July 23, 2011

Freedom from Debt Slavery

I am intrigued by the argument, now being voiced by more prominent figures such as Bill Clinton, that the way out of the debt ceiling impasse is through use of a rather obscure paragraph of the Fourteenth Amendment to the United States Constitution. To wit,

4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
When the 14th Amendment is mentioned in public discourse, it's usually about its first paragraph, the one containing the prohibition against denial of due process or equal protection by any State of the Union (the Fifth Amendment already covering these points where the federal government is concerned). The 14th was one of the crowning achievements of Reconstruction; it eventually assured the citizenship of any slave born in the United States, and served, ultimately (nearly a hundred years after its passage in 1868), as the basis for the Civil Rights Movement, as the 14th was the great federal trump card against George Wallace, Orval Faubus and other blights upon American history, who were the ones who gave "States' rights" a very bad name which persists to this day.

Paragraph 4 was not really passed with the current situation in mind, of course, anymore than the Founding Fathers were thinking about gestational trimesters when they enacted the Ninth Amendment. The Constitution is a small island of text, however, surrounded (and inundated) by an ocean of judicial gloss and exegesis (and oceans made of glosses and exegeses rarely occur in nature). The 14th Amendment's "debt" clause (the above paragraph) has only rarely been addressed by the United States Supreme Court, and never in the context of a contest between the legislative enactment known as the debt ceiling (which has only been around since 1974, I believe) and the Constitution. If there is a contradiction, of course, then under the holding of Marbury vs. Madison the 14th Amendment prevails, although with Roberts, Scalia and Alito around, the overturning of even Marbury vs. Madison is a possibility. That would raise some interesting logical paradoxes - the Supreme Court overruling the concept of Judicial Review by using Judicial Review to conclude that Judicial Review is unconstitutional. More or less like figuring out: This Statement Is False. I love stuff like that. Maybe the Supreme Court could meet in a building patterned after an Escher drawing.

Although there has not been much judicial guidance as to the application of the 14th to the debt ceiling, the current learned debate concerns whether the "public debt" that "shall not be questioned" refers to existing debt incurred through Treasury borrowing or is a more general prohibition against denying the validity of obligations of the federal government. Either way, it might offer President Obama a way out if push came to shove.

Under a conservative reading of the first sentence (and Obama, being a preternaturally cautious individual, would certainly prefer to go out on a limb only as far as necessary), the 14th would seem to permit the incurring of additional debt if necessary to carry on debt service on existing debt or to "roll over" outstanding Treasury obligations (since there is never a precise, neat and clean correspondence between maturing debt and how much money you need to handle the redemption). That is to say, the Ponzi economic scheme we now use, whereby we take on additional debt by selling Treasuries to marks and suckers who "invest" so we can use their money to handle the debt from suckers who invested earlier in the inverted pyramid, "shall not be questioned," because it's either who we are or what we've definitely become. A nation with an acquired, vested right to live permanently beyond our means because we're Exceptional. Deal with it, world.

A great cry would of course arise from the humid, fetid trailer parks of this great land, as the Tea Bag contingent of the Booboisie (h/t: H.L Mencken) realize they've been had by this Ivy League hipster, and next thing you know, we'd be embroiled in an impeachment crisis; a Constitutional crisis, as the Supreme Court, naturally, rules against President Obama on the issue; and many other circus-like developments. I can only say: please, Lord, let all that happen. Impeachment would fail, as it did against Clinton, because 2/3rds of the Senate is not going to vote to convict. If the Supreme Court rules against President Obama, O can reach into the mists of history and use that great quote from President Andrew Jackson replying to the Supreme Court's ruling in Worcester vs. Georgia: "Justice Marshall has made his decision; now let him enforce it."

Sure, the quote is apocryphal, and sure, Barack Obama would never say such a thing, but it would be a great "Mr. Smith Goes to Washington" moment. More interesting, anyway, than listening to John Boehner.

July 21, 2011

The Upside of the Downside, Revisited

I think I should first make clear that I don't consider the current financial predicament of the United States my personal fault. I've done what I could, but it was obviously insufficient. I think, rather, that the proximate cause of the current troubles (employing that term in the vague way it is used in legal parlance) was the 8 years of catastrophic misrule by the Bush/Cheney cabal, from which we're not likely ever to recover, at least not in the proximate future. Bush's decision to reduce the top tax rate from 39.6% to 35%, thus granting relief to the taxpayers (high earners) who primarily finance the income tax side of national government, while substantially increasing defense spending both as a baseline and with all the huge supplemental appropriations for the unnecessary, profiteer-motivated wars in Afghanistan and Iraq, operated as the coup de grace.

None of this has anything to do with Barack Obama. Bush ran deficits, measured in the only real way, as the increase in the national debt year over year, of about 1/2 trillion per year for a period of 8 years. The red ink flowed at exactly the wrong time, while the Baby Boom generation was nearing retirement (78 million strong), and while the endless series of "free trade" agreements and federal enabling of big companies that wanted to move jobs offshore were in full cry. Bush & Cheney wore flag lapel pins, but Cheney reportedly kept about 69% of his vast fortune (acquired through his connections to corporations with strong federal contracting, such as Halliburton) in foreign currency denominated assets. So while Bush & Cheney were ostentatious in their "display" of patriotism, they were not patriots in the sense I think of the word. They were using the United States, and the fear they could instill in the populace through their absurd exaggeration of the terrorist threat, to make a bundle, although certainly this was more Cheney than Bush, since Ol' W couldn't figure out how to get really rich even when the fix was totally in. As the great Phillip Roth wrote about Bush, he was a man who "lacked the acumen to run a hardware store," and we put him in charge of the most complicated political/economic organization on Earth.

This is a failure of democracy, pure and simple, although certainly in 2000 it was not the fault of the popular vote. Whatever, Bush performed true to all indicators in his past, which is to say, he ran this country into the freaking ground. Because the attention span of the average American observer is approximately that of a six-week old kitten juiced on methamphetamine, most members of the American electorate, dazzled and confused by the carnival barking of the Mass Media, can't remember how we got here - on the brink of default. But that is, in fact, where we are. The cable TV news shows (which I am now privileged to see again, having hooked up the satellite and changed my habits from watching only Netflix streams of old "Twilight Zone" and "Alfred Hitchcock" episodes) naturally turn the current dilemma into a Red/Blue, Dem/Repub morality play, with some justification, but this drama does not actually produce any money for the country. Nor is it productive, as I hear Ed Schultz say tonight, to constantly repeat that the "Social Security trust fund is solvent through 2037," because this is a talking point with about as much content as the trust fund itself.

The only salient fact is that the United States does not really have very much money. The Treasury has some billions in its operating account at the Federal Reserve. You can look it up online, if you like. This is the one area of federal governance of reasonable transparency. Beyond those billions (certainly less than $50 billion), the United States does not have any cash. To speak of one part of the government owing another part money (as the game is played with the entitlement trust funds) is a form of denial bordering on delusion. We say such things because, at bottom, we're afraid to come to terms with what is real here. Any money that we raise through some mechanism other than printing must come from either taxes or from borrowing through Treasury auctions. Taxes (inclusive of income taxes and FICA) come to about $2 trillion annually, net of trust fund games. The outgoes are on the order of $3.7 trillion. If we don't raise the debt ceiling and resume borrowing more, we're stuck trying to match the insufficient income to the overwhelming expenses.

I don't know which way this thing ought to go, to tell you the truth, and thus the title of the post. It is not that I sympathize with the Tea Party, because I think they're mostly lunatics. They are dangerous True Believers who sign away their independence to loyalty oaths and pledges, and these are always the mark of the Fascist Right. The Nazis were not great political theorists, they simply achieved their aims through iron discipline (enforced implacably and increasingly through violence as the years went by). The Tea Party cadres love the feeling of solidarity they get from the Movement, of signing the pledge never to raise taxes, no matter what, even if the country must have additional income. These are the stigmata of the extremist.

Yet if the whole system goes down because of the implacable resistance of the Right Wing, as it possibly could, then I think the Right Wing will go down with the whole system. Like Samson, they will bring the temple down on their own heads. If the federal government is an "insurance company with an army," as it appears increasingly to be, given its extreme budgetary limitation, what happens, at the state level, if the central government lacks the money even to perform these two functions, that is, it cannot fund both the entitlements and the trillion dollar defense budget?

An interesting conundrum. If the entitlements are the only things that survive (and Social Security, Medicare/Medicaid and debt service on existing Treasuries is all that $2 trillion will pay for), then why have a federal government? Would the states encourage their citizens to send money to Washington, D.C. just so D.C. could send it back, minus its "administrative costs?" Wouldn't the states be more likely to begin thinking, "it sure would be nice to keep that money right here where we can put it to use right now" ? If, on the other hand, defense keeps its trillion dollar share, perhaps by what amounts to a military coup (and here's where Barack Obama would be particularly useless, standing up to the Pentagon), thus requiring drastic cuts in the entitlements (but leaving room for the $300 billion or so in interest payments to avoid default), wouldn't the citizenry then cry foul! at this betrayal of government promises, leading to the same result of dissolution?

What's very interesting to me at this point is that I am not describing some sci-fi potboiler plot (it wouldn't be as good as Rod Serling's anyway). The situation I'm describing is the pretty pass to which the United States has been brought. I am describing the actual financial condition of the United States of America. Raising the debt ceiling is the actual fantasy, because given the intransigence over taxes, the future holds only an ever-deepening hole. The American economy is not recovering, employment is not getting better (stagnant, except for the bubble years, for well over a decade), and we are talking only about taking on The Bridge Loan to Nowhere.

A curse, I suppose, to live in such interesting times. We may be on the precipice of (a) default and dissolution, (b) a printing-press fired Weimar hyperinflation (if the Treasury decides to print its way out of bankruptcy), or (c) all three of these things. It's a Mad Tea Party, alright.

July 19, 2011

Refinancing Sparta

Glenn Greenwald, who does a much better job than I ever could of cataloging the absurdity of America's "war on terror," recently devoted one of his columns to Leon Panetta's exciting revelation that only about "10 or 20 al-Qaeda leaders" remain in Afghanistan. I think I mentioned before that Panetta, who always seems to hold some high post in every Democratic Administration (I think he's Secretary of Defense now, having moved on or up from the CIA), got his start as a character actor, playing a pharmacist on "Dobie Gillis." That's either true or something that I find funny and keep repeating even though it isn't.

A couple of thoughts come to mind: so this is why we're still fighting the war in Afghanistan, about ten years after we started? To finish killing off these 10 or 20 guys? And one other question: if we're at the point where we can count them, how come we can't just kill them now? My guess is that Leon did not clear this statement with Message Control Central over at the White House. He's been in politics for so long, Leon has (virtually his whole life), and has held so many big positions (he was Chief of Staff to Clinton for a while) that he perhaps forgot that he's a functionary in the Obama political machine and not a policy maker. There must have been some elaborate cringing in the West Wing when Leon delivered that little aper├žu.

Still, it highlights the craziness of America's misguided reaction to 9/11. 9/11 was significant for two reasons: (1) it highlighted that it's dangerous to go to sleep on the job and to fail to use the existing intelligence apparatus to protect the country, as the Bush Administration unquestionably did; and (2) it was highly significant for the people who were killed and for the people who loved them. Beyond those things, 9/11 became simply a grandiose political football (if a football can be grandiose), and entered the myth-making machine of American mass media, never to be recognized for what it actually was again. Bush's carefully calculated overreaction (orchestrated by Cheney) was for the express purpose of diverting the national attention from the fact that it was the Bush/Cheney Administration's fault in the first place, and, of course, also serving as a pretext for what they wanted to do all along, pump more and more money into defense. If the al-Qaeda problem has been reduced to 10 or 20 guys (even allowing for a moment the unproved assertion that al-Qaeda was behind 9/11, instead of, say, the much more logical conclusion that it originated with the Muslim Brotherhood or Saudi factions unrelated to al-Qaeda), then why the continuing production of advanced fighter jets and aircraft carriers to launch them from, and the Bradley Fighting Vehicles and all the rest of this costly nonsense (h/t: Charles Dickens)?

It's a rhetorical question. Bush & Cheney, and now Obama, realize that all this "investment" is not necessary for anti-terrorist operations, which, last time I looked, is supposedly the existential threat to America justifying our extreme devotion to defense spending. I note that the Right Wing in particular likes to talk about our defense spending in terms of a "percentage of the budget," or even as a percentage of GDP, as if there is some unwritten axiom somewhere that dictates that a country must spend some part of the national wealth on the military. But what about just the absolute freaking number? We like to deceive ourselves with the idea that this number is $700 billion (as if we could afford that), but it's not $700 billion, because the metastatic process of the Security State gave us the Department of Homeland Security, the 14 different intelligence agencies scattered throughout the government, the National Security Agency, and they're all more or less doing the same thing: keeping us safe from those 10 or 20 guys, and it costs closer to $1 trillion a year, as the late, great Chalmers Johnson informed us in numerous books, including The Sorrows of Empire.

In other words, about half of our actual national income. If you look over there to the right and click on the link to Cost of Iraq War, you'll see a running total of the costs of the wars in Afghanistan and Iraq. We're currently at about $1.222 trillion for these diversions. If you add about $700 billion, representing the cost of Bush's reduction of the top tier tax rate from 39.6% to 35%, you come to about $2 trillion in squandered treasure, all for no reason other than mismanagement of the nation's business. The fact that Bush was elected twice should tell you why democracy does not actually work in America. Thomas Frank's brilliant query in What's the Matter With Kansas?, to wit, why do Americans vote against their own economic and social interest, cannot be answered except by saying, well, the electorate is kind of stupid, actually. The combination of a misinformed and poorly educated electorate with a money-driven, manipulative politics is pretty lethal, really. Which explains a lot of why things look the way they do these days.

So I notice, at long last, that even Washington, D.C., has begun to question the wisdom of so much defense spending. True, it's only because there's no other choice. Perhaps this will even lead to a diminution in missile attacks in Afghanistan, Pakistan, Yemen, Somalia and God knows where else, and will thus lead, as Glenn Greenwald persuasively argues (as do many other observers, including Robert Baer) to a diminution in newly-created, anti-U.S. terrorists, because our random killing of many non-terrorist people in these countries with our "precision bombing" is one of the main sources of terrorism. You could say that these constant drone and Predator attacks represent our cynical investment in the War on Terror: it's a self-perpetuating business, although if Panetta is right, the inventory is a little low, which probably explains why we've moved on to new markets in Yemen and Somalia.

Still, a chance to reduce the militarized nature of American priorities is one patch of blue in the dark skies of national insolvency. It would be nice if President Obama talked about that for a change, instead of decreasing the COLA adjustments in Social Security for Americans in their 80's and 90's, where his current focus seems to be. Maybe if we cut back just a little on the aircraft carriers and $250 million jets, and allowed our military budget to be, I don't know, only three times larger than the next biggest budget, that of China, instead of somewhere between 6 and 10 times larger, we could still be safe from the world, where no actual nation has any intention of attacking us, with enough left over to handle the 10 or 20 guys.