Monday, April 11, 2011

Borrowing from our Children's future

Obama "won" another round in his political struggle with the Republicans by giving them as yet unspecified but by all accounts draconian budget cuts in return for not shutting down the government and collapsing the economy if not western civilization itself.

But the Republicans make no secret that they will be back demanding still more cuts for the new budget year that begins October first and more immediately they will demand “something big“ as speaker Boner put it in return for increasing the debt limit.

The Republican answer to Obama’s status quo is the Ryan budget and it is such a ridiculous document that even a tea-bagger should be able to see how absurd it is. Among the jewels it contains are forecasts of an increase in Federal revenue based on a 2.3% unemployment rate. Five percent is considered full employment, even during WWII it didn't get as low when anybody with a pulse could get a job or was drafted.

Ryan also forecasts that the older the baby boomers get, the lower the cost of Medicare will be. His mechanism for this is to eliminate Medicare insurance and replace it with vouchers to buy private insurance. This will really only save money as the people who can't pay the matching premiums out of pocket or are too sick and un-insurable will have their vouchers go unused while they die.

Social Security is also a target as the 3 trillion in the Social Security Trust Fund money is not to be repaid to retirees under the Republican plan. George Bush called the money contributed during the last thirty years and held as Treasury Bonds worthless pieces of paper. Bush and other Republicans had no problem spending the money to enrich war contractors or giving it to rich Republican cronies in tax breaks but repayment to the people to whom it is owed is not on the table.

The Republican budget also assumes that Defense spending and other mandatory spending (things like interest on Reagan's debt) and non-defense discretionary spending will drop from the current 12% of GDP to 3.5% of GDP. (Defense contractors and red states with military bases take note, not that any of these cuts will really happen)

There are also trillions in unspecified cuts in order to justify slashing the top rate of income tax rate for the rich and corporations to a maximum of 25%. No pretense is made of cutting taxes for the run of the mill taxpayer. In fact the deference between Obama’s budget and Ryan’s is about 3% but under the Republicans the poor will suffer and die while the rich will reap trillions in windfalls.

The Republicans do all this based on the panic brought about by the debt crisis. There is no “debt crisis”. It is a simple fact that you can’t borrow from our children’s future. Every penny borrowed of the 14 trillion currently owed did not come from the future but represented taxes the rich did not pay. And we did not “borrow” it from the Chinese as evidenced by your tax refund or Social Security check. It is paid in USD and not in Yuan.

Wall Street is “concerned” about a possible failure to expand the debt limit and you see this all over the corporate news because they don’t want Americans catching on to the scam. Dick Cheney said “Reagan taught us that deficits don’t matter”. He was right if we realize what is really going on. We don’t really owe this money, it’s just uncollected taxes.