A Must Read. If you read nothing else today, read this. Then get out of debt as fast as you can…
Henry Paulson and the Five Circles of Economic Hell
As onerous as they are, the deficits described in Circle Three, above, constitute only a small fraction of the total indebtedness of the U.S. economy. The official “national debt” is approaching $9 trillion, as noted, a substantial figure, to be sure. But the government’s “unfunded liabilities”—obligations it has committed to pay but for which there is no known source—are estimated at an incomprehensible $58 trillion. Add in revolving consumer debt, mortgage debt, and corporate debt, and the nation’s total obligations exceed $90 trillion, more than seven times GDP. At the time of the 1929 stock market crash, total debt stood at two times GDP. These obligations will never be paid.
The reason is that the job drain from the U.S., while it looks like a torrent now, is still only a trickle. Though the U.S. won the Cold War, it is rapidly losing the Cold Peace, which began when China ended its communist isolation and joined the world market. The average wage in China is $.57 per hour. China has more than half a billion workers meaning the drain of good jobs from the U.S. to China can go on indefinitely—and will. Alan Blinder, a Princeton economist and former Governor of the Federal Reserve Board, has estimated that as many as 56 million U.S. jobs are susceptible to outsourcing of the sort that has already dealt such damage to U.S. incomes.
But this is exactly what Bush and Paulson and their fellow “conservatives” intend. This is the magic of “globalization” that the Heraldic voices of Thomas Friedman and others eulogize as inevitable. Globalization means liberating capital from all obligations to national well being, freeing it to pursue only the highest returns it can find, no matter where they may lie. That means seeking out the lowest paid labor and shifting all possible jobs there. That is China. Or India.
The U.S. worker and the U.S. economy will be left to their own devices. All social safety net systems must be dismantled for, given the colossal debt, they can no longer be afforded. These include welfare, unemployment and disability insurance, pensions, health care, Medicare, Social Security, job retraining, and eventually, education. The U.S. is a high cost economy in a world where, when capital is perfectly mobile, low cost wins. If capital is to be honored, then the U.S. must be ballasted, abandoned, in the way the British economy was in the aftermath of World War II. It will be milked of its remaining assets—that is what the huge run-up in debt is intended to do—and then thrown away.
The only government programs of substance that will be maintained will be police and military systems. The Patriot Act, with its massive recissions of civil liberties, is not so much directed at foreign terrorists as it is at future domestic dissidents, citizens who dare confront these putative inevitabilities with demands for democratic (as opposed to capitalist) recourses. The military, of course, is needed to carry out the nakedly colonial expropriations such as Iraq that remain the last hope of America to compete in the world: by controlling the oil, the substance without which no industrial civilization can operate.
