My Government Borrowed $3 Trillion Additional Dollars and All I Got was This Lousy Chart

As the soap opera that is the debt ceiling standoff between our so-called “leaders” continues in the imperial capital, I thought it would be a good time to step back for a moment, revisit the past three years and examine what brought us to this point in the first place.

Return with me now to the wacky fall of 2008. Those were crazy days. George W. Bush was still occupying the Oval Office, a nation sat charmed by the never ending antics of the adorable brood from Jon and Kate Plus 8, millions of middle-aged women throughout the land embraced their inner cougar as they relived their adolescence through the first Twilight movie, and…uh…oh yeah, a little Wall Street bank named Lehman Brothers collapsed, sending shockwaves through the world financial community.

As panic swept the stock markets and the credit markets seized up, the leadership in the imperial capital did the only thing it really knows how to do—throw money at the problem. A cool $700 billion was immediately allocated to bail out the big banks and Wall Street, while the U.S. Treasury ramped up spending as if there was literally no tomorrow. The crisis began at the very end of Fiscal Year 2008, which set a record for federal deficit spending at the time—a whopping $455 billion. But as the old sports announcer cliché goes, you hadn’t seen ANYTHING yet.

The bailout was followed by a stimulus program that was every bit as costly. These two programs plus ramped up spending in other areas combined with declining tax revenues to add a whopping $1 trillion dollars a year to that 2008 deficit figure for each of the next three years. This increase in federal spending alone constituted nearly 7% of the nation’s annual GDP during that time.

So what did we get for all that running around spending money like a hyperactive sailor on shore leave hopped up on a combination of alcohol, cocaine and crystal meth? The chart above (courtesy of Calculated Risk) showing new housing sales paints a pretty clear picture.

The economic bubble of the first half of this century’s first decade was propped up by insane speculation in the housing market. Rather than its traditional role of providing food and shelter, a house became a speculative investment. Many families treated their homes as a gigantic ATM, extracting their increased equity and splurging on the high life.

The folks in charge knew all of this, of course, which is why so much effort has been put into trying to re-inflate the housing bubble. From the Fed’s Zero Interest Rate Policy to Obama’s new homebuyer’s tax credit, getting people to start buying houses again and drive prices back up was a key strategy for economic recovery.

So how’s it all working out? Not so good according to the chart. Two things really stick out. One is just how terrifying the collapse of home sales was from the peak in 2005 until the beginning of 2009 when the federal rescue efforts finally began to take hold. Had the government not stepped in, we can imagine that the crash in sales would have continued downward until almost all home sales stopped and the whole market completely disappeared. But the second thing which is becoming apparent is that rather than blowing a new bubble, all the government managed to do was arrest the free fall.

And therein lays the truth of the whole debt ceiling charade that ought to scare the living daylights out of any thinking person. If no agreement is reached and the U.S. defaults on its debt, the artificial props holding up the remaining facsimile of the real economy will be removed and the result will be complete implosion.

Our “leaders” have led us into a trap from which we cannot escape. Were they to stop all the deficit spending the economy will crash; but if they raise the debt ceiling, the dollar will continue to erode in value, oil and other commodities will continue to rise in price and the day will come when skyrocketing fuel and energy costs will squeeze the consumer and crash the economy. As the old car repair commercial motto goes, “you can pay me now or you can pay me later.”

Or put another way, it’s analogous to a chess player being reduced to having only his King but not yet checkmated. He can still try to move his last powerless piece around the board to avoid the inevitable, but the effort will ultimately prove to be in vain.

Lack of a Debt Ceiling Increase a Big Old Nothingburger—So Far

If you were following the federal debt limit increase debacle over the weekend, you witnessed quite a spectacle as our so-called “leaders” spent the whole time acting like a bunch of damn kindergartners. Nobody in this whole fiasco has covered himself or herself with any glory. The Republicans appear to be recklessly risking a debt default over what are really only cosmetic cuts to out-of-control federal spending, while Obama seemed to lose his cool because he once again thumbed his nose at his progressive base by putting major cuts in social programs on the table, only to have the Republicans make him look like a fool by rejecting them.

Both sides spewed a lot of hot air about needing to get a deal done before the Asian markets opened last night. Yet a funny thing happened, the deal didn’t get done and the markets are largely holding up--so far. Clearly, the big money boys still believe there WILL be an agreement, if not in time to avoid a technical default, at least in time to keep them from suffering any substantial losses.

So the game remains afoot, even as 4,000 employees of the Federal Aviation Administration received furlough notices over the weekend. They must feel like the loneliest people in the word right now given that all debt ceiling theatrics are keeping their plight off the front pages.

If there was any solidarity among the American working classes, the Air Traffic Controllers, who are required to keep working but will not get paid in the meantime, would walk off the job en masse and shut down the airline industry until Congress restores the FAA’s funding. Given disastrous results when their union tried to challenge President Reagan back in 1981, that seems unlikely to happen.

And thus August 2nd, the date we’ve been told is the ultimate day of reckoning, draws ever closer with no deal in place. The website Zero Hedge published an analysis last night blandly confirming what I’ve asserted before, that a debt default and the instant elimination of all federal deficit spending will contract the U.S. economy approximately 10% by about September if there is no deal in place. My guess is doing so would be like kicking the leg out from under a stool, and begin a fast crash of the economy that would make the Great Depression look like a walk in the park.

Both sides seem to be playing chicken with that scenario, and trying to position themselves so the other side gets the blame. The problem with playing chicken, however, is that sometimes neither side blinks in time to avert catastrophe.

1972: Tricky Dick Successfully Cons the Working People

Not long ago, I finished reading author Rick Perlstein’s excellent biographical work, Nixonland, which is essentially a social and political history of the United States from 1964-1972. To me, this period is THE pivotal moment in recent American history. Not only did it see the coming of age of our largest and most influential generation, but it also marked the culmination of the progress that America liberalism made in reshaping the nation beginning with the election of Franklin Delano Roosevelt in 1932. Not incidentally, it was also the moment when America’s domestic oil production peaked and began a slow decline that has closely mirrored that of the country as a whole.

Perlstein’s account shows how the seemingly disgraced former Vice President dusted himself off after his narrow 1960 campaign defeat by John F. Kennedy and his subsequent loss in the 1962 California governor’s race to ride a wave of public reaction and resentment to the White House in 1968. It’s a fascinating and ultimately depressing story. Nixon was perhaps the shrewdest politician to occupy the Oval Office during the post-World War Two period. He was also the first one willing to do ANYTHING, however damaging to the country, to get elected.

During the run-up to the 1968 election, Nixon figured out that exploiting the growing backlash against the antiwar and civil rights movements was the key to victory. Never mind that these movements had history on their side and held the moral high ground. When it came to doing the right thing versus exploiting the fear and loathing of the electorate, Nixon invariably chose the latter throughout his long political career. Once in office, he cynically prolonged and expanded the scope of the Vietnam War for political advantage after making vague promises during the campaign that he would find a peaceful solution.

As he geared up for reelection in 1972, the increasingly paranoid Nixon became obsessed with victory at all costs. He raised tens of millions of dollars for the effort from corporate America, an unprecedented sum at the time. With some of that cash, he financed his own domestic spying operation headquartered out of the basement of the White House. Among the antics of the so-called “Plumbers” was to break into the office of the psychiatrist who was treating Pentagon Papers whistleblower Daniel Ellsberg. They then decided to get really cute, and on June 17, 1972, led by ex-FBI agent and all around maniac G. Gordon Liddy, broke into Democratic Party campaign headquarters at the Watergate Hotel in Washington.

During that campaign, Nixon’s opponent was Senator George McGovern, the last true progressive to win the nomination of one of the two major parties. In addition to being a World War Two veteran, McGovern was a fundamentally decent man who was motivated to run in the first place by his passionate opposition to the Vietnam War. On economic issues, McGovern stood far to the left of Nixon, and was a strong advocate for the poor in the best tradition of the New Deal and Great Society. Beyond ending the Vietnam War, he also proposed a whopping 37% reduction in Pentagon spending. Now THAT was change you could believe in, the American electorate has not had such a clearly defined choice in any election since that year.

Nixon clearly represented the worst excesses of postwar America, while McGovern tried to defeat him by appealing to what Lincoln once called, “the better angels of our nature.” Of course, we all know what happened next. Nixon won reelection with more than 61% of the vote, meaning that nearly two-thirds of all Americans who showed up at the polls supported a figure with a long reputation as a political hatchet man who had not ended the divisive war he had promised he would end. Nixon successfully convinced millions of working and middle class voters that the hippies and the civil rights marchers were a greater threat than the big corporations that had underwritten his reelection effort.

Nixon’s resounding victory set the stage for the election of Ronald Reagan in 1980 with the support of many of those same working and middle class voters. It was Reagan, serving as corporate America’s first hand puppet president, who ratcheted up the class warfare by the financial elites that is reaching its zenith today under a Democratic president who is raising so much corporate cash for his own reelection effort it would have made even Tricky Dick blush.

Nixon was ultimately done in by his own hubris, and the Watergate scandal utterly consumed his presidency before his second term was even half over. Back then, the political system was still functioning as it should, and there was still this quaint notion that no person, not even the president, is above the law. That ideal was upheld when Nixon was forced to resign in 1974, much to the chagrin of two young Nixon aides named Dick Cheney and Donald Rumsfeld, who vowed that such an usurpation of executive power would never happen again. Thirty years later, they and their neoconservative fellow travelers completed the effective destruction of American representative democracy under George W. Bush.

America today finds itself rapidly approaching the endgame of four decades of disastrous economic and foreign policies that have hollowed out the nation’s public finances and are now destroying the working and middle classes. It’s been a long, strange trip, indeed, since the days when Tricky Dick politically kneecapped his genteel rival from South Dakota. During the 1972 campaign, in the first instance of what would become a distressingly familiar pattern, the electorate decided to trade, in the immortal words of Benjamin Franklin, “a little liberty for a little safety.” In the long run, just as Franklin predicted, they have actually gotten neither.

Friday Rant: It’s Hard to Take a Stand When They Have You Over a Barrel

There are a number of reasons why I decided many years ago before I even got married that I didn’t want to have children. One consideration was not wanting to experience the feeling of being financially trapped by an employer and forced to compromise my integrity for the sake of still being able to feed, clothe and house a family. As it so happened, there ended up being one time during my professional career a few years ago in which I was forced to make a ethical stand that could have gotten me fired. I survived it, thank goodness, but it was the worst year of my life—and I can only imagine how much worse the stress would have been had the possibility of becoming an unemployed head of household been hanging over me all the while.

I’ve often heard it remarked that with all of the malfeasance in the corporate world these days it’s amazing more whistleblowers don’t come forward. Actually, what I find amazing is not that more people don’t blow the whistle but that any actually do at all. I’ve been there and it’s no fun. But it’s even less fun when you have children who are depending on you.

There was a Mother Jones article published recently featuring anecdotes from workers both blue and white collar who are feeling stressed by overwork as their employers heap on more and more duties without raising their compensation. Many have been forced to work long hours without extra pay, but in this awful economy are afraid to complain for fear of being fired. One woman even told the interviewer, “I have four children and I’m scared of what’s going to happen to them.”

And that’s how they get you over a barrel these days. Want to keep the plebes in line, slash salaries and benefits while increasing their workload but making sure they don’t protest? Get them thinking about what effect losing their salary will have on their kids. Works every time. Now then, you weren’t REALLY planning to put in for overtime for all of those extra hours you had to work to meet your higher quota, were you?

Several weeks ago I wrote about Leslie, the young college graduate burdened with $100,000 in student loan debt whose search for a job has thus far been fruitless. Leslie is a progressive-minded young woman who deplores America’s various wars around the world and has soured on President Obama. And yet she told me she would consider joining the military as an absolute last resort if she exhausts all of her other options. Given my opinions regarding America’s war and empire foreign policy I might have been expected to object, but all I could do was agree that the very first thing anyone can do is what they have to do to survive. Have you noticed how you don’t see stories anymore like back during the middle of the last decade about the military having trouble meeting its recruiting goals because of the wars? Lots of young adults are doing what they need to do to survive these days, apparently.

The really sick part of all of this is that it’s happening in the same country that pioneered the very idea of having a robust middle class. After World War Two, the economic protections put in place by the New Deal during the Great Depression combined with the effects of a postwar, cheap oil-fueled economic boom to create opportunities for working people such as no society has ever provided before in human history. For the first time ever, the scales between capital and labor were relatively balanced, and all of us who were raised between the late 1940s and the 1990s benefited immensely from it.

Today, ironically, as the greatest financial crisis since the Great Depression descends upon the land, all of that progress made during the New Deal is under assault and slowly eroding thanks to insatiable greed of the same corporate elites who brought on the crisis in the first place. Even more tragic is that it's happening after 30 years of those same elites being able to use their political hand puppets to convince enough of those very same workers to vote for the very policies that are now destroying their livelihoods.

Perhaps it was all inevitable. As soon as the first postwar suburban tract homes began being purchased by returning servicemen and their families—who then needed automobiles and new automotive infrastructure to get to work, and shopping malls and supermarkets to meet their daily needs—America had started down a path that would eventually lead to this point. There were several opportunities along the way to recognize our collective folly, most notably the warnings sounded by the oil shocks and gas lines of the 1970s, but the greed and avarice of those same corporate elites assured those warnings would go completely unheeded.

I realize there are plenty of parents who are aware of the impending effects of peak oil and resource depletion and who are likely very afraid for the futures of their children. I’m actually a bad one to ask for advice on how to cope, being childless as I am. It seems to me that at least you can console yourselves at having a chance to educate them about what’s coming so that they can be as prepared as anyone could ever hope to be. Being prepared will place them above most of their peers and help ensure that they won’t be consumed by economic collapse before they even get started in life. The other thing being prepared does is keep the bastards from ever being able to get you over that barrel, forced to do their bidding or face the risk of utter destitution.

Forget what the libertarian types and Randian fellow travelers might try to tell you, that is the REAL definition of freedom in this day and age.

Borders Books Finally Succumbs to the Inevitable

Yesterday, Reuters reported that the Borders bookstore chain has succumbed to the inevitable and will now be liquidating its 400 remaining stores. Not incidentally, 10,700 employees will now be cast out into the worst jobs downturn since the Great Depression. No doubt, huge flocks of mindless consumer vultures will descend upon the remaining stores when the bankruptcy sales begin to pick over the carcass, just like they did during the first go-round of store closings last March.

Go on, you just GOTTA get that 30% discount on those Harry Potter and Twilight novels. Ignore the poor guy behind the counter ringing them up who will be facing financial destitution in just a few weeks. Consume, consume, consume and the consequences be damned. That’s the AMERICAN way.

While I feel bad for the employees, I will not particularly miss Borders the company. I’m an avid reader who owns over 1000 books, but only a very few of them were ever purchased there. Borders and its stronger competitor, Barnes & Nobel, were responsible for driving most of the independent booksellers around the country out of business during the past 30 years. And not because they had better prices either—they didn’t. I guess it must have been because they had larger and glitzier stores, for if there’s one thing American shopper zombies love almost as much as a sale, its glitz.

Here in the DC-area the big local retailer was Olsson’s Books, a homegrown chain that had a cadre of loyal employees, some of whom worked for the company for 20 years or more. They had great customer service, an actual sense of community and I always made sure to purchase my books there whenever I could. Fat lot of good it did for them in the end. After closing individual locations one by one starting in the middle of this past decade, the company finally went under completely just a couple of years ago.

Ironically, after helping to devour Olsson’s the predatory Borders was ultimately done in by an even bigger, leaner and meaner predator, Amazon.com. Amazon not only features the convenience of online shopping and cheaper prices, but best of all it has expertly wriggled around the law to avoid having to charge sales tax.

What’s not to like? Except for, you know, another empty storefront at the local mall and longer lines at the unemployment office. Oh, and an insolvent state government that is now raising your taxes in other areas to make up for what the scofflaw Amazon refuses to charge.

The question that never seems to get asked whenever a story like this appears is, what happens when Internet shopping has finally destroyed so many American jobs that hardly anyone can afford to buy what’s being offered online? That’s the endgame our economy is slowly sliding towards even without the rampaging economic effects of Peak Oil and resource depletion.

But hey, bargain hunters; don’t worry yourselves about all of that depressing stuff. As the Reuters article went on to report:

The liquidation is expected to start for some stores and facilities as soon as Friday, July 22, and will conclude by September, the company said.

So make sure you get there early on Friday, so you can force your way in line ahead of the other massed hordes and get the good stuff before its all gone. That’s the AMERICAN way.

America’s Domestic Oil Production Peak Presaged the Rise of Legalized Gambling

As a lifelong history buff and someone who became Peak Oil Aware several years ago, I find it interesting to reexamine the past 40 years of American history since America’s domestic oil production peaked in 1970 through that lens. Some aspects of that momentous event are clearly obvious—for instance we have since become totally dependent upon oil imports to keep our economy running. Other changes in our society are much subtler—such as the fact that the average working person’s wages when adjusted for inflation have been virtually stagnant since the Nixon administration.

Not coincidentally, I would argue, gambling has in recent years shaken off its Mafia-dominated roots and has ridden a wave of legalization to spread far and wide across the landscape. In 1970, there was only one place in America where you could go a wager your paycheck without the risk of being arrested, and that place was Las Vegas. And it wasn’t the sanitized, Disneyfied Las Vegas of today either. The casinos were grungier, and effectively run by the Kansas City mob. If you failed to make good on your losses, you’d likely get a visit from a couple of hired goons who had a price list of what body part they would break depending on how much you owed.

Beyond southern Nevada, there were a handful of state lotteries, the first one having been established by the state of New Hampshire a mere six years earlier. Gambling was frowned upon by religious institutions who fought vigorously the keep the wages of sin away from local communities.

This all began to change during the first era of economic stagnation in the 1970s. Three years after the first round of gas lines hit the country in 1973, Atlantic City became the second location in America to legalize “gaming” as it came to be known, and began building its own casinos as fast as it could. The rundown New Jersey beach resort would become the first of many locales to try to use Americans’ insatiable desire to get something for nothing as a basis to finance urban renewal. Though controversial at the time, this pattern would become so pronounced going forward as to become routine today.

Meanwhile, enticed by the idea of easy revenues, state legislatures everywhere fell all over themselves to pass their own lottery bills. In order to get the public to swallow the bitter pill of legalizing “sin,” proceeds from the lotteries were supposedly committed to help fund education or other popular programs. In reality, lottery proceeds instead merely replaced appropriated funds so the money could be used elsewhere. Actual levels of spending on education usually did not change.

My favorite hypocritical trick was the communities that built “offshore” casinos to assuage voters who were still uptight about gambling. For this reason, riverboat casinos sprung up everywhere along the banks of the Mississippi River in the traditionally conservative Midwest. Down south, the state of Mississippi similarly built its Biloxi casinos out in the Gulf of Mexico. The folly of the latter ludicrous idea was seen when Hurricane Katrina ripped the unfortunately placed buildings apart as it slammed ashore in 2005.

Today, there are so many casinos dotting the landscape that they are draining the revenues from America’s original Sin City in Las Vegas. Forty-three states and the District of Columbia now have lotteries. Whatever moral qualms there used to be about gambling have been buried under a mountain of easy revenue for state governments. Vinny the Nose and his crew would have been proud and probably a little dismayed to know that they used to risk serious jail time for providing this exact same service.

Of course, as with many other aspects of modern America, we are now facing Peak Gambling. Las Vegas has been particularly hard hit from declining revenues, as evidenced by the city having one of the most dramatic housing bubble collapses in the country. Empty subdivisions, condo towers and commercial developments have become an all too common feature around the famous Strip. Elsewhere, lottery revenues are no longer sufficient to save insolvent state governments from fiscal disaster.

The tale of the rise and now imminent fall of legalized gambling in America is just another sad example of the ending of the American Dream. Gambling always was a sucker bet, often strip-mining assets from those who could least afford it. Vinny and his buddies knew that, which is why they always kept the brass knuckles handy. The problem for those that pushed so hard to bring it to every corner of the United States during the past four decades is that the “suckers” are rapidly becoming tapped out. You can’t get blood from a stone, as the old saying goes. And now it is the entire U.S. economy that is rapidly turning to stone.

Innocent Woman Nearly Murdered Because She Looks Like Casey Anthony

Editor's note - since I first posted this story, it has been reported that the initial account was erroneous. Just goes to show, you can't trust the mainstream media at all.

Last Sunday, I wrote a post called “The Hologram Lynches Casey Anthony” deploring the media’s conduct in whipping up mass anger and hysteria at one ordinary criminal defendant, thereby creating conditions in which it would be dangerous for her to walk the streets despite her acquittal on murder charges by a jury of her peers. I likened it to the very real lynchings that have plagued much of American history, and asserted that the public’s out-of-control reaction should make any thinking person’s blood run cold. Since then, there have been reports that Anthony’s lawyers and even her unfortunate parents have been receiving death threats from crazed morons whipped into a frenzy by the coverage of the case.

Then, just yesterday there was this report from a television station out in Oklahoma:

Blackwell drove a few miles and says Nalley suddenly rammed her van into the back of Blackwell's truck.

"I said, 'Oh my God, help me,'" Blackwell told News On 6.

She then pulled into a parking lot to get away.

"She hit me again, causing my vehicle to flip two and a half times, landing on the driver's side, and I just laid there playing dead," she said.

Blackwell's mother says she'll never forget her daughter's reaction.

"I got to her, she was crying, she was shaking, she says, 'Mama, this lady thinks I'm Casey Anthony and she tried to kill me," her mother said.

Police chased Nalley for a while and finally arrested her for assault and battery with a deadly weapon. Nalley told police she was "trying to save the children."

How fucking scary is that? The readiness of this deranged woman to murder a complete stranger without even verifying her identity is absolutely frightening. You would think that such a story would cause the mainstream media recognize how dangerous it is to engage in such irresponsible sensationalism, especially at a time of severe economic distress when many people are already on edge. But of course they won’t.

The trial drew the eyeballs of millions who apparently have nothing else to fill up the empty void in their lives. Consequently, the 24/7 cable “news” channels were able to fill up countless hours of programming time endlessly discussing every aspect of the case and turning Casey Anthony into someone more real for their viewers than the people they encounter in their daily lives. Nancy Grace may have actually had an on air orgasm or two in her extreme lust for fame and attention.

I said in my original post that everyone who spent their time obsessing over Casey Anthony’s fate ought to be ashamed of themselves. I am now doubling down on that assertion.

The economic collapse we are collectively facing is gravely serious. Going forward the threat of crime committed by the economically distressed is going to increase exponentially. We don’t need the media fanning the flames and turning ordinary people into targets of mass vengeance.

Friday Rant: America’s Plutocrats are No Different than the Leaders Who Ran the Soviet Union into the Ground

Author Dmitri Orlov has developed quite a following with his book, Reinventing Collapse, in which he compares the fate of the United States to that of the Soviet Union. Orlov sees many similarities between the world’s sole remaining superpower and the one that collapsed 20 years ago, and thinks that we are well into our “Gorbachev period.” As it so happens, I agree with him, though I only wish we had a “leader” half as humane as the last Soviet premier ultimately turned out to be. When push came to shove, not only did Gorbachev end his own nation's mindless war in Afghanistan, but he refused to use the awesome military might of the Soviet empire to try and hold things together. For that, he deserves history’s thanks.

Over here on the other side of the globe, the twilight years of the American Empire have seen our political system become every bit as sclerotic and undemocratic as that of Soviet Communist Party.

Boy—talk about a statement guaranteed to blow a gasket in the mind of your average Rotarian or American Legionnaire.

America STANDS for freedom, Bill. Many thousands of our brave young soldiers have fought and died for it. How can you possibly SAY such a thing?

Just calm down for a moment and hear me out. Are we all in agreement that the Communist Party had a monopoly on power and Soviet elections were a complete sham in which the outcome was guaranteed ahead of time? Okay, then ponder for a moment the results of the last U.S. presidential election and the major moves that President Obama has made since taking office, contrasting them with the likely actions of his defeated opponent had he won.

Considering the publicly stated viewpoints of Senator John McCain, would he have acted any differently on the Afghanistan surge? Would he have declined to participate in the Libyan bombing campaign? Would he have not enacted some kind of stimulus program early in his tenure to stave off the financial crisis given that President Bush pushed through a stimulus bill during his first year in office? Would he have closed Guantanamo and put an end to the excesses of the national security state? Would he have opposed the bailouts of Wall Street and the big banks even though he voted for them in the Senate?

The answer to all of those questions is, of course not.

The only possible difference is that McCain MIGHT not have pushed through some version of Obamacare, but even that is questionable given that the structure of Obama’s health care program is a corporate giveaway similar to Bush’s prescription drug program. On every single issue of importance there is no substantive difference between what President Obama has done and what President McCain would have done had he been elected instead.

But, but, but...what about gay marriage, or abortion or the Pledge of Allegiance? Certainly McCain differs from Obama on those issues.

So what if he does? Do you really think any of those issues matter one whit to the likes of Goldman Sachs Chairman Lloyd Blankfein? Blankfein doesn’t give a damn if two lesbians can say their sacred vows, or whether that scared teenager has access to a family planning clinic or whether kids unfortunate enough to have to attend the shitty New York City school system say “under God” while holding their hands over their hearts in the morning. After all, his kids go to elite private schools and if his daughter should happen to get in trouble he can send her to some first class, discreet facility to get her fixed right up— no muss, no fuss.

Social issues are merely a distraction to keep the plebes fighting with one another so they won’t notice that the likes of Lloyd Blankfein are stealing their country right out from under them. The dynamic usually works something like this. Step 1: Some wingnut commentator says something outrageous, or some far right Republican Congressman introduces an outlandish piece of legislation that has no chance of ever passing. Step 2: Mainstream liberals and progressives get themselves all in a huff about it—maybe Jon Stewart lampoons the originator on The Daily Show or Keith Olbermann does a Special Comment about it. Step 3: The overwrought liberal and progressive reaction causes an equal and opposite supportive reaction on Fox News and right wing talk radio. Step 4: Both sides send out fundraising letters citing the issue and imploring their supporters not to let the other side “win.” Step 5: Rinse and repeat.

Meanwhile, Blankfein and his Wall Street buddies quietly keep writing huge campaign checks to candidates of both parties so that none of them will oppose their agenda, which is continued government support for big business, war and empire. Republican or Democrat, it doesn’t matter whom you choose. The result is the same either way. Given his deplorable record and how many times he has thumbed his nose at his own base, how do you think Obama is going appeal to liberals and progressives this time around? By scaring them with the specter of President Palin or President Bachmann, of course. It’s all he has got left going for him at this point.

That’s the way it is in the American political system these days. If you don’t play ball with the big money boys, you’ll never be able to position yourself to stand a chance at being elected to national office, and the corporate owned and thoroughly corrupted mainstream media will never take your candidacy seriously. Just ask Ralph Nader or Dennis Kucinich.

In essence, this system of vetting candidates works very similarly to how the old Communist Party apparatchiks used to do it. Perhaps it’s even worse than that, given that the last guy the Soviets picked at least TRIED to reform the system before it all fell apart on him. You can accurately call Obama a lot of things, but reformer is not among them.

There is a chance that 2012 may be the last time that even the façade of representative democracy is maintained during a presidential election year. My bet is that five more years of slow grinding, peak oil-induced economic collapse will snuff out even the remaining pretense by 2016, and some kind of authoritarian regime will be established shortly thereafter. It’s the only way the corporate elites can possibly hope to maintain any kind of order as the reality of our teetering on the brink of the economic abyss finally becomes undeniable. For even your average Jersey Shore watching, stupefied zombie will probably begin to notice that something’s amiss when he or she can no longer afford to pay the monthly cable bill, nor put gasoline into the F-150.

Why We’re Screwed (Part 4): The Propaganda Ministry Touts the Dow Jones Industrial Average

If you spend a lot of time watching our corporate owned and thoroughly corrupted mainstream media, you might have the rather ridiculous idea that the American economy is in the midst of a recovery from the recession that accompanied the 2008 financial crash. Sure, there might have been some bumps along the way, but expansion has resumed as evidenced by two years of positive GDP growth and the fact that jobs are being created again. It’s just a matter of time now before all of the unemployed folks are back to work and home values resume soaring to the stratosphere.

Sadly, far too many people still believe all that nonsense. They have failed to notice that the only thing propping up the so-called “recovery” is an insane amount of U.S. Government deficit spending ($1.5 trillion annually out of $14 trillion dollars in total economic output), without which the GDP numbers would be an astonishing 10.7% lower than they have been the past three years. There’s no other way to spin those figures—three straight years of double digit economic contraction are Great Depression numbers. That’s why for tens of millions of people it doesn’t FEEL like the economy has recovered, whatever the news might say. If you got laid off in 2008 or early 2009 and weren’t lucky enough to get a stimulus program-funded government contract, you were likely left to become a “99’er” whose unemployment benefits are now running out.

So why aren’t more people up in arms? Why are there not massive demonstrations on the Washington Mall and elsewhere? Why have we not seen Greek-style rioting here in America? So far, such activity has been limited to some campus unrest out in California; a few weeks of union-backed demonstrations in Wisconsin that accomplished exactly nothing except for some relatively meaningless local recall elections; and the faux-outrage of the billionaire funded and utterly compromised tea party movement. As far as genuine anger out in the streets goes, Americans have been as docile and accepting as a newborn lamb.

The answer should be pretty obvious. What the late author Joe Bageant called the American Hologram has been working overtime on behalf of its corporate masters, spewing forth happy-talk financial propaganda when not serving up celebrity-spectacle distractions and vapid reality shows to keep its viewers fat, and if not happy, at least not in a rightly justifiable rage.

Conversely, if you really want to understand what’s happening with the American economy, you actually have to READ, something which many Americans find as abhorrent as having to take the stairs instead of using the escalator. Some print sources have done a reasonable job of covering different aspects of the ongoing economic malaise, and there are many places on the Internet where the truth is presented without the cheerleading spin. But as far as the vast majority is concerned, those reports might as well be buried under that flag Neil Armstrong planted in the Sea of Tranquility back in 1969.

There is perhaps no more observable example of the Hologram in action than the relentless touting of the stock market indices, the Dow Jones Industrial Average (DJIA) in particular. Every cable “news” channel features a stock ticker that provides updates in real time all day long. The evening news shows, despite only having about 21 minutes per half hour broadcast to sum up the day’s events, always makes sure the stock results get highlighted—even on that bane of right wing conservatives everywhere, National Public Radio. It’s been this way for so long that no one ever questions why that should be.

Why promote the DJIA so relentlessly when it’s the upper 10% of households that own a majority of stocks while the lower half of wage earners own virtually no stocks at all? The networks insist on persistently pumping a figure of little meaning to a vast majority of the population. What’s more, most of those who do have large stock portfolios presumably get their financial information from sources far more sophisticated than the nightly news. And if they don’t, they shouldn’t be investing in stocks in the first place.

The only answer I can come up with is that the DJIA is being used a propaganda device to help sell the narrative that all is fine with the economy. Since the depths of the market crash in March 2009, the DJIA has regained nearly all of its pre-crash losses.

Yes, stocks are way up. Whoo-hoo, happy days are here again. Pop the cork on the champagne, honey, tonight we are going to celebrate.

Don’t pay any attention to the fact that the rally was bought and paid for by the Federal Reserve’s Zero Interest Rate Policy and Quantitative Easing programs; the federal government’s $700 billion bailout of the big banks and Wall Street; and an additional trillion dollars of annual deficit spending being added over and above the already high deficit levels of President Bush’s last full year in office. Also ignore the fact that even with the recent run-up, stocks are not much above where they were in 2000, meaning you could have kept your money under your mattress for the last 11 years and been just as well off—not to mention that you probably would have slept better during the market’s many wild gyrations.

The very purpose of all the reckless post-crash economic policies was primarily to pump up the stock markets. In the minds of our economic overlords, it was imperative that at least the facade of prosperity be propped back up in order to quickly dissipate the doom and gloom mentality that accompanied the financial crash. Consumer spending represents approximately 70% of the American economy, so they had to get the plebes to open their wallets and pull out the plastic again. Coaxing folks back into the shopping malls required getting them to stop worrying about the future and to resume partying like there’s no tomorrow.

There was nothing else that could be touted which would achieve the same effect. The GDP numbers swinging back over to the positive in the summer of 2009 wasn’t going to do it, as far too many people don’t really comprehend what that abstract concept really means. Besides, GDP is only reported once a quarter—and thus is not very useful for the daily drum beat. The unemployment numbers continued to relentlessly suck despite the upward bias in the government’s calculations, so there was no help there. And they certainly couldn’t hype a real and non-manipulated indicator like the number of Americans on food stamps, because that one was literally exploding in the wrong direction.

No, they had to focus on the rebound in stocks, which was a win-win since it fit into what their agenda was anyway—making good the losses experienced by the same group of predatory capitalists who caused the market crash in the first place with their reckless financial bets. This is why I have stopped paying attention to the stock market and the DJIA altogether. The last time it had any value as a true economic indicator was in late 2008 and early 2009, before all the massive manipulations began to take effect. In addition to what I’ve written above, how can you trust any institution where on average an asset is held for mere seconds before being transferred from one supercomputer's data bank to another?

At some point, those doing the manipulating will run out of ammunition and there will be another crash. They will then no doubt argue for more bailouts, more stimulus and more quantitative easing to get this whole cycle going all over again. We’re now so far in the hole, that trying to keep the game going a little longer is all they have left. The problem is, by that time the dying economy may have finally reached the point where all attempts at emergency resuscitation prove ultimately futile.

Why We’re Screwed (Part 3): The Social Security “Trust Fund” is a Lie

After I began this “Why We’re Screwed” series as the U.S. Government debt limit showdown D-Day approaches, I received several inquiries from readers asking why Social Security benefits are on the table to be slashed given that the Social Security Trust Fund is supposed to make up any gap between revenues and benefits payments. It’s actually a very good question. The short answer is that the Trust Fund is a gigantic lie being used to pull the wool over people’s eyes so they won’t realize just how bad America’s fiscal situation really is.

As for the longer answer, the first thing you need to know about Social Security is that it’s a pay-as-you-go program. That means that today’s benefits are paid for by current year payroll tax collections. Any extra payroll taxes collected over and above the amount paid out in benefits rolls over into the Social Security Trust Fund. Prior to the financial crash of 2008, the Social Security program had enjoyed many years of large surpluses. According to Wikipedia, as of the end of calendar year 2010 the accumulated amount in the fund stood at just over $2.6 trillion. Had that money be placed into real revenue generating assets, the U.S. Government could have withstood payroll tax collections dropping below benefit payouts for a long time.

Unfortunately, the crash could not have come at a worse time—the very year that the oldest members of the Baby Boom generation became eligible to take early (though reduced) retirement benefits. It has long been recognized that the size of the Baby Boomer population bulge was eventually going to cause Social Security to begin running an accounts deficit and thus have to dip into the Trust Fund. Up until just a couple of years ago, that wasn’t expected to happen until around the year 2020.

Well, guess what? It’s already happened. During 2009, the payroll tax surplus disappeared as more Boomers than expected opted for early retirement benefits, presumably because they had lost their jobs during the Great Recession. Then, in one of the more insane ideas to come out of Washington in a while, President Obama and the Republican congressional leadership agreed in December 2010 to slash the payroll tax from 6.2% of the first $106,800 of every wage earner’s income to only 4.2% as a (rather desperate) way of stimulating the economy. This meant that Social Security’s revenue stream was being reduced by the short-sighted politicos just as the program was beginning to run in the red. Sure enough, a month later the Congressional Budget Office estimated that Social Security’s account deficit in 2011 would be approximately $45 billion.

All of this still might have been survivable for awhile if the Trust Fund really existed. Unfortunately, when it was set up it was required by law to buy Treasury securities, which means U.S. Government debt. As Wikipedia explains it:

“These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”

So in effect, the U.S. Government has been filling up the Trust Fund with IOUs that can only be cashed in at the cost of increasing the deficit. It’s like raiding your son’s piggy bank to buy cigarettes and leaving a promissory note. Do it often enough and there’s no cash left in there, and your son will be mighty disappointed when he tries to go buy that new toy he really wants.

Now you know why the politicos are suddenly so hot to trot to slash Social Security benefits. The program has gone from being a net plus, whereby they could use its surpluses to mask the size of the deficit, to being a net drain that is now directly increasing the deficit. The blindingly obvious fact that they are the ones responsible for this state of affairs seems not to register with them.

Even more disconcerting is that as of next year the first Baby Boomer retirees, those born in 1946, will be eligible to receive FULL (not reduced) Social Security benefits. Without cuts in the program this year, the net drain on the U.S. Treasury is about to get a whole lot worse.

These are the facts you need to know in order to have any understanding of what’s at stake in the debt ceiling battle. For the last 30 years, America has been living high on the hog on money borrowed from the future. Now the future is here, and NOBODY wants the programs that benefit them to be the ones cut in order to reduce the deficit. The politicos find themselves trapped in a box from which not even they will be slimy enough to worm their way out.

Why We’re Screwed (Part 2): Deficits DO Matter

Back when President Bush was still in office, it was common on liberal and progressive websites to see derisive references to Dick Cheney’s infamous quote justifying the Bush tax cuts, “deficits don’t matter,” as a way of chastising Bush for his reckless fiscal policies—cutting taxes on the wealthy while engaging in two costly wars of choice. But a funny thing happened after January 20, 2009. A Democratic president took office, albeit during the worst economic downturn since the Great Depression, and now all the sudden many of those same liberal and progressive commentators are chastising the supposed deficit reducing zeal of the Republicans and even of President Obama himself.

This is, of course, in the wake of deficits that have more than tripled since Bush’s last full year in office and a total national debt that has soared to more than 100% of America’s GDP. Obama’s relatively mild deficit reduction proposal offered to the Republicans this past week sent off howls of protest in liberal and progressive circles, who have been citing opinion polls like the one I wrote about yesterday showing that the public overwhelmingly opposes deficit reduction if it means slashing government benefit programs. Thus we have the spectacle of Dick Cheney’s most implacable enemies now belatedly agreeing with him.

Regarding those public opinion polls, as far as reality is concerned it matters not one whit whether the majority of the public opposes deficit reduction any more than it matters whether they oppose the law of gravity. Despite their passionate opposition, they are still going to remain firmly attached to this tiny sphere as it goes hurling through the vastness of space. What this shows is that Dick Cheney was partially right—deficits DON’T matter, until they do. And now they do, which is the dynamic that no one in Washington is willing to face, so addicted have the denizens of the imperial capital become to simply borrowing what they need to pay for their grandiose visions of worldwide empire.

It was actually a hell of a run. For 30 years, starting with the 1980 election of Cheney’s hero, Ronald Reagan (the one for whom deficits didn't matter), America was able to have its cake (a globe-dominating military establishment) and eat it too (massive social programs) by mortgaging its future. Unfortunately, we have reached the point where the bill is coming due and something has to give. The only alternative is the rapid devaluation of the dollar, with food and energy prices skyrocketing far above the already elevated levels we have today. Additionally, when interest rates begin to rise as our creditworthiness sinks, our already-fragile, debt saturated economy will implode like a house of cards in the middle of a hurricane.

Another sad fact is that liberals and progressives who stridently oppose deficit reduction are also tacitly arguing in favor of the war policies they claim to abhor. The argument on the left SHOULD be: No cuts to domestic programs that help Americans citizens while we continue to spend trillions of dollars policing the globe. Deficit reduction should first and foremost fall upon the back of the Pentagon before we even BEGIN to talk about reducing entitlements.

Mainstream liberals and progressives shy away from making such arguments because that rhetorical line brings them far too close to the truth about the man in whom they placed all of their hopes and dreams back in 2008. It should be perfectly clear by now to any sentient being not wearing partisan blinders that when it comes to those issues of real importance—maintaining the big business, war and empire agenda of the nation’s corporate elite—Obama is no different from Bush. The confidence of his Wall Street benefactors is what will allow Mr. Hopey-Changey to raise a billion dollars in campaign cash for his reelection. Yet criticism of Obama for his war policies is off limits in most left wing circles, as evidenced by the fact that the antiwar movement, already anemic when Bush was in office, has virtually disappeared altogether.

So the debate is being framed by two sides, neither one of which understands the true predicament facing America. The liberals and progressives are digging in their heels on entitlement spending, while the conservatives are steadfastly against tax increases on those with the most ability to pay. Trying to negotiate the middle ground between the two is Obama, but even if his original deficit reduction proposal that had the liberals and progressives so up in arms were to somehow pass unaltered, it would STILL leave the federal government spending a trillion dollars more than it takes in from taxes every year.

In the first half of this post, I asserted that the outcome of the debt limit fight is going to be very interesting to watch as what it really represents is the first time the country has been faced with making hard choices and can no longer “kick the can down the road” with the bill being paid by future generations. The clock is ticking and there is about to be huge amounts of metaphorical blood spilled on the floors of the House and Senate as sacred cows, including Social Security, likely get gored in the name of deficit reduction. But it won’t be nearly enough, and I’ll be surprised if it even staves off the resumption of the debt crisis until after the November 2012 election.

Author James Kunstler predicted that as what he referred to as The Long Emergency unfolded, resource wars would break out all around the world. Welcome to the first round of America’s very own domestic resource wars.

Why We’re Screwed (Part 1): Public Opinion Poll Regarding Entitlement Cuts

The federal debt limit debate is heating up in Washington, with just over three weeks to go until the nation defaults on its debt obligations. Last week, President Obama offered up cuts in government programs, including Social Security and Medicare, in order to try to reach a compromise with the Republican leadership. There was only one little problem with the President’s strategy, as reported by Talking Points Memo:

“Despite all the talk about cutting the deficit, neither party has wanted to be the first one to put entitlements on the chopping block. A Pew poll released Thursday explains why, as it shows that a robust majority of Americans don't want the government to rollback benefits for entitlement programs, even if those cuts are made to reduce the deficit.

“Six in ten Americans said it was more important to leave Social Security and Medicare benefits untouched than to make cuts as a way to reduce the deficit, roughly twice as many as the 32% who said the opposite. Further, 61% said Medicare recipients already pay enough of their health costs, while 31% said beneficiaries should pay more money into the program.”

My regular readers will recall a post I wrote a couple of weeks ago chastising the American Association of Retired Persons for initially saying it would be willing to accept some cuts in social security benefits. My point at the time was that nobody should pay dues to any self-interested organization that was more inclined to protect its own perquisites than fight on behalf of its membership. Well, the AARP must have gotten a real earful from its members in the meantime, because it has reversed course and is now claiming it will fight against any cuts in Social Security benefits, even through the back door of changing how the cost of living index is calculated.

Anyone who has been paying attention to what is really going on knows that America is rapidly approaching the endgame of 30 years of reckless fiscal policies. Since the election of Ronald Reagan and the subsequent massive ramp up of borrowing both by the government and private sector, much of America’s economic “growth” has become dependent upon cheap and easy credit. The problem is, as any individual who has ever declared bankruptcy could tell you, borrowing huge amounts of money is a great way to maintain the illusion of prosperity until the day finally comes when you can’t borrow anymore. After that, you’re in deep trouble.

America is in deep trouble. Not only have we reached the point where continuing to expand our borrowing will destroy the remaining value of our currency, but because of the rampaging economic effects of peak oil we can no longer maintain the growth we need to service the debts we already have. Since the beginning of the economic crisis of 2008, the federal government has been borrowing approximately 40% of the money it spends. Entitlement programs, of which Social Security and Medicare are the two largest, together with so-called “defense” spending constitute approximately two-thirds of the federal budget. That means you could cut everything else, including interest payments on the national debt (which would, of course, mean default) and the budget would STILL not be balanced.

The only way to even begin to tackle this predicament is if funding for domestic federal programs is reduced across the board, defense spending is slashed by half or more and taxes are increased on those with the most ability to pay. Even these drastic actions, however, will only buy us some time to begin adjusting to the new reality—permanent peak oil-induced economic contraction—before it becomes necessary to go through the whole exercise all over again. What this strategy would allow is some semblance of an orderly descent, though it would obviously inflict massive amounts of economic pain on the majority of Americans.

As you can see from the results of the Pew poll, however, the equal-pain scenario I just outlined is a political non-starter. Every group is going to fight like a rabid Rottweiler to avoid their slice of the pie being cut, from senior citizens who rely upon Social Security and Medicare, to farmers who rely upon agriculture subsidies, to government employees protecting their salaries and benefits, to defense contractors who have grown fat and happy from lavish Pentagon spending. Meanwhile, the corporate elite who really run things will be continuing to transfer as much of the nation’s wealth as possible into their own hands.

The outcome of the debt limit fight is going to be very interesting to watch as what it really represents is the first time the country has been faced with making hard choices and can no longer “kick the can down the road” with the bill being paid by future generations. The outcome of the battle ought to give you some idea of just how ugly these kinds of fights are going to be in the future when the choices REALLY start to get tough. Let’s just say that I am far less than optimistic for any kind of positive outcome.