By Stephen Lendman
It explained bipartisan support for incrementally ending Social Security, Medicare and Medicaid, no matter that:
— Medicaid provides essential healthcare for low-income beneficiaries, jointly funded by the states and Washington, managed at the state level.
— In contrast, Social Security and Medicare are insurance programs, funded by worker-employer payroll tax deductions. They’re contractual federal obligations to eligible recipients who qualify.
However, you’d never know it the way both programs are publicly discussed, explaining everything but the truth, including about S & P conspiring with Washington and Wall Street to end them as they’re now structured to create greater profit opportunities for financial vultures, while, at the same time, shutting out growing millions losing what they can’t afford.
On April 18, Standard & Poor (S & P) showed its hand, downgrading its rating on America to negative, saying:
S & P “affirmed its ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the US. (It also) revised its outlook on the long-term rating of the US sovereign to negative from stable….(W)e now believe (US strengths may) not fully offset the credit risks over the next two years at the ‘AAA’ level….”
“More than two years after the beginning of the recent crisis, US policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures.”
S & P analyst Nikola Swann added that from 2003 – 2008, US debt ranged from 2 – 5% of GDP. However, it ballooned to over 11% in 2009 “and has yet to recover.”
Moreover, as annual deficits soar, no matter what Congress does, that percentage will keep rising exponentially because decades of reckless policies aren’t easily fixed, never short or even intermediate-term, especially when excesses exceed cuts.
Swann also warned of “a one in three chance that the US could lose its AAA rating in two years because of its mounting debt.”
S & P’s entire statement can be accessed through the following link: http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245302886884
In November 2010, China’s Dagong Global Credit Rating Company (one of the nation’s three largest) downgraded America to A+ from AA and its debt to negative because of burgeoning levels. It added that Fed QE is eroding the dollar’s value, harming creditors like China, America’s largest with over $1.1 trillion reported last October. So far in 2011, Beijing has been a net US Treasuries seller, signaling its lack of confidence.
S & P and other major credit agencies partnered with Wall Street speculation and grand theft because they’re paid by the companies they rate. In fact, Washington, too-big-to-fail banks, other FIRE industry (finance, insurance and real estate) giants, and major rating agencies were complicit in fueling the bubble economy and crash by design, not chance.
What Franklin Roosevelt once said about politics applies to easily manipulated markets and other Wall Street shenanigans that “(n)othing happens by accident. If it happens, you can bet it was planned that way.”
It’s because there’s so much money in it for all of them, including corrupted politicians to the highest levels on the take, getting huge campaign contributions for going along plus unreported special favors.
Now, an April 13 Senate Investigations Subcommittee report on the “key causes of the financial crisis (catalogued) conflicts of interest, heedless risk-taking and failures of federal oversight (resulting in) the deepest recession since the Great Depression.”
Chairman Carl Levin specifically cited “high-risk lending, regulatory failures, inflated credit ratings, and Wall Street firms engaging in massive conflicts of interest” by advising clients one way, then betting against them covertly. In other words, committing massive, brazen fraud to earn billions of dollars in dirty money.
Using thousands of internal industry, government and regulatory agency documents, emails, memos and other materials, “the report discloses how financial firms deliberately took advantage of their clients and investors, how rating agencies assigned AAA ratings to (junk), and how regulators sat on their hands instead of” doing their job honestly above board. “Rampant conflicts of interest are the threads that run through every chapter of this sordid story.”
Naming S & P and Moody’s specifically, the report said it wasn’t in their “short-term economic interest….to provide accurate credit ratings for high-risk (junk debt instruments) because doing so would have hurt their own revenues,” so they conspired with Wall Street crooks for greater profits.
The full report can be accessed through the following link: http://levin.senate.gov/newsroom/supporting/2011/PSI_WallStreetCrisis_041311.pdf
Though the Senate report documented massive fraud, expect no prosecutorial actions against top industry officials, nor legislative or regulatory changes to prevent repetitions of the grandest of grand thefts. In fact, the entire dirty game continues daily. Obama, Senator Levin, and most others in Congress know it, but do nothing to stop it – a topic previous articles addressed and for future ones to discuss.
In response to S & P’s downgrade, Austan Goolsbee, chairman of Obama’s Council of Economic Advisers, said the president proposed fiscal responsibility by cutting trillions of dollars in spending over the next 12 years, and will work with Republicans to assure it.
On April 19, Financial Times contributor, Economics Professor Brad DeLong headlined, “S & P to whip Congress into debt action,” saying:
S & P’s downgrade was “a political move.” Congress “only moves when hit with a whip….Over the next few months we will see if” S & P’s announcement did the trick.
He’s right as Dave Lindorff wrote asking if “S & P (is) Running Interference for the Right to Help Crush Social Security and Medicare,” pressuring politicians to do it by creating debt and default hysteria.
It won’t happen as financial writer Ellen Brown explained in an earlier article saying:
America never defaulted and won’t now. Washington pays for its debt in dollars, borrowing all it needs to do so unlike Euroland countries unable to print their own money.
The US doesn’t have “a sovereign debt crisis because it has no sovereign debt,” the term referring to bonds and short maturities issued in foreign currencies. In contrast, America issues “government bonds” in its own with no constraint on how much, no matter how irresponsible in amounts or for what purposes.
However, out-of-control debt creates enormous burdens for future taxpayers, as well as likely cuts or elimination of essential social services and entitlements to devote national resources to militarism, Wall Street and other corporate favorites.
It’s Washington’s decade’s long reverse Robin Hood scheme, fleecing working Americans to reward the rich, Obama continuing the same dirty game as Republicans, masked in deceitful rhetoric.
As a result, bipartisan support is capitalizing on crisis for greater wealth transfers to super-rich beneficiaries already with too much. At the same time, America’s middle class is being destroyed, forcing millions into poverty with low-paying jobs and no futures for those lucky enough to have them.
A Final Comment
In his April 15 article headlined, “Budget Battles: Sound, Fury and Fakery,” Professor Richard D. Wolff discussed years of Capitol Hill shenanigans running up deficits that matter “because they divert tax revenues away from serving most taxpayers to enriching Washington’s creditors instead.”
They also matter when” politicians exploit high deficit and debt levels “as excuses to cut government programs they oppose.” It’s a sort of bait and switch con to convince people to sacrifice entitlements and other essentials for their own good, not realizing they were swindled until it’s too late.
On April 18, financial expert/investor safety advocate Martin Weiss explained another problem, what he calls a deficit and debt crisis catch-22, saying:
If enough remedial action is taken, “whether with spending cuts or tax hikes, it will plunge the economy into a double-dip recession and take us right back to where we were in 2008….But if they don’t do enough,” deficit and debt levels will balloon. Massive borrowing will be needed to finance it, leaving lawmakers two choices – either borrow from less willing creditors or “grab the funds from the Fed’s money printing press.”
Either way at some point, maybe soon, “interest rates will spike higher, hurting financial institutions and the economy.” Locked in a debt trap, there’s no easy escape, but the longer irresponsible policies continue, the sooner an inevitable tipping point is reached, including the possibility that creditors will dump dollars and shun US debt. Weiss calls it the “panic factor,” potentially surfacing any time unexpectedly.
In fact, it’s already happening “in phases.” At issue is possibly reaching “critical mass” as it did in 1980 when 30-year Treasuries topped 12% yields heading for 15%.
As a result, expect policy makers to strike anti-populist deals harming working Americans, Obama’s hyperbolic “shared sacrifice,” omitting who shares and who sacrifices.
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.