On October 30th 2015, President Obama and Congress agreed to suspend the US debt ceiling until 15th March 2017 – this expired almost two weeks ago. The suspension was designed to ensure that the issue of national insolvency did not disturb the campaigning of people with absolutely no intention of doing anything about it. There are some things that Democrats and Republicans do agree on – ducking their responsibility to tell the truth is one of them.
Politicians believe that telling the truth is bad for their election prospects, and acting upon the truth, once elected, is totally ruinous for any chance of re-election. This one dynamic, more than any other single factor, cements the ‘stuck’ nature of US social and economic problems. I’ll come back to that later in this piece.
At the end of WW2 the debt ceiling stood at $300 billion. Twenty years later, in 1965, it had risen less than 10% to $328 billion. Over the next eleven years - the ‘guns and butter’ era - it almost doubled to $627 billion. It took only 6 years for the next doubling to $1.3 trillion courtesy of the seventies oil crisis and the abandonment of the link to gold. Another six years on - by the end of President Reagan’s time in office in 1988 - it had more than doubled again to $2.8 trillion. By the time that George W Bush entered the White House in 2001 it was nearly $6 trillion…when Barack Obama arrived in 2009 it was nearly $12 trillion…and Donald Trump has just inherited a national debt of $20 trillion and change.
So far this century, the debt has risen over 330%. During the same period GDP has risen from $12.3 trillion to $16.8 trillion - 37%. Does that sound sustainable to you? Well unless you’re a complete moron, or a Keynesian PhD with Friedman rising and your moon in Krugman…of course it doesn’t.
So will the 45th President, or the 115th Congress of the United States do something about it? No.
Over the next few months a highly predictable charade will play out in Washington. President Trump will demand that his budget be funded and the debt ceiling be raised. Democrats will vote against that, regardless of whether or not they agree with any of the budget items. Republicans will bicker and banter and pursue their own agenda. Reps will blame Dems, and Dems will blame Reps. President Trump will blame anyone and everyone, sometimes changing his mind during the course of a single day. Everyone will stress their commitment to fiscal responsibility, particularly in front of the cameras, but meanwhile, behind closed doors, they will all plot and haggle for their own ‘projects’ – i.e. they will fight for the goals of the ‘donor class’ of billionaires and corporations that effectively ‘own’ them - the people that put them there and keep them there…living in comfort and basking in ludicrous self-importance…far away from the realities of people who work for a living, and those that would like to.
Now…I fully appreciate that you and I may think we vote these people into office so that they will address little things like national insolvency…but these guys don’t work for you and I, they don’t work for the voters…they lie for the voters…they work for the donors, and the donors don’t want the party to end.
In 2009 President Obama, who had been elected on ‘hope’ and ‘change we can believe in’ had the perfect opportunity to clean up Wall Street. He had been put into office after 8 years of Bush’s oil wars and the financial crisis. He could have made the banks pay for the financial crisis and thrown the crooked executives in jail – that would have been change I could’ve believed in. But what did he do? He saved the banks and made Main Street pay for the crisis. Jimmy the Diamond got the big bonus; Joe Sixpack got the big finger.
There is a ‘donor class’ in the US, which is drawn from Wall Street, Silicon Valley, big oil, big pharma', insurance, armaments and billionaire 'philanthropists' like the Koch Brothers on the ‘right’ and George Soros on the ‘left’. That’s whom Congress works for.
Will Donald Trump do any better? No. He’s already sold the Treasury to Goldman Sachs, and caved in on firing the guy most feared by the neocons - Mike Flynn. Flynn was not fingered by the ‘Intelligence’ agencies because he helped Putin rig the election…he was brought down because he intended to re-start diplomatic relations with Russia…and the very last thing that the neocon war machine wants is détente with Russia. If you are in the business of making money out of war and the threat of war, you always need a bogeyman, and they don’t come much better than good old Vladimir. Flynn was targeted for that reason, and Trump threw him under the bus. So no, Trump will not do what is necessary to stand up to the vested interests that run the US governmental machine whichever party appears to be ‘in power’.
If President Trump were genuinely serious about 'draining the swamp' and 'making America great again', here is where he should start:
1. Introduce term limits for Congress. Politicians should only be allowed to serve one term of six years in the House or the Senate – there should be no more ‘jobs for life’, no more permanent running for office, no more sucking up to donors for re-election. As I said at the beginning of this piece: “This one dynamic, more than any other single factor, cements the ‘stuck’ nature of US social and economic problems”
2. Re-enact Glass Steagall - take ‘moral hazard’ out of the banking system and put Wall Street back on the hook for their own actions
3. Immediately talk to Russia in order to agree a common approach to the middle east, and a cooling off of tensions between Russia and NATO in the Baltics
4. Address the debt – openly and honestly and without regard for re-election
Mr Trump will not do this. He would get no support from Congress for any of the above – Turkeys don’t vote for Christmas. To do it he would have to go on TV every day, he would have to go state-to-state, and probably door-to-door to wake up enough people to force the system to change itself. This isn’t going to happen. What will happen? Economic ‘mother nature’ will…sooner or later…flush this monetary and financial travesty down the toilet of history. This will not be very pleasant for most of us, but in evolutionary terms, I am afraid that it is inevitable and it is necessary – like gravity.