The real cause of America’s debt crisis

Over the past century, America’s rich made their millions and billions through the use of public assets shared by everyone. By virtue of those profits, they have not only a moral, but a rational obligation to pay more for the upkeep of public services.

See this article.

And see this article by William Greider:

The claim that cutting Social Security benefits will “strengthen” the system is erroneous. In fact, Obama has already undermined the soundness of Social Security by partially suspending the FICA payroll tax for workers—depriving the system of revenue it needs for long-term solvency.

“The mendacity has a more fundamental dimension. Obama helped conservatives concoct the debt crisis on false premises, promoting a claim that Social Security and other entitlement programs were somehow to blame while gliding over the real causes and culprits. Social Security has never contributed a dime to the federal deficits (actually, the government borrows the trust fund’s huge surpluses to offset its red ink).

“This mean-spirited political twist amounts to blaming the victims. There should be no mystery about what caused the $14 trillion debt: large deficits began in 1981, with Ronald Reagan’s fanciful “supply side” tax-cutting. Federal debt was then around $1 trillion. By 2007 it had reached $9 trillion, thanks to George W. Bush’s tax cuts for the wealthy and his two wars in Iraq and Afghanistan, plus the massive subsidy for Big Pharma in Medicare drug benefits. The 2008 financial collapse and deep recession generated most of the remainder, as tax revenues fell drastically. Obama’s pump-priming stimulus added to the debt too, but a relatively small portion….

“The White House evidently thinks it’s good politics for 2012 to dismiss the left and court wobbly independents. Obama no doubt assumes faithful Democrats have nowhere else to go. It’s true that very few will wish to oppose him next year, given the fearful possibility of right-wing crazies running the country. On the other hand, people who adhere to the core Democratic values Obama has abandoned need a strategy for stronger resistance. That would not mean running away from Obama but running at him—challenging his leadership of the party, mobilizing dissident voices and voters, pushing Congressional Democrats to embrace a progressive agenda in competition with Obama’s.

“To be blunt, progressives have to pick a fight with their own party. They have to launch the hard work of reconnecting with ordinary citizens, listening and learning, defining new politics from the ground up. People in a rebellious mood should also prepare for the possibility that it may already be too late, that the Democratic Party’s gradual move uptown is too advanced to reverse. In that event, people will have to locate a new home—a new force in politics that speaks for them.”

And see and hear this interview with economist Richard Wolff.

This [issue of the debt ceiling] is political theater in which the two parties are posturing for the election coming next year, using this occasion—to put it in perspective, the number of times the government has raised the debt ceiling since 1940: 90, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it…. What you’re seeing is a decision, politically, to make it theatric, out of what otherwise would have been a normal procedure….[S]o, suddenly, the Republicans basically decided to make theater, to run their campaign a little early this year, and to slow it all down and make a big to-do….

[The] Democrats also have participated in the process by making this seem [that] Armageddon will occur unless we get this done by August 2nd. And in essence, at times it seems almost like the Obama administration is seeking this deadline to start moving in a more centrist direction economically that it has wanted to do, but has been absent the type of crisis that it would be able to convince the American public that it needs to do….

Basically, the Democrats have said, ‘We will do massive cuts. They just won’t be as massive as the Republicans want.’ And then they will appeal to the American people in the hope that Americans will choose the lesser evil: the Democrats who won’t cut so terribly compared to the Republicans.

And the Republicans are appealing to folks that are very upset by the economic situation, don’t know who to be angry at. In the American way, they get angry at the government…. The overwhelming majority of people who’ve lost our jobs in this crisis have been fired by private employers. The overwhelming majority of people who have been thrown out of their homes have had that happen because a private bank has gone to court to get that to happen. And yet, the American people have this tendency, built into our culture, to leap right over the person who’s actually done you the damage and to blame the government. And so, the government, in general, and the particular government of Mr. Obama, is the target, and the Republicans are playing on this. And that’s their ploy.

And the Democrats are saying, ‘Well, we’re not so bad. We’re going to tax the rich, just a little, and the corporations a little less. And that’s something the Republicans won’t do. And we will protect your Social Security, at least more than…’

In the process, everything moves over to massive cutting. And besides the morals of that, it’s economically crazy. In an economic situation where recovery is very poor, very uneven, to have the government cut back… is to make an economic situation that’s bad worse….

[Economist] Joe Stiglitz, [has] said, over time, the wars in Iraq and Afghanistan will cost $5 trillion [but the idea of cutting ‘defense’ spending is off the table]. There are a number of things that are not on the table. And frankly, I’m amazed that the President refers to what he does as a ‘balanced approach.’ First of all, the war and its enormous costs, off the table in any serious way. Going back to a serious taxation of corporations and of the rich in America, just, for example, at the scale that they were taxed in the ’50s, ’60s and ’70s, off the table.

[Now], after a ‘recovery,’ in quotations, that has only recovered the stock market and corporate profits and bank reserves, that has done nothing about unemployment and foreclosure—we haven’t had a balanced economic arrangement in this country for years. So, suddenly we’re going to be balanced in what’s coming next. That’s a strange kind of logic. Why is there not facing up to the war, the fact that you’re not taxing the rich? And perhaps the worst, we’re at a crisis because we have an economic system that hasn’t worked well, and the government bailed out banks and corporations by using public money. That was done to help them. It hasn’t helped many other folks. So now is not the time to do balance. Now is the time to correct the imbalance that has built up over all these years….

If you look at what happened to the American budget over the last 20 or 30 years, the culprit is obvious. We have dropped corporate taxes. We have dropped taxes on the rich.

[In the 1940s for] every dollar that individuals paid in income tax, corporations paid $1.50. [Today for] every dollar that individuals pay to the federal government, corporations pay 25 cents….

In the ’50s and ’60s, … [every] dollar over $100,000 that a rich person earned, he or she had to give 91 cents to Washington and kept 9…. The top rate for rich people today, 35%… a shift from corporate income tax to individual income tax, and among individuals, from the rich to everybody else…. And there’s something shameful about… how we’re going to take out our budget problems by cutting back benefits to old people, to people who have medical needs….

If corporations were going to do what the President gave them incentives to do [to create jobs], they would have done it. They’re not doing it. There’s no sign they’re going to do it. You have to face: that policy didn’t work….

The private sector has answered: ‘We are not going to hire people here. We’re either going to hire no one, because we don’t like the way the economy looks, or we’re going to hire people in other countries, because they pay lower wages there.’

[What] the corporations are doing [with the huge piles of cash they are sitting on]—because it’s not profitable for them to hire—in large part, is they lend it to the United States government to fund these deficits. The United States government refuses to tax corporations and the rich. It then runs a deficit. It spends more than it takes in, because it’s not taxing them. And here comes the punchline. It then turns around to the people it didn’t tax—corporations and the rich—and borrows the money from them, paying them [tax-deductible] interest and paying them back….

And now the ultimate irony, we’ve borrowed so much as a nation from the rich and the corporations, they now are not so sure they want to continue to lend to us, because we’re so deeply in debt. And they want us instead to go stick it to poor people and sick people instead. It’s an extraordinary moment in our history as a nation.

This interview was very dramatic and informative.

Then note this.


The national debt, all $14.29 trillion of it, does not exist because of profligate spending on social programs. It was not caused by public works projects, aid to students, Medicare, Social Security or any other initiative to help working people. In fact, Social Security as a program funds itself, does not contribute to the debt and continues to run a large surplus.

The national debt exists because of the programs the capitalist class created to help itself. Trillions of dollars are directly attributed to the bailouts of Wall Street and other corporate criminals at the heart of the economic crisis. Trillions more are for the capitalists’ wars—Afghanistan, Iraq and Libya in the current context, but also every attack, overt or covert, on oppressed nations, going back generations, as well as for the two hugely expensive inter-imperialist wars of the 20th century.

Compared to the largesse the capitalist class grants itself by controlling the mechanisms of government, social programs are a relative drop in the bucket. Indeed, social programs have been under attack for decades as part of a cruel, double-edged strategy to redistribute to the rich ever more of the social wealth while making workers who produce that wealth ever more desperate and reliant on the capitalists.

It should be no surprise, then, that Obama and his advisors have been planning to eviscerate Social Security and Medicare almost since they came to power in 2009. The famed National Commission on Fiscal Responsibility and Reform, a “bipartisan” commission formed by the president in 2010 (a different group, the so-called “Gang of Six,” is furthering the commission’s work during the current debate), was composed of men hostile to Social Security and Medicare, and its findings clearly pointed to these and other vital programs as being at the heart of the nascent debt crisis.