The Real State of the Union, 2011
We’ll soon be hearing from President Obama on the State of the Union. This is my analysis and opinion of the actual state of affairs in our country as the new year is dawning.
Oil is at 90 dollars a barrel. The governments of Europe, Japan, and the United States are saturated with debt. Housing prices in the US are falling again, and there’s no job growth in America. For some reason, many are still imagining that we’re in an economic recovery. Our economic system remains as fragile and dangerous as it ever was. Meanwhile the perpetrators of the financial crisis are enjoying record profits.
We find ourselves bailing out not just American banks but large banks around the world. The economies of scale in the financial sector continue to chip away at the sovereignty of not just ours, but all the nations of the world. In fact, we had begun refinancing foreign banks as early as 2007, indicating that the Fed was aware of a crisis long before they had admitted. Giving those monies to foreign banks without so much as a press release or a demand for better trade agreements, it is clear that even with all those big geopolitical shifts we have been hearing so much about, the United States remains the world’s sole Schmuck Superpower. The good news?: Of the money that was used in bailing out financial institutions, about half has been returned.
So, the economy limps along following its near collapse from risky investments by the banks following the deregulation of the banking industry during the past 28 years and the repeal of the Glass-Steagall Act in 1999. Rather than forcing banks with large deficit positions on their books to come clean as to their actual financial position as would have been done in any developing nation which was in financial crisis by the IMF, we’ve suspended “mark to market” accounting and have allowed these banks who put our entire financial system at risk in order to continue their activities without reducing their leverage positions. Banks don’t want to decrease their leverage positions as keeping their leverage high decreases their tax burden, and increases the implicit guarantee of their debt by the government.
Rather than dealing with these liquidity issues directly, we’ve opted to allow the banks to “earn” their way back to solvency by arbitraging interest rate spreads against the US government through low/no-interest rate loans. This allows us to conceal what is essentially a bailout as a non-budget item. The banks have continued to hold onto this money rather than infuse it into our staggering economy as they slowly build themselves back into solvency at our societal cost. As a senior bank official said to The New York Times in fall, 2008, “It doesn’t matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.” Meanwhile the financial sector, which accounted for no more than 16% of our corporate profits between 1973 and 1985, accounted for 41% of the same this decade. Executive compensation in finance out-performed this statistic, now accounting for 181% of the average executive compensation of all our industries combined. In spite of decreasing contributions from corporations in sharing the nation’s tax burden, our current wisdom dictates that we must not increase taxation on our corporations for fear of stalling any economic recovery. Employment taxes, by contrast—the regressive bit of the fiscal structure—are bearing a large and increasing share of the brunt.
These bankers precipitated the crisis with risky bets, implicitly guaranteed by the taxpayers, and they continue to use their influence to stymie attempts to regulate their industry. They retain the advantage for themselves and investors at the public’s expense. The Federal Reserve has taken on a major role in providing credit to the economy—the function that the private banking sector is supposed to be performing, but isn’t. This will remain unchanged unless the oligarchy of these powerful banks is broken, but with our elected officials relying on the political contributions from the financial sector, this will be an uphill battle.
When Teddy Roosevelt broke up the trusts he was focused on collusion and price fixing within industries, while today our primary concern is that one firm or a group of interconnected firms can bring down our whole economy. The exponential math of debt by definition dictates that countries will only lose their wealth over time and become increasingly indebted to the global central banking network.
There has been job growth, but it’s apparently only in part-time jobs. Our official measurements of unemployment were changed in the 1990s to reflect less negatively on the ruling oligarchy. While real unemployment approaches rates not seen since the 1930s.
Our Legal System
The Supreme Court has ruled that corporations are people and have the same rights to free speech as people, while the Lower courts are finding that the laws don’t apply equally to corporations as they would to individuals by ignoring the letter of the law in foreclosure actions in favor of the banks. Unless we find our District Courts of Appeal willing to stand up, will we find our laws being subverted by a Supreme Court all too willing to once again defend the rights of corporations at the expense of ordinary citizens. Prominent economists have warned that unless changes are made to our mortgage policies, another financial crisis awaits us.
The Free Press
It no longer exists.
Fear will continue to trump reason in our national security decisions.
Why bother with the terrorists? National security is now distilled down to its core mission of protecting corporate intellectual property, and Homeland Security has carried out a court-approved seizure “against 82 domain names of commercial websites engaged in the illegal sale and distribution of counterfeit goods and copyrighted works.”
And if we can’t defeat our enemies on the merits of the charges, we’ll get them for alleged sex crimes.
Shoppers at Walmart will soon have something other than glossy magazines and chewing gum to look at when in the checkout line: A “video message” from the Department of Homeland Security asking them to look out for “suspicious” activity and report it immediately. Would you like some Big Brother with your chicken salad?
We continue to wage an expensive war and build permanent bases in Iraq to secure access to oil, while our ally Saudi Arabia remains the biggest funder of terrorism.
Meanwhile in Afghanistan we continue to try and build coalitions by destroying homes and businesses, as we expand the war into Pakistan.
Job opportunities and defense are now critically linked as the U.S. military now has more people in its marching bands than the State Department has in its foreign service.
The dispersants used in the Deepwater horizon oil spill are increasing contamination in the gulf, but like our political paradigm, having fallen down the rabbit hole perception is king while reality takes a back seat.
The myth of free markets as our best approach to allocating resources has been discredited if not disproved; yet the financial orthodoxy hasn’t acknowledged the fact. Like medieval bloodletters, the oligarchy prescribes austerity for the taxpayers, while promoting subsidies for their own industries. Creating hysteria about debt, allows these captains of industry to advance their agenda of gutting social programs while perversely advocating low taxes for the rich. Likewise the oligopoly seeks to preserve its control of the financial, healthcare, and defense sectors, which could individually or collectively solve all our deficit problems if the government would find the political will to regulate them.
The Center on Budget and Policy Priorities has calculated that the extended Bush-era tax cuts will contribute by far the largest share to the next decade’s deficits — ahead of the recession’s drain on tax revenues, Iraq and Afghanistan war spending, TARP and Obama’s stimulus. Again, the many must suffer so that the few may prosper. Meanwhile we’ve succeeded in attaining record levels of poverty among families with wages. The axiom, “the business of America is business” has never been more true, and we taxpayers must look to our mighty GDP as our sole consolation as we queue up in soup lines.
President Obama will continue to advance his conservative agenda by cynically freezing federal employee pay, which even if he could reduce payroll costs by 50% would only affect the deficit by 3%. Oh, and the deficit commission recommendations would kill and additional 4 million jobs in an analysis done by the Economic Policy Institute.
States and Local Government
All 50 states now find themselves in worse shape than Ireland with respect to their debt/GDP ratio.
Many municipalities are considering or have all ready sold or leased their water systems to private enterprise to meet budgetary shortfalls. The sale/privatization of public assets will be continue to be the oligarchy’s first choice for balancing budgets, as the reins of sovereignty are abdicated inexorably to Capitalism.
The President continues to play 3-dimensional chess by alienating his own party, including Democratic conservatives, while courting Republican opposition.
In the end, the appearance of a political opposition is the essential window dressing required to fool people into thinking that there’s actually more than one side that will be heard on any public issue. There isn’t. The ultimate winners are the great accumulations of wealth represented by that bipartisan coalition that has no permanent friends or enemies, just permanent interests – The Money Party. The enemies of greatness and progress are the politicians and their patrons who insist on having their way on every issue, who take every thing that isn’t nailed down; and, who create fake dramas and diversions to further the distortions and censorship of the corporate media.
That’s the real state of the Union. Happy New Year to us.
Writer’s note: In an effort to make this read as an actual public address, I’ve not identified certain passages as quotes, which some of this essay certainly is. I’ve attempted to identify the sources of these quotes in the embedded links.
Cross-posted at http://dagblog.com/reader-blogs/real-state-union-2011-8402