Obama’s deficit speech

I suppose every self respecting blogger should say something about President Obama’s much hyped deficit reduction speech – so here’s my two cents.  I think it was well delivered but, in substance, deeply inadequate.  Only in comparison with the appalling proposal of Paul Ryan can it be considered progressive.

We’re in an era of feudal-like inequality in which the vast majority are sinking while the uber-rich live like the royalty they seemingly have become.  Obama alluded briefly to this:

In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each.

But it’s been going on for decades.  And not only that, the majority has also seen a collapse in both retirement security with almost no one receiving a pension anymore, and in job security as an increasing number of jobs are temporary.  We are becoming a serf-like society.

Given these conditions, a strong defense of medicare and medicaid should be a given.  It wasn’t that long ago, after all, that virtually all republicans accepted these programs.  George W. Bush actually expanded medicare!  I don’t give Obama much credit for defending them.

One would think a “center-left” party would also draw a red line around social security but Obama could only provide a mushy promise that the benefits of younger generations wouldn’t be “slashed”.  Social security benefits average only $1,100 per month and are among the lowest in the developed world yet Obama is open to cutting them further.  And we must keep in mind the horribly regressive means by which this program has been financed.  For decades workers have been paying vastly more into the program than what’s been paid out.  There was never an Al Gore lock box for these excess payments – it’s not gold that was collected and buried, it was a fiat currency that can be created at will by the government.  The excess cash taken from the workers should be seen as nothing more than a highly regressive tax.  And any change now to make social security “solvent” sometime in the distant future will be just as regressive since it will inevitably require workers to again pay more each year than is paid out.  It’s a con game benefiting the wealthy, nothing more.  The only fair way to fund social security is to match current revenue with current expense, ideally in a highly progressive manner.

Obama seems to have forgotten that unemployment, properly measured, is at least 15%.  If we add to this the number who are poorly paid or are financially insecure, we are well above a majority of the population.  Yet Obama seeks to drastically cut domestic spending in what amounts to a virtual surrender of a federal role in maintaining full employment.

Military spending is at $685 billion per year or, at current levels, $8.2 trillion over the 12 year horizon Obama uses in his projections.  It’s at the highest inflation adjusted level since the end of World War II but Obama is seeking cuts of only $400 billion, less than 5%, by 2023!  This has nothing to do with true defense.  Domestic spending continues to be sacrificed in order to maintain a military that benefits only the arms industry, multinationals, and the top elites who enjoy the role of global alpha males.

Obama sounded tough with taxes but it’s all rhetoric.  Tax rates on upper incomes will automatically adjust to the pre-Bush levels so he’s only maintaining the status quo.  Top tax rates on earned income will rise just 4.6% – from 35% to 39.6%.  They were 50% in the Reagan years of 1982 to 1986 and ranged from 70% to 92% between 1950 and 1979 – a period which included the greatest boom in the history of capitalism.  The capital gains tax, meanwhile, will only revert to the pre-Bush 20% level, lower than the rate middle income workers pay on wages over $69,300.  Adding insult to injury, the corporate income tax is targeted for reduction.  The sad truth is that the nation is being asked to suffer austerity in order to keep the tax rate on its aristocracy at historically low levels and to maintain its global military dominance.

And finally, Obama fully buys into the myth that the nation is at the mercy of a clique of financiers, completely ignoring the reality the dollar is a fiat currency.  Virtually all of the pain of austerity that’s being experienced by majorities in the US and around the world can be laid at the footstep of an uncritical acceptance of this false ideology.  It’s almost impossible to overestimate the importance of this myth to the continued dominance of capital.  It truly is the keystone without which the entire house collapses.  This of course is well known by those who follow “Modern Monetary Theory”.  But I think MMT is misnamed.  Is it just a theory that we don’t need the bond market in a fiat currency regime or that we can spend rather freely as long as there’s unemployment?  It’s not a theory, it’s an obvious fact.  And a fact that essentially renders Obama’s entire speech a fraud.

To sum up, I think Obama has predictably positioned himself on a point in the political spectrum that’s to the left of the republicans but far to the right of what anyone from the left should accept.