One of the most amazing and resilient aspects of human nature is perhaps the capacity to be whipped into a frenzy whenever politicians, with the help of the establishment media, decide it is advantageous to do so. Most people are aware of the famous quote by Hermann Göring, which says that "people can always be brought to the bidding of the leaders" by telling them "they are being attacked." A variation of the idea that populations can be frightened like little children and that once frightened they will, like little children, defer to their leaders for safety and protection can be seen at play today in the current talks on U.S. debt default.
In an article published today titled Obama's Ambush on Entitlements, economist Michael Hudson tells how the current debt default crisis is, to all intents and purposes, a con and the logical continuation of the massive bailout which produced the debt in the first place.
During Obama’s speech [July 25] I could not help feeling that I had heard it all before. And then I remembered. Back in 2008, Treasury Secretary Henry Paulson sought to counter Sheila Bair’s argument that all FDIC-insured depositors would be able to ride out the September crisis, with only the reckless gamblers losing the gains they hoped to make on their free credit. “If the financial system were allowed to collapse,” he warned in his Reagan Library speech, “it is the American people who would pay the price. This never has been just about the banks; it has always been about continued prosperity and opportunity for all Americans.”
But of course, it is all about the banks.
What is even more astounding is the fact that this con is taking place less than three years after the first act of the Shock Doctrine was first applied onto the U.S. economy. Back then, as we can all remember, banks, insurance companies, credit rating agencies, the Fed, and the Treasury conspired -- in some form or another -- to transfer an unprecedented $13 trillion of public wealth into the coffers of private institution with little to no oversight, practically overnight.
With the aid of two unfunded wars in Iraq and Afghanistan, that well orchestrated heist produced the massive deficit hole which the President and the Republicans in congress are trying to plug on the backs of the middle class and low income people today. And while there is a difference to be detected in the position of the two actors of this kabuki theater, such difference is simply the addition of some sugar coating by president Obama on the very same bitter pill.
Obama has come to bury Social Security, Medicare and Medicaid, not to save but kill them. This was clear from the outset of his administration when he appointed his Deficit Reduction Commission, headed by avowed enemies of Social Security Republican Senator Alan Simpson of Wyoming, and President Clinton’s Rubinomics chief of staff Erskine Bowles.
The reason why I titled this diary The Shock Doctrine (Act II) is because what we are seeing today is a replay and a continuation of the same doctrine which was applied in the fall of 2008. The main difference between then and now is that the 2008 crisis was caused by an actual eight-year long housing bubble while this crisis is completely manufactured. If this comes to pass, the sky will be the limit as the corporate state devises more and more ways to shock middle class and low income people people out of their hard earned money and benefits.
In today's version of the crisis, the very same rating agencies who were giving fraudulent AAA ratings to all kinds of junk derivatives just days prior the 2008 crash, are now threatening to downgrade U.S. debt unless the U.S. government massively reduces its deficit. Instead of being glad for not having been arrested after having participated into precipitating the world economy into a depression, they are more galvanized than ever.
Obama also pretends that credit ratings agencies are able to act as mascots for their clients, the large financial underwriters, by making the entire economy pay even higher interest rates on its credit cards and banks. “For the first time in history,” . Obama dissembled, “our country’s Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people.”
The reality is that running a budget surplus would increase interest rates, by forcing the economy into captivity to the banking system. The Obama administration is now deep into its Orwellian rhetorical phase.
On the other side of the equation we have the Republican party which will not concede one iota of new revenues which, in turn, allows Obama to stand in the fictitious Solomonic middle and impart lessons on compromise and shared sacrifice. Needless to say, Obama's position is as bogus as everyone else's, and doctor Michael Hudson explains why Obama's threat that the there won’t be money to pay Social Security checks is simply a scare tactic:
Of course the government will have enough money to pay the monthly Social Security checks. The Social Security administration has its own savings – in Treasury bills.
The most reasonable explanation for his empty threat is that he is trying to panic the elderly into hoping that somehow the budget deal he seems to have up his sleeve can save them. The reality, of course, is that they are being led to economic slaughter.
This is a perfect case of 'fool us once, shame on them; fool us twice, shame on us.' We should be ashamed that we are willing to fall for the very same scare tactics that worked in 2008. Some might say that if we had done nothing it would have been a disaster. Of course, we will never know what would have happened since we didn't allow it to happen. And this is what the scare tactic rests upon since it is impossible to disprove a negative.
With this I am not trying to argue that nothing would have happened, but simply that somehow, we allow the very people that couldn't even see the crisis as it was staring at them in the face, to all of a sudden have all the answers in regard to what will happen if we don't do what they say. We fell for it then, and we are falling for it now. Why? Because of what I wrote in the beginning of this diary: that once we have been scared into a panic, we'll just give the keys to the store to those in charge, under the assumption that if they are there, they must have done something right and they must know something that we don't know. And indeed, they do:
Whenever one finds government officials and the media repeating an economic error as an incessant mantra, there always is a special interest at work. The financial sector in particular seeks to wrong-foot voters into believing that the economy will be plunged into crisis of Wall Street does not get its way – usually by freeing it from taxes and deregulating it.
And so, after little over two years of this Democratic administration the American people are beginning to realize the very grim reality that both parties are apparently serving the interests of the Wall Street corporate oligarchy. In a sense, it can be said that the interests of nation states have been superseded and obliterated by those of transnational corporations. Today, these conglomerates can wield the power once reserved to nation states and they are using it to return the working people of the world into a state of medieval serfdom.
Instead of being tied to the land as under feudalism, families today may live wherever they want – as long as they take on a lifetime of debt to pay the mortgage on whatever home they buy.
And instead of society paying land rent and tribute to conquerors, we pay the bankers. Just as access to the land was a precondition for families to feed themselves under feudalism, one needs access to credit, to water, medical care, pensions or Social Security and other basic needs today – and must pay interest, fees and monopoly rent to the neo-feudal oligarchy that is now making its deft move from the United States to Ireland and Greece.
Seen in this light, the current crisis is thus the next logical step in a 40 year effort by the business elites to roll back all the advancements that working people had made through the struggles of the previous 150 years. And while from FDR until Carter, the Democratic party had stood as a safeguard, today it has become a sort of stealth facilitator.
Wall Street knows that to get sufficient Congressional votes to roll back the New Deal, Social Security, Medicare and Medicaid, a Democratic president needs to be in office. A Democratic Congress would block any Republican president trying to make the kind of cuts that Obama is sponsoring. But Congressional Democratic opposition is paralyzed when President Obama himself – the liberal president par excellence, America’s Tony Blair – acts as cheerleader for cutting back entitlements and other social spending.
In the end, and as Glenn Greenwald astutely pointed out in the Guardian of London a few days back, the president's attacks on America's social safety net are destroying the soul of the Democratic party's platform. Or, as Michael Hudson puts it,
Obama is doing what any good demagogue does: delivering his constituency to his campaign contributors on Wall Street.
In so many words, what Obama and the Republicans have done is to put a gun to the head of the American people saying: if you don't give us your Social Security retirement fund, we'll plunge the world economy into chaos. They are daring us, and instead of giving them what they want, we should call their bluff. This, incidentally is also what the European Central Bank and the various
socialist governments are doing in Greece, Ireland, Portugal, Italy and Spain.
Perhaps, it is time for the American people to retake control of their institutions and join the wave of worker's solidarity which is sweeping across the globe, from Tahrir to Sintagma square. It's time to put a stop to the pillaging of the Treasury by private financial corporations.
This nightmare can be avoided, if, as progressives, we continue to stand together for social justice and common decency.