Much in the same way that US investors were "steered" into rip-off mortgage loans, the entire country has been "steered" into an economic crisis. The question is how to get out of it.
The Bush administration similarly used promises of cakewalks and increased security to con the US public into wars with Iraq and Afghanistan. US taxpayers have spent over $450 billion on Iraq alone, while Bush/Cheney cronies continue making a killing from military contracts. Meanwhile, global security has degenerated and over 4,100 US service members have died in Iraq and Afghanistan, along with an untold number of coalition troops, contractors and civilians.
Bush's military adventurism, not to mention his administration's exorbitant tax cuts for the wealthy, gutted the surplus of $128 billion Clinton handed him in 2001 into a deficit of well over $200 billion today. And Bush has simultaneously increased the national debt by over $3 trillion (to roughly $9 trillion), effectively nailing each and every US citizen with a bill for almost $30,000.
While heavy borrowing from Asia has mopped up some stateside red ink, there's an inherent threat: China, for example, has an estimated $900 billion in US bonds and can increasingly call the shots on the US economy and foreign policy.
In other words, the US itself has become as vulnerable to its lenders as any other subprime borrower.
Overall, the US debt situation looks so dire that the non-partisan Government Accountability Office Comptroller recently warned, "America is on a path toward an explosion of debt. And that indebtedness threatens our country's, our children's, and our grandchildren's futures. With the looming retirement of the baby boomers, spiraling health care costs, plummeting savings rates, and increasing reliance on foreign lenders, we face unprecedented fiscal risks."
Financial analysts say credit markets are facing a Minsky moment – the inevitable downward spiral when over-leveraged investors have to sell valued assets just to pay back their loans. Some analysts have even coined a new term, suggesting we are in a "Minsky meltdown" – the prelude to a wider market crash.
But it looks more like a "Minsky massacre," not an unavoidable economic downturn but rather a coldly-calculated hit, with the intention of transferring wealth from the lower and middle classes to an unaccountable few at the top.
Bottom line, this economic downturn isn't hurting everyone. Select brokers and lenders made a fortune off the backs of subprime borrowers, and now that the related hedge funds are collapsing, well-leveraged private equity firms can buy assets at fire-sale prices.
And as Jim Hightower recently noted, a "hands-off regulatory ideology" is complicit: "There are no less than five financial agencies at the federal level that could have protected people, yet the subprime surge was allowed to proceed .... The Federal Reserve Board, for example, has direct authority under the Home Ownership and Equity Protection Act to 'prohibit acts or practices in connection with mortgage loans that the board finds to be unfair, deceptive or ... associated with abusive lending practices, or that are otherwise not in the interest of the borrower.' The Fed simply ignored this law."
Ironically, the Bush family was involved in that scandal too, with Bush Jr.'s brother Neil serving on the board of the disgraced Silverado Savings and Loan, which went bust and stuck US taxpayers with a $1.3 billion debt. Regulators accused Neil of "multiple conflicts of interest" but he never did jail time – thanks at least in part to the S&L bail out engineered by his father, Bush Sr., who happened to be President at the time.
Just as in the S&L crisis, the poor and middle class have borne the brunt of the current subprime disaster, an especially nasty fact given the nation's huge wealth gap. As Inequality.org points out, "The richest one percent of U.S. households now owns 34.3 percent of the nation's private wealth, more than the combined wealth of the bottom 90 percent. The top one percent also owns 36.9 percent of all corporate stock."