Hoo Boy!

In an entirely predictable move, the “catfood commission” (Their obvious goal is to reduce all of our senior citizens to eating catfood) has proposed that America should consider maybe perhaps defaulting on government debt:

But many budget experts question whether supporting the existing benefit structure should be a cash-strapped nation’s first priority.

In other words “Hey, we’ve got $2.6 trillion saved up that is guaranteed to keep Social Security paying full benefits until 2044. Surely, there must be something better for us to do with all that wonderful cash!” I mean hey, if America is “cash-strapped,” well heck, why do we want to spend all that glorious money on mere *ugh* Social Security recipients? One might also consider, of course, that for America to default on its debts and to declare that it’s an unreliabl payer of its debts would not be a very intelligent idea.

One of the really obvious ways to reduce the deficit is for health care to get truly fixed. The public option would have helped even more than the Affordable Care Act does in its current configuration. Another way is to fix immigration, as America has “…12 million people working in this country and not maximizing their contributions to the economy” by being undocumented and therefore, outside the income tax rolls (They pay sales taxes and Socal Security, Medicare, etc.), though of course, that consideration has to be balanced off by the fact that they don’t use quite as many services, either. Heck, getting rid of the IMF would be a great way to start fixing the financial picture of the US as it relates to the rest of the world.

At the top of the list of villains in this story is the IMF. Its ineptitude managed to reverse the fundamental flows of capital in the world economy. In normal times capital is supposed to flow from wealthy countries with large amounts of capital, like the United States and the European countries, to the developing countries who need capital to fuel their development. Due to the failure of the IMF to establish a workable system of international finance, the flows went in the opposite direction in a huge way. The world’s poor were sending their capital to the United States because the IMF gave them little choice.

Normally, the wealthy countries send capital out to the poorer parts of the globe, capitalists make investments and then bring the profits back to their home country. By supporting IMF policies, the US is making itself poorer by making speculation more profitable than actually making useful things for people to purchase. Senate candidate Carly Fiorina defends her “right-shoring” or sending American jobs overseas. This practice may be fine for the company’s top layer of management and for stockholders, but the working men and women who toil for those companies are less than enthusiastic about the practice.

There are many, many choices available to the US that would improve our financial picture. Canceling the Bush tax cuts of 2001 and 2003 would be a great start as just about our entire current deficit can be traced to just those actions. A speculation tax, that would “slow the churning of stocks and financial instruments on Wall Street” would also be a great way to raise money. By charging a “quarter-percent tax on stock trades, and a commensurate rate tax on other instruments, [it] could raise more than $100 billion a year.” Simply putting more Americans to work through the spending of money by the government, i.e., by extending the stimulus bill of February 2009, a bill that Republicans keep insisting they hate, but gee, wow, amazingly enough, every time the stimulus money is used for a project that benefits their state, they’re right there claiming credit for a bill they opposed and didn’t vote for. Representative Barney Frank (D-MA) has put forth a proposal that the Pentagon cut spending by around a trillion dollars over the next decade as the Pentagon is currently spending huge amounts of money on seriously wasteful items.

Arbitrarily reducing Social Security obligations to our citizens is not only a very, very bad idea as that would call into question the creditworthiness of the United States of America, but it would also be a grossly ineffective method of fixing the economy. There are many, many better ways to go about doing that.

Update (14Jun): Have to agree, it sure is nice that the  Obama Administration is finally starting to see the light and that they’re now seeking $50 billion in further stimulus funds. Of course, it would have have been far nicer to have discovered this bit of wisdom a year and a half ago. Instead, they allowed the “moderate” Senators (Lieberman, Collins, Specter) to chop out around $100 billion from the stimulus bill so that they could crow about what pragmatic, sensible, frugal moderates they were.

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