As the austerity budget crisis continues to plague diverse Euro countries, American voters may breathe a sigh of relief that even with an economy that remains sluggish, the harsh level of austerity cuts being proposed in Greece and Spain and elsewhere have not happened here. At least that’s what conventional wisdom espoused by those who have not suffered from the 2008 financial collapse or experienced the $1 trillion budget cuts in 2011 would have you believe.
As the early weeks of the Presidential campaign have shown, the American electorate can expect a mind-numbing election season devoid of a real debate on real issues offering real solutions for millions of desperate citizens living on the edge, confronting the daily hopelessness of an utter catastrophe, abandoned by a government that once claimed to be ‘Of, By and For the People”. Lost in the shuffle of birth certificates or whether a private equity multi-millionaire is qualified to be President more than a community organizer is any discussion of the impacts on the upcoming second round of $1.2 trillion budget cuts.
In addition, with little substantive disagreement on most international affairs, any real discussion of US foreign policy objectives will be virtually non-existent as the killing of Osama bin Laden is accepted as the crown jewel of foreign policy achievement.
Absent from political dialogue will be a convincing argument that the systemic causes of the economic failure of 2008 have been corrected and its accomplices held responsible while expunged from public discourse will be the on-going foreclosure crisis that has claimed more than two million homes, 30 million long-term unemployed Americans, 50 million Americans living in poverty (the majority of whom are children with 1.5 million homeless since 2009), a student loan debt crisis that exceeds the $1 trillion credit card debt or a profit-driven health care systemthat fails 45 million Americans. As a third-world poverty spreads throughout the country dooming already-chronically destitute citizens to a lifetime of extreme poverty and with no real glimmer of recovery on the horizon, the impersonal statistics fail to convey the private suffering that millions of citizens are experiencing as an enduring economic depression destroys any hope of a vibrant quality of life. Lost among the statistics is the socially unacceptable subject of economically-related suicides with the Center for Disease Control’s latest report that US suicides are at its highest rate in 15 years with 8.3 million Americans reporting thoughts of suicide.
The political establishment’s failure to deal more forthrightly with the housing crisis which is essential to economic recovery has been painfully apparent as both Romney and the Obama Administration have adopted a hands-off approach to foreclosures reminiscent of Herbert Hoover. Romney favors allowing the ‘free market to work’ as Housing and Urban Development Secretary Donovan opposes a foreclosure moratorium as ‘counter productive’ with neither in support of direct Federal intervention like FDR’s Home Owners Loan Corporation of 1933 which refinanced at-risk mortgages and created the thirty year mortgage timeline.
With the spectacle of the Republican primaries over, it might have been expected that Mitt Romney, once a moderate Governor of Massachusetts and not heretofore seen as a typically mean-spirited Republican, would pivot to the center. Instead, as he co-opted ‘traditional values’ from his zealous primary opponents, Romney redefined himself as ‘severely conservative’ as he has chosen to follow the Republican party in pursuit of policies that will do little to help millions of American families most in need of assistance.
A graduate of Harvard Law and Harvard Business School, Romney, who could easily make a guest appearance on HBO’s Mad Men, has hyped his fifteen years at the helm of Bain Capital as evidence of his job-creating ability and insight into economic issues as qualifications for the Oval Office. Among issues earning his support is the malicious austerity Ryan Plan which would cut the federal budget $4.3 trillion. While Ryan’s tax cuts for the 1% would deprive the Federal treasury of $4.5 trillion in revenue, near-final elimination of the social safety net would be accomplished with an $800 billion reduction in Medicaid, a $134 billion cut in food stamps and a $1.2 trillion cut in non-defense discretionary spending over the next ten years. Non-discretionary cuts would include veterans benefits, education, Head Start, environmental protection and meals on wheels among other programs.
Innocuous references to the economic collapse have largely overlooked the ramifications of the $14 trillion debt ceiling crisis that saw adoption of the Budget Control Act(BCA) of 2011. The Act, which mandated the first round of $1 trillion cuts and approved the debt ceiling but did not include an increase in tax revenues from the country’s top 1%. The BCA capped reimbursements to Medicare providers, cut $487 billion from the Pentagon to begin in 2013 as it established a bi-partisan Congressional ‘super committee’ to recommend a second round of $1.2 trillion cuts. Those were the days when a frightened American public was persuaded that a “Grand Bargain” with ‘everything on the table’ required a ‘shared sacrifice” from 99% of American citizens, none of whom were responsible for the 2008 collapse while the 2012 mantra is ‘we’re all in this together.”
The BCA was adopted by the House of Representatives on a 269 – 161 vote with 95 Democrats voting aye and 95 Democrats voting Nay while the Senate approved the BCA on a 74 – 26 vote with 7 Democrats voting against adoption.
Once the Super Committee failed to reach their goal of $1.2 trillion deficit-reducing cuts, the Act called for $ 1.2 trillion of across-the-board (aka sequestration) decreases to be automatically triggered by January 1, 2013. Here. Those cuts would be a 50-50 split of approximately $600 billion from the military budget and $600 billion from domestic spending over ten years. In retrospect, it is puzzling that the political drama of the Super Committee’s ‘failure’ to agree on $1.2 trillion cuts was all for naught since, by virtue of its failure, $1.2 trillion in sequestration cuts are mandated anyway. Either way, there was going to be $1.2 trillion in additional budget cuts regardless of whether the Super Committee acted or whether the sequestration ‘trigger’ was pulled at the end of 2012. "Trigger" generated cuts may appear anonymous without specific Congressional sponsors to blame as claims of an unwilling Congress being ‘forced’ to act will insulate some Members from public anger.
In the aftermath of the Super Committee, the President offered his support for the $1.2 trillion reductions due later this year promising to “ veto any effort to get rid of the new automatic cuts” (ie sequestration) while citing a ‘balanced approach’ with everyone doing their ‘fair share’ and, at the same time, reaffirming his earlier request for $3 trillion worth of cuts – on top of the already-approved $1 trillion cuts.
Here’s where the already-complicated details become more convoluted:
Therefore, if Congress follows the President’s lead, the Federal budget would be reduced by a total of $4 trillion. In other words, adopting a level of budget cuts that will be comparable to the Ryan Plan. While the specific details between the two may vary, a $4 trillion budget cut is a $4 trillion budget cut and the necessary reductions have too few pots from which to withdraw the money.
Looking ahead six months, there is no doubt that this fall’s lame duck Congressional session immediately after the election will potentially be the most divisive and the most damaging to the interests of the American people - all in the name of sharing the burden. With an as yet indeterminate number of lame duck Members packing their desks on their way out the door, there is no guarantee that those lame duckers will vote their conscience in support of the country’s forgotten citizens.
And now the convoluted scenario becomes even more complex:
With the prospect of $600 billion in cuts to Pentagon spending as required by sequestration, some of the world’s largest defense contractors are warning in anticipation that they ”cannot wait until a lame duck session to deal with the consequences of sequestration.” Both Lockheed Martin and Northrop Grumman have raised the possibility of significant job losses or facility closures causing further unemployment turmoil. The Aerospace Industries Association representing defense manufacturers is actively campaigning against sequestration.
In response to concerns from defense contractors, Deputy Defense Secretary Ashton Carter appeared before the American Enterprise Institute on May 29th offering the assurance that the Administration had reversed its earlier opinion and was determined to avoid the automatic cuts (sequestration) scheduled to take effect January 1st. Citing that sequestration will ‘disrupt thousands of contracts and programs’, Carter was reported to have referred to Defense Secretary Leon Panetta’s warning to Congress that another $500 billion in additional cuts would "inflict severe damage to our national defense for generations."
All of the above is a lot to digest for most Americans who have assumed that the country’s elected leaders have been tending the national cash register – we now know from experience that no MBA Wharton School expert can replace feet-on-the-ground common sense that says with austerity budget cuts, the public will have less money to spend and if there is less money circulating, the entire economy will stagnate thereby increasing an unconscionable level of pain and suffering.
As might be expected, the 2012 campaign will avoid reference to the US continuing to borrow its way out of debt (47% of which is owned by foreign entities and 53% owned by domestic entities) or mention of a $533 billion annual interest debt payment by 2015 or to provide clear, concise data on exactly how much interest the debt is costing taxpayers annually and what institutions are profiting from US indebtedness.
Also lacking will be any examination of the very real benefits of a public banking alternative which would allow the government to finance its own infrastructure needs and public services as the Bank of North Dakota does without usury interest payments to a rapacious Wall Street financial services industry that cares nothing for the lost, forgotten Americans on Main Street.