The Catskill Chronicle

By Mort Malkin

(Editor’s Note: This column is being posted the same day President Obama signed the new debt ceiling bill. It was, however, submitted two days before.)

The Tea Party and Rush Limbaugh have cowed the reasoned Republicans and seasoned Democrats with the specter of debt. The White House is afraid of the Republicans and their corporate backers who may refuse campaign donations when Team Obama comes begging for money in advance of the 2012 presidential election.

The NeoCons are delighted with the discomfort of both the political parties— it’s another chance to give away the $ 2.4 trillion Social Security Trust Fund to the 21st century robber barons (Wall Street). Their spin doctors are trying to create a new four-letter obscenity: DEBT. They compare the government’s finances to those of the consumer who runs up so much credit card debt that the usurious rates of the credit card companies make it impossible to pay the interest, let alone the principal.

They say the government must learn to live within its means. But, they forget that for eight years of Bush-Cheney (Cheney-Bush?), an original budget surplus was deficitized on two new wars, generous no-bid contracts for military contractors, a whatever-it-takes Pentagon budget, and a spanking new Department of Homeland Security. But everyone knows that no one pays for everything with gold doubloons (or dollar bills) — not the government, not commercial businesses, and not private citizens. The federal government issues treasury bonds, and states and cities float municipal bonds. Corporations offer stocks and bonds to raise money.  Ordinary people generally do not buy their homes for cash, but obtain a long-term mortgage loan from a bank. Is it debt, or credit, or deficit spending?

So much for “debt” versus “credit.” In Congress, the Tea Party and the fraidy Republicans say that any tax increases are off their table. Rather, we must cut spending. Military cuts are naturally off the table, too, which leaves “entitlements.” Even the Republicans are afraid to say they want to cut “Social Security” and “Medicare,” so they use the euphemism “entitlements.” If the cuts to entitlements are not made, the Republicans will vote against a new federal debt limit. Michele Bachmann, the Tea Party darling, says she’ll vote against it anyway. Moody’s, Standard & Poor’s and Fitch — the bond rating companies that set the packages of sub-prime mortgages as AAA — now say that if the US of A defaults on debt, they may have to lower the rating of US treasury bonds  to that of junk bonds. Well, maybe only AA.

President Obama is so afraid of not getting an extension of the debt ceiling that he says he’ll consider entitlement cuts if the Republicans will allow him to eliminate tax subsidies for the big oil companies. He has warned seniors that if he gets no debt ceiling extension, Social Security checks for August 2011 may not go out. He has already expressed his good (conservative) will when he reduced FICA withholding taxes on all paycheck deductions for a year — a first monkeying with the Social Security Trust Fund. So, Obama seems ready to sacrifice seniors on the altar of the great god Molech — but in small steps — on the road to privatizing Social Security and Medicare. But, if seniors don’t receive their monthly check, there’s no telling whom they will vote out of office in 2012.

What to do? The Gadfly Revelry & Research team (GRR) switched its focus from play to politics and came up with some observations which provided a few answers. First of all, the money in the Social Security and Medicare Trust Funds is not the government’s to use as it wishes. It is invested in US Treasury Bonds, the same as the as the Chinese invest their trade balance dollars in. Many countries hold US Treasuries: South Korea, Malaysia, Saudi Arabia, Kuwait …  A default means that the Treasury Department fails to pay interest on the bonds and does not redeem the bonds that come due. A default does not mean that the Social Security Administration can fail to send out checks to seniors. The Social Security Trust Fund holds $2.4 trillion in reserve and can pay its obligations to seniors until 2036. The $2.4 trillion is safely invested in those AAA rated US Treasury bonds – even if the government fails to pay interest on those bonds for a time. If President Obama directs the Social Security Administration to send no checks in August or September, that is a high crime and requires impeachment. GRR advises the Treasury Department to delay, instead, payment of interest on bonds held by the China, Saudi Arabia, hedge funds and private equity funds. Set fair late fees such as those charged by your local library for books you forgot to return on time.

But, the Republicans are right about reducing spending. A previous Gadfly column, “Entitlements Or IOUs” lists a batch of excessive federal expenditures and programs that bring in no money and could simply be deleted. Start with the huge State Department Embassy in Iraq and the one under construction in Afghanistan. Social Security is not a luxury —  those monthly checks provide most of the income received by the majority of seniors.

Last, there are five enormous sources of money the government can access to balance the budget and, so, keep its hand off Social Security and Medicare.

•  Allow the Bush Tax cuts for the richest 2% to sunset as that law stipulates.
•  Collect taxes on the undocumented corporate off-shore accounts in the Cayman Islands, the Bahamas, Dubai …
•  Delete all tax subsidies for oil and gas companies.
•  Remove the ceiling on salaries for FICA payroll deductions — presently all income above $106,000 has no FICA taxes deducted.
•  Set a small fee for all trading in derivatives — puts, calls, collateralized debt obligations (CDOs), credit default swaps, and more exotic derivatives. The total market for derivatives is $500 trillion. $500 trillion!

With all the money collected, the government could provide:

•  free college tuition for all, including courses in satire writing.
•  job training in everything from farming to electronics.
•  three Peace Academies, a Peace College. and a cabinet level Department of Peace.
•  a National Infrastructure Maintenance and Repair Service.
•  a national program of primary preventive medicine.
•  priority programs to develop tidal power, wave energy, high altitude wind power …
•  subsidies for organic farms so we all could enjoy pesticide-free strawberries and BGH-free cream.