/security complex
is off limits, nothing can be done about the U.S. budget
deficit except to renege on obligations to the elderly, confiscate private
assets, or print enough money to inflate away all
The other great contribution to the US deficit is the off-shoring of
production for US markets. This practice has enriched corporate management,
large shareholders, and Wall Street, but it has eroded the tax base, and thereby
tax collections, of local, state, and federal government, halted the growth of
real income for everyone but the rich, and disrupted the lives of those
Americans whose jobs were sent abroad. When short-term and long-term discouraged
workers are added to the U.3 measure of unemployment, the U.S. has an
unemployment rate of 22%. A country with more than one-fourth of its work force
unemployed has a shrunken tax base and feeble consumer purchasing
To put it bluntly, the $3
trillion cost of the Iraq war, as computed by Joseph Stiglitz and Linda Bilmes,
is 20% of the size of the U.S. economy in 2010. In other words, the Iraq war
alone cost Americans one-fifth of the year's gross domestic product. Instead of
investing the resources, which would have produced income and jobs growth and
solvency for state and local governments, the US government wasted the
equivalent of 20% of the production of the economy in 2010 in blowing up
infrastructure and people in foreign lands. The US government spent a huge sum
of money committing war crimes, while millions of Americans were thrown out of
their jobs and foreclosed out of their homes.
Congress had no qualms about unlimited funding for war, but used the resulting
"debt crisis" to refuse help to American citizens who were out of work and out
of their homes.
The obvious conclusion is
that "our" government does not represent us.
The US government remains
a champion of offshoring, which it calls "globalism." According to the US
government and its shills among "free market" economists, destroying American
manufacturing and the tax bases of cities, states, and the federal government by
moving US jobs and GDP offshore is "good for the economy." It is "free
It is the same sort of
"good" that the US government brings to Iraq and Afghanistan by invading those
countries and destroying lives, homes and infrastructures. Destruction is
good. That's the way our government and its shills see things. In America,
destruction is done with jobs offshoring, financial deregulation, and fraudulent
financial instruments. In Iraq and Afghanistan (and now Pakistan) is it done
with bombs and drones.
Where is all this
It is leading to the
destruction of Social Security and Medicare.
Republicans have convinced
a large percentage of voters that America is in trouble, not because it wastes
20% of the annual budget on wars of aggression and Homeland Security
porn-scanners, but because of the poor and retirees.
Pundits scapegoat the
middle class and blame the struggling middle along with the poor and retirees.
Fareed Zakaria, for example, sees no extravagance in a trillion-dollar military
budget. The real money, he says, is in programs for the middle class, and the
middle class "will immediately punish any [politician] who proposes spending
cuts in any middle class program." What does Zakaria think the military/security
complex will do to any politician who cuts the military budget? As a well-paid
shill, he had rather not say.
Andrew Sullivan also has
no concept of reductions in military/security subsidies: "they're big babies I
mean, people keep saying they don't want any tax increases, but they don't want
to have their Medicare cut, they don't want to have their Medicaid [cut] or they
don't want to have their Social Security touched one inch. Well, it's about time
someone tells them,you can't have it, baby."
Niall Ferguson thinks that
Americans are so addicted to wars that the U.S. government will default on
Social Security and Medicare.
Republicans tell us that
our grandchildren are being saddled with impossible debt burdens because of
handouts to retirees and the poor; that $3 trillion wars are necessary and have
nothing to do with the growth of the public debt. The public debt is due to
unnecessary "welfare" that workers paid for with a 15% payroll
When you hear a Republican
sneer "entitlement," he or she is referring to Social Security and Medicare, for
which people have paid 15% of their wages for their working lifetime. But when a
Republican sneers, he or she is saying "welfare." To the distorted mind of a
Republican, Social Security and Medicare are undeserved welfare payments to
people who over-consumed for a lifetime and did not save for their old age
America can be strong
again once we get rid of these welfare leeches.
Once we are rid of these
leeches, we can really fight wars. And show people who is
Republicans regard Social
Security as an "unfunded liability," that is, a giveaway that is
interfering with our war-making ability.
Alas, Social Security is
an unfunded liability, because all the money working people put into it was
stolen by Republicans and Democrats in order to pay for wars and bailouts for
mega-rich bankers like Goldman Sachs.
What I am about to tell
you might come as a shock, but it is the absolute truth, which you can verify
for yourself by going online to the government's annual OASDI and HI reports.
According to the official 2010 Social Security reports, between 1984 and 2009
the American people contributed $2 trillion, that is $2,000 billion, more to
Social Security and Medicare in payroll taxes than was paid out in benefits.
What happened to the
surplus $2,000 billion, or $2,000,000,000,000?
The government spent
Over the past quarter
century, $2 trillion in Social Security and Medicare revenues have been used to
finance wars and pork-barrel projects of the US government.
Depending on assumptions
about population growth, income growth and other factors, Social Security
continues to be in the black until after 2025 or 2035 under the "high-cost" and
"intermediate" assumptions and the current payroll tax rate of 15.3% based on
the revenues paid in and the interest on those surplus revenues. Under the
low-cost scenario, Social Security (OASDI) will have produced surplus
revenues of $31.6 trillion by 2085.
When I was Assistant
Secretary of the US Treasury, Deputy Assistant Secretary Steve Entin worked out
a way to put Social Security on a sound basis with the current rate of payroll
tax without requiring one cent of general revenues. You can read about it in
chapter 9 of my book, The Supply-Side Revolution, which Harvard
University Press has kept in print for more than a quarter century. Entin's
solution, or a variation of it, would still work, so Social Security can easily
be saved within the current payroll tax rate. Instead of acknowledging this
incontrovertible fact, the right-wing wants to terminate the
Treasury was blocked from
putting Entin's plan into effect by the fact that other parts of the government
and the Greenspan Social Security Commission had agendas different from ensuring
a sound Social Security system.
Wall Street insisted that
the Reagan tax-rate reductions would explode consumer spending, cause inflation
and destroy the values of stock and bond portfolios. When inflation collapsed
instead of exploding, Wall Street said that the deficits, which resulted from
inflation's collapse, would cause inflation and destroy the values of stock and
bond portfolios. This didn't happen either.
Greenspan commission played to these mistaken fears. The "Reagan deficits" could
not cause inflation, because they were the result of the unanticipated collapse
of inflation (anticipated only by supply-side economists). As I demonstrated in
a paper published in the 1980s in the US, UK, Japan, Germany, Italy, and other
countries, tax revenues were below the forecast amounts because inflation, and
thus nominal GNP, were below forecast. The collapse of inflation also made real
government spending higher than intended as the spending figures in the
five-year budget were based on higher inflation than was
The subsidy to the US
government from the payroll tax is larger than the $2 trillion in excess revenue
collections over payouts. The subsidy of the Social Security payroll tax to the
government also includes the fact that $2.8 trillion of US government debt
obligations are not in the market. If the national debt held by the public were
$2.8 trillion larger, so would be the debt service costs and most likely also
the interest rate. The money left over for war would be even smaller. More
would have to be borrowed or printed.
The difference between the
$2 trillion in excess Social Security revenues and the $2.8 trillion figure is
the $0.8 trillion that is the accumulated interest over the years on the
mounting $2 trillion in debt, if the Treasury had had to issue bonds, instead of
non-marketable IOUs, to the Social Security Trust Fund. When the budget is in
deficit, the Treasury pays interest by issuing new bonds in the amount of the
interest due. In other words, the interest on the debt adds to the debt
The robbed Social Security
Trust Fund can only be made good by the US Treasury issuing another $2.8
trillion in US government debt to pay off its IOUs to the
When a government is faced
with a $14 trillion public debt growing by trillion dollar deficits as far as
the eye can see, how does it add another $2.8 trillion to the
Only with great
Therefore, to avoid
repaying the $2.8 trillion that the government has stolen for its wars and
bailouts for mega-rich bankers, the right-wing has selected entitlements as the
A government that runs a
deficit too large to finance by borrowing will print money as long as it
can. When the printing press begins to push up inflation and push down the
exchange value of the dollar, the government will be tempted to reduce its debt
by reneging on entitlements or by confiscating private assets such as pension
funds. When it has confiscated private assets and reneged on public obligations,
nothing is left but the printing press.
We owe the end-time
situation that we face to open-ended wars and to an unregulated financial system
concentrated in a few hands that produces financial crises by leveraging debt to
The government of the
United States does not represent the American people. It represents the
oligarchs. The way campaign finance and elections are structured, the American
people cannot take back their government by voting. A once proud and free people
have been reduced to serfdom.