A Colossal Blunder
What we have been and still are witnessing is a frenzied, breathless, totally opaque, antidemocratic, stage-managed spectacle between the House and Senate leadership and the White House — designed to not only achieve preordained results, but as importantly, designed to confuse and overwhelm the American people. The labyrinthine, marathon, back and forth rounds of “negotiation” have been used as a foil to pull the wool over the eyes of the public (and the too-easily duped press) in terms of understanding what’s really going on, and what’s really at stake.
For the last few weeks, within the overall context of a frenetic amount of tactical jockeying for political positioning, and for political advantage, the fix has long been in regarding a debt-ceiling bill; the die had already been cast; and by using an inside and outside game; and a good-cop/bad cop routine, the end results were virtually assured, with only inevitable end-stage amendments, and unavoidable dotting of i’s and crossing of t’s, to finally close the deal.
The resultant one-sided “compromise” debt-reduction bill that is the result of these sham, rigged negotiations — falls, most heavily, on the backs of Americans who are already in the worst economic straits, the poor and middle-class, in terms of the draconian domestic, nonmilitary cuts contained in the bill. While at the same time, the wealthy, again, escape even the most minor inconvenience in terms of their already pathetically low tax rates on their obscenely high incomes .
The initial $1 trillion dollars in immediate cuts is going to turn out to be not only a down-payment, the first installment, of what appears to be a two-stage $2.4 trillion agreement; its going to end up being a first step of a multistage agreement, that, in the end is going to end up implementing the vast majority of the Catfood Commission’s and the “Gang of Six’s” policy recommendations. These recommendations are what Wall Street, the bond market, and central bankers want (with Bernacke, economic historian of the Great Depression, expressing some reservations) — and what the financial markets want, nowadays, the financial markets (with the help of the bought off and “captured” political class) get.
But this totally unjustified, deceitful “compromise,” and subsequent “compromises” are going to prove to be a hollow, Pyrrhic victory. They’re going to end up as a victory not worth winning, given the hard, cold economic facts of the stagnant, moribund economy that the American people find themselves in. Pushing austerity in the midst of a severe economic downturn, with unconscionably high unemployment, a mortally wounded housing industry, and a still severely damaged financial sector that to this day is continuing to play its dangerous, Russian-roulette, speculative games, is going to prove to be a blunder of immense proportions.
Almost two year after the “official” end of the Great Recession, more than fourteen-million Americans are still unemployed, and more than twenty-five million Americans find themselves either unemployed or underemployed. And those Americans lucky enough to have a full-time job are faced with stagnant wages (less than 4% growth over the last ten years — a paltry 0.4%/year) and the need for longer working hours, in order to sustain themselves and their families. And when coupled with an American economic landscape that is now littered with the homes of more than two million Americans having been foreclosed, more than two million Americans in default, and eleven million Americans whose homes are underwater, and a plummeting in value of all homes approximating, on average, thirty-five percent — the average American, working, unemployed/underemployed, retired, is barely scraping by.
In the wake of the casino-like, speculative housing bubble, the too-big-too-fail banks, despite record profits, and a $16 trillion dollar Fed bailout, are still saddled with trillions of dollars of toxic mortgage-backed securities, and a myriad of other toxic derivatives. But in spite of this mountain of bad debt, the basically, still, unregulated banks are continuing apace to find other avenues (oil, precious metals, food stocks, e.g.) in which to whet their crazy, speculative, rapacious appetites — more confident than ever, that their TBTF systemic-risk status ensures that they will be bailed out by the Fed/US government when they, inevitably, get in trouble again.
As we have recently seen, the economy over the last six months continued to remain stagnant — with GDP growth rates of only 0.4% in the first quarter, and a preliminary 1.4% in the second quarter of 2011. This stagnation is a reflection of the high unemployment/underemployment rates; its a reflection of a more than decade long stagnation in wages; it’s a reflection of the overall net worth of Americans falling dramatically, either because of loss of homes, or a dramatic fall in the value of their homes; and its a reflection of a badly damaged financial sector, still engaging in practices that will lead to another financial bubble, another financial crisis..
Pushing austerity under these circumstances is unbelievably short-sided and myopic. Pushing austerity is inevitably going to lead us to another economic downturn and crisis — both in the real economy and in the financial sector. Pushing austerity in this type of precarious economic environment is going to push us to the brink, and then over, for a second time in the last four years — leading us all down the road to economic disaster.
Emphasizing deficit and debt reduction, instead of the need for a stimulative set of economic policies leading to reviving the economy, is going to prove to be a 1937-type colossal blunder.