Michael Hudson: Panic about debt ceiling used to attack social programs; no real need for more borrowing
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. And in Washington the drama over whether the United States Congress will raise the debt ceiling or not continues. The Republicans defend the need to cut spending and get government under control and the Democrats standing, defending the people’s social programs–at least that’s the theater that’s being played out. What is the reality? Well, for his take on all this, we’re now joined by Michael Hudson. Michael is a distinguished professor at the–distinguished research professor, I should say, at the University of Kansas City. He’s the author of Super Imperialism: The Economic Strategy of American Empire. And he joins us again from New York City. Thanks for joining us, Michael.
MICHAEL HUDSON, RESEARCH PROF., UMKC: Thank you, Paul.
JAY: So, what do you think? Good versus evil. We’re playing out the debt struggle and the debt ceiling issue. And if we don’t raise the debt ceiling, we’ll be in the apocalypse. What do you make of it all?
HUDSON: I think it’s evil working with evil. I think the whole argument in Congress is a charade that was pretty much set up two years ago, when the Obama administration first took office and Mr. Obama appointed the debt reduction commission of Republican Senator Simpson and Clinton manager Bowles. When Mr. Obama went on television two days ago, he said he’s hoping to reach a compromise, which is pretty much what this commission said. And the people he appointed to the commission to head it were the people who said, number one, cut back Social Security. If you have to choose between paying Social Security and Wall Street, pay our clients, Wall Street. And secondly, cut back Medicare. But most especially, cut back Medicaid to the poor. You have to give money to the job creators, mainly the financial managers who are closing down firms, downsizing, and outsizing–outsourcing on labor. They’re called job creators instead of–to the people who actually get work and spend money on goods and services, which is what’s keeping the market going in business.
JAY: Now, somebody who defends the Obama administration would probably say, number one, Obama was dealing with the political reality in America that public opinion and the press and the media were heavily on the side that government needs to be cut. And they would also probably make the argument that there are inefficiencies that could be cut. I mean, Obama did at least early on in his administration say–talk about the need for stimulus. So that certainly his waned. Do you think there’s any merit to some of that defense?
HUDSON: I think that words–Mr. Obama’s great with words. He says one thing, and he does the opposite. Here’s basically the charade that’s happening when he’s trying to be reasonable. In order for him to move way to the right and to continue the Bush administration policies, he needs the Republicans to move even further to the right. They have to be so extreme that they’re perceived as the crazies. And then Mr. Obama can say, look, they will give Mr. Obama room to move way to the right, because he’ll say, I’m not as crazy as Michelle Bachman. I’m not as crazy as Boehner. I’m not as crazy as the Republican leaders. But they were going to close down the government, and that would have really hurt us. And we have to–we do have to cut what’s inefficient. What’s inefficient? Paying for poor people on Medicaid. Got to cut it. What’s inefficient? Medicare. Got to cut it. What’s inefficient? Paying Social Security. What is efficient? Giving $13 trillion to Wall Street for a bailout. Now, how on earth can the administration say, in the last three years we have given $13 trillion to Wall Street, but then, in between 2040 and 2075, we may lose $1 trillion, no money for the people? That is absolutely crazy. So when we talk about public opinion, we’re talking not about public opinion that watches your Real News Network; we’re talking about the public opinion of Fox TV and sort of the echo chamber that says–that presents the financial sector as job creators rather than job destroyers.
JAY: Well, what would you think are the real repercussions if, let’s say, they don’t raise the debt ceiling now in August? Let’s say Obama calls the Republicans’ bluff. It seems to me it is quite a bit of a bluff, seeing as the US Chamber of Commerce has told the Republicans they have to vote in favor of raising the debt ceiling. It’s kind of hard to believe that in the long run the Republicans are going to defy the business and banking community. But let’s say they play this out and Obama says, okay, we’re not going to savage government spending the way you want us to, and if you want to not–if you want to force us into this quote-unquote “abyss”, we’ll go there because it’s on you. So what is the abyss? I mean, is this really such a serious issue?
HUDSON: It’s not about the abyss at all. It’s not about the debt ceiling. It’s about making an agreement now under an emergency condition. You remember what Obama’s staff aide Rahm Emanuel said. He said a crisis is too important to waste. They’re using this crisis as a chance to ram through a financial policy, an anti-Medicare, anti-Medicaid, anti—selling out Social Security that they could never do under the normal course of things. They’re using this to stampede the Democrats.
JAY: Yeah, I understand the point. What I’m saying is is, you know, whether Obama would want an alternative policy or not. What if he says to Republicans, okay, do your worst, we’re not going to go down this road? What would be the repercussions of him saying–. I mean, I think the Republicans, personally, would more or less cave in, because they’re not going to defy the whole business community. But let’s say–. So, what happens? So they don’t raise the debt ceiling. So, what happens next?
HUDSON: Then, obviously, they have to cut back some kind of government spending. What are they going to cut back? They’re not going to cut back the war in Libya. They’re not, because that’s–.
JAY: They have to cut back because they can’t borrow more. That’s the point you’re making.
HUDSON: Right. They’re going to have to decide what to cut back. So they’re going to cut back the bone and they’re going to keep the fat, basically. They’re going to say–they’re going to try to panic the population into acquiescing in a Democratic Party sellout by cutting back payments to the people–Social Security, Medicare–while making sure that they pay the Pentagon, they pay the foreign aid, they pay Wall Street.
JAY: Yeah. But what–I hear you. But what I’m–I’m saying, what could be an alternative policy? For example, don’t raise the debt ceiling. Number two, raise taxes on the wealthy. Number three, cut back military spending. I mean, there are ways to do this without having to borrow more money, aren’t there?
HUDSON: Of course. There’s no need at all. Of course they’d–. First of all, the Federal Reserve can basically print money. And whether they count this as the debt or not, they can say this is off-balance-sheet activity. They can technically sell Treasury bonds to themselves and say this is–. They can do Enron-type accounting if they wanted to.
JAY: [crosstalk] probably is some of that going on anyway. But go on.
HUDSON: Of course they could cut back the fat. Of course what they should do is change the tax system. Of course they should get rid of the Bush tax cuts. And the one good thing in President Obama’s speech two days ago was he used the term spending on tax cuts. So that’s not the same thing as raising taxes. He said just cut spending by cutting spending on tax cuts for the financial sector, for the speculators who count all of their income that they get, billions of income, as capital gains, taxed at 15 percent instead of normal income at 35 percent. Let’s get rid of the tax loopholes that favor Wall Street.
JAY: I mean, this is, I guess, the point you were making at the beginning of this segment. Obama has bought into the only solution is some form of cutting. The alternative strategy’s not even being talked about. So of course he loses the battle of public opinion, because he’s not fighting it.
HUDSON: That’s correct. And that shows where his actual beliefs are. Lawyers very rarely understand economics anyway. But Mr. Obama has always known who has been contributing primarily to his political campaigns. We know where his loyalties lie now. And, basically, he promised change because that’s what people would vote for, and he delivered the change constituency to the campaign contributors.
JAY: Thanks for joining us, Michael.
HUDSON: Thanks a lot, Paul.
JAY: Thank you for joining us on The Real News Network.
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