That is from a post titled "Saving Social Security: Stopping Obama’s Next Bad Deal" about the upcoming battle on raising the debt ceiling . Baker helps us makes sense of the situation , what really is at stake and shows us a way forward.
Here is some background on the debt ceiling for starters :
http://my.firedoglake.com/...
Sometime in the spring the government will run up against its debt ceiling. This will prevent the government from any further borrowing.
Since the government has a substantial deficit, with spending exceeding revenue, hitting this limit would mean that the government would not have sufficient funds to pay for all its programs. It also would mean that the government could not pay interest or principal on debt that is coming due, in effect requiring it to default on its debt.
So, the debt ceiling has to be raised by Congress. When the issue comes before a more Republican Congress in 2011, they get another chance for "hostage taking", to use President Obama's own words. Just like they did in the Bush tax cuts extension debate. If you have any doubts, there are indications/efforts already from the Republican side, about ransom demands:
http://thehill.com/...
"The debt ceiling, obviously, is going to have to be increased if we're not going to default, so the question is, what do we get in exchange for that, and what kind of fiscal controls?" said Rep. Paul Ryan (R-Wis.), the incoming chairman of the House budget panel, last week on Bloomberg Television.
And the same article says Bob Corker (R-TN) is assembling a team to come up with ransom demands.
And here comes the real deal.While we know hostage taking is in the offing, Baker warns us how Shock Doctrine will be used to hide the real issue once again to push a plutocratic agenda:
The prospect of the U.S. government defaulting on its debt creates the sort of end of the world scenario in which Congress rushed to pass the TARP in 2008. Back then, President Bush, Fed Chairman Ben Bernanke and all sorts of other luminaries told members of Congress and the public that we would have a second Great Depression if the Wall Street banks were not immediately bailed out, no questions asked. And the money flowed.
The prospect of defaulting on the debt will create a similar outbreak of shrill warnings of disaster. This would likely to lead to scenario in which President Obama signs whatever debt ceiling package House Republicans hand him, even if it includes the privatization of Social Security and Medicare and major cuts and/or elimination of other important programs. The argument from the administration will be that they have no choice.
Obama will have any number of good excuses to take cover/hide behind : the Catfood commission report, for example. Here we need to remember that he has been all over the place when it comes to defending SS/Medicare. For example, saying that SS contributes to long-term deficits, when in fact it doesn't.
Now about the worst case scenario - should a debt default happen :
A debt default would be a very bad situation and one that we absolutely should try to avoid. But the day after the default, the country would still have the same capital stock and infrastructure, the same skilled labor force and the same technical knowledge as it did the day before the default. In other words, the ability of our economy to produce more than $15 trillion in goods and services each year will not have been affected.
But who will be the most affected? Surprise !
One thing that would not be around the day after a default is Wall Street. The default would wipe out the value the assets of the Wall Street banks, sending Goldman Sachs, Citigroup and the rest into bankruptcy. The recovery for the economy from such a situation will be difficult, but the shareholders of the Wall Street banks would be wiped out and their top executives unemployed.
Here we need to remember that the big Wall Street banks are still basket cases and are on life support , thanks to all kinds of backdoor bailouts by the FED. They hold tons of US government bonds bought using money borrowed for free from the Fed (with 0% interest) and that contributes significantly to their "real" profits. The government bonds will become worthless in case of a default. This even as they are holding billions in bad debt (mortgages etc) thanks to their gambling addiction and value these at whatever prices they want to, thanks to the phony accounting they follow (these represent the "phony" part of their stated/inflated profits).
Back to Baker:
For this reason, the threat of a default is a gun pointed most directly at Wall Street. Given the power of Wall Street over Congress, is inconceivable that they would ever let the Republicans pull the trigger.
But don't expect to hear this from the ruling class (or their puppets/stenographers in the lame stream media). And they sure will use any chance to fleece us - the little people , the peasants. In fact , they never let a crisis go waste - to distribute wealth upwards. We need to remember that when the Wall street welfare kings that are the banks came to their knees in 2008, Bush, Obama (who passionately whipped Dems for their votes on the bailout) and the Congress didn't push for any relief for homeowners.
So in essence, the Republicans won't dare to isolate their Wall Street buddies, but they will pretend to take hostages without actually meaning to (especially since they have seen how easily Obama caves in).And that is precisely why Baker thinks progressives have an opening here and offers us a way forward :
In order to avoid this train wreck, supporters of Social Security and Medicare have to restructure the options. They have to push President Obama to announce in advance that he will never sign a debt ceiling bill that includes cuts to Social Security and Medicare, the country’s two most important social programs.
These programs are crucial to the financial security and health of tens of millions of people. If there are to be changes in these programs then they should occur after a full public debate in the light of day, not as the result of Republican trickery and parliamentary game playing.
This would be a hugely popular position since not only Democrats, but also independents and even Tea Party Republicans overwhelming support Social Security and Medicare.
Baker ends thus:
This means that if President Obama is prepared to take the right and popular position of supporting Social Security and Medicare, he will win. This is both good policy and great politics. The public just has to force President Obama to stand up and show some leadership.
Yes, "When people lead, the leaders will follow ", to quote one of my favorite authors David Korten. That is the key to winning this fight. Please share your thoughts on how best we can organize in this fight in the comments.