By Patrick J. Buchanan
We were blindsided. We never saw it coming.
So said Goldman Sachs CEO Lloyd Blankfein of the financial crisis of 2008. He likened its probability to four hurricanes hitting the East Coast in a single season.
Blankfein was reminded by the chairman of the Financial Crisis Inquiry Committee, Phil Angelides, that hurricanes are “acts of God.” Financial crises are manmade. Yet Blankfein was backed up by Jamie Dimon of JP Morgan, who said, “Somehow, we just missed … that home prices don’t go up forever.”
The Wall Street titans thus conceded they did not foresee the housing bubble ever bursting and they did not consider the possibility of a collapse in value of the sub-prime mortgage securities piled up on their books.
Backing up Blankfein’s plea of ignorance and incomprehension is this: The crisis killed Lehman Brothers and would have killed every one of them had not the Treasury and Fed, neither of which saw it coming, either, intervened with hundreds of billions in bailout cash.
Yet there were those who warned a housing bubble was being created like the dot-com bubble; others who predicted the Empire of Debt was coming down. As, today, there are those warning that the United States, with consecutive deficits running 10 percent of gross domestic product, is risking an eventual default on its national debt.
The warnings come from the Committee on the Fiscal Future of the United States, chaired by Rudolph Penner, former head of the Congressional Budget Office, and David Walker, former head of the Government Accountability Office and author of Comeback America: Turning the Country Around and Restoring Fiscal Responsibility.
With that share of the U.S. national debt held by individuals, corporations, pension funds and foreign governments having risen in 2009 from 41 percent to 53 percent of GDP, Penner and Walker believe it imperative to get the deficit under control. Unfortunately, it is not possible to see how, politically, this can be done.
Consider. The five largest elements in the budget are Social Security, Medicare, Medicaid, defense and interest on the debt.
With interest rates near record lows, and certain to rise, and back-to-back $1.4 trillion deficits, this budget item has to grow and has to be paid if the U.S. government is to continue to borrow.
Second, with seniors on fire against Medicare cuts in health care reform, it would be fatal for the Obama Democrats to curtail Social Security or Medicare benefits any further this year. Next year, they will not only lack the congressional strength but any desire to do so, after their anticipated shellacking this fall.
The same holds true for Medicaid. The Party of Government is not going to cut health benefits for its most loyal supporters. Indeed, federal costs may rise as state governments, constitutionally required to balance their budgets, cut social benefits and beg the feds to pick up the slack.
This leaves defense. But the president is deepening the U.S. involvement in Afghanistan to 100,000 troops, and the military needs to replace weaponry and machines depreciated in a decade of war.
Where, then, are the spending cuts to come from?
Can the administration cut Homeland Security, the FBI or CIA after the near disaster in Detroit? Will Obama cut the spending for education he promised to increase? Will he cut funding for Food Stamps, unemployment insurance or the Earned Income Tax Credit in a recession? For the near term, the entitlements are untouchables.
Is this Democratic Congress, which increased the budgets of all the departments by an average of 10 percent, going to take a knife to federal agencies or federal salaries, when federal bureaucrats and beneficiaries of federal programs are the most reliable voting blocs in their coalition?
What about tax hikes?
Obama has promised to let the Bush tax cuts lapse for those earning $250,000 but has pledged not to raise taxes on the middle class. Any broad-based tax would be politically suicidal for him and his increasingly unpopular party.
But if taxes are off the table, Afghan war costs are inexorably rising, and cuts in Social Security, Medicare, Medicaid and entitlement programs are politically impossible, as pressure builds for a second stimulus, how does one reduce a deficit of $1.4 trillion?
How does one stop the exploding national debt from surging above 100 percent of GDP?
America is the oldest and greatest constitutional republic, the model for all the others. But if our elected politicians are incapable of imposing the sacrifices needed to pull the nation back from the brink of a devaluation or default, is democratic capitalism truly, as Francis Fukuyama told us just two decades ago, the future of mankind?
What the looming fiscal crisis of this country portends is nothing less than a test of whether this democratic republic is sustainable.
Related posts:
- Let Russia Default!By Patrick J. Buchanan – June 9, 1998 Why would Republicans even think of throwing...
- Was the Holocaust Inevitable?by Patrick J. Buchanan “What Would Winston Do?” So asks Newsweek’s cover, which features a...
- Bailing Out Politicians Now?By Patrick J. Buchanan Even lifelong Democratic pol Steny Hoyer, majority leader of the U.S....
- Is This How Democracy Ends?By Patrick J. Buchanan “I used to think it would take a great financial crisis...
- Greenspan’s Grim Diagnosisby Patrick J Buchanan – March 1, 2004 The job of the chairman of the...
- The Party’s OverBy Patrick J. Buchanan The Crash of 2008, which is now wiping out trillions of...
- Tapped Out Nationby Patrick J. Buchanan It was to be the year of change, of new ideas,...
Loading ...
Interesting thought Pat. If America goes bankrupt does this mean our vaunted constitutional republic is not as great as we thought. And if this is so, what went wrong. I would love to hear your thoughts and what flaws existed in our system that led to this upcoming failure (assuming that happens).
My first idea is that the progressives discovered that you can control a democratic system by controlling the media, the text books, and the teachers. This is exactly what they have done. The hard truth is that there are very few of us that understand what is going on. Indeed, very few of us even bother to pay attention. People base their votes on “fashion” or “branding.” My solution to this problem is that the informed should have their voting power increased. What if the constitution outlined a set of questions which must be answered each year before you vote. Question #1: Name your senators, governor, majority leader of the senate, speaker of the house, etc. Question #2: What form of government do we have in the United States. The better one scores on the test, the more votes that person gets up to a total of ten votes. Everyone gets one vote, property owners get two votes. Therefore informed people get up to a total of twelve possible votes. Would this fix our system?
Again, what are your thoughts?
What should the government do? What would Pat do if he were the legislative branch tomorrow? Use the machete or just the hedge trimmers? I know something’s gotta budge. I know that most, if not all, should be cut, but what first, and next, and when? I’d like his next article to be a detailed process of how it should be done. Please give us some wisdom…
Bankruptcy? And I say – bring it on!
Shut the whole damned thing down. Default on all the debt that THEY – not US – racked up. End Computer voting. End the Fed. End this corrupt government. Then We the People start over with the original US Constitution and Bill of Rights and go from there.
I’m ready are you?
BTW — Unless we stop them from rigging our elections with their computer voting nothing will ever change. They will always give us the false choice of two lying Neocon scumbags. Don’t you get it by now? We will never be able to vote them out because the machines are rigged!
Because our government leaders do not have the political will to do what is necessary to avoid bankruptcy, default is inevitable! I hope that Linda is right – that we can then begin anew with the original US Constitution and Bill of Rights.
With regard to the housing bubble…..I don’t believe for one minute that these economic guru’s were ignorant to the lax rules and the consequences of dispensing millions to people who could not qualify for loans and that it never entered their minds that housing would not continue to increase forever.
The Real Estate industry and anything involved with it was a robust sector employing millions in retail, financials, home construction, sales and the like. This wonderfully producing industry also allowed more taxes to flow to individual states via new taxes collected on the new properties sold (property tax). Then, state coffers could at least, temporarily prosper from the benefits of increased homeownership and there would be new jobs and more tax revenue created by new buyers. In addition, their programs to increase home ownership for lower /moderate income people, not worthy, could further the American dream for many, on paper, even though for some, results could be temporary.
I believe this was the avenue the government took as a desperate course of countering the outflow of manufacturing and other jobs lost through the outsourcing and relocation of companies overseas. While cleverly elevating a critical sector of the economy, they knew it was a bubble that would eventually burst, but they were hopeful of a soft landing rather than a crippling of the economy. It was a toss of the coin …. Thus throwing the future of America in jeopardy. without solid financial plans for growth and without a crucial manufacturing sector to contribute to our continued success. They anticipated passing the eventual blame and burden to the future parties in power thus camoflauging fatal flaws in their current and past financial “management” of the nations treasure……and the people be damned.
Pat makes it seem as if Republicans would do better at fiscal responsibility. They just take money from the welfare pile and move it to the military and corporate sweetheart pile. The solution won’t come from an established political entity.
If anything will fix it, it would be domestic terrorists. If we get more Tim McVeighs out there bombing the banks, the corporations, and the government, and avoiding civilian deaths, only that would scare the politicians into action.
We’ll never get out of this hole as long as the two parties keep shoving their lousy candidates down our throats.
I stopped voting for either party when Pat was running for the White House the first time around. We really did have the forces of King George on the run but the bush smear machine went into overdrive and we got stuck with King George and later on the little dunce.
Everyone should vote third party at all elections. Throw the bums out and keep doing that until all the corrupt career politicians are back in the private sector where they belong. Or jail.
Linda:
What makes you think we will reboot as a constitutional republic. More likely we will reboot as a pseudo-european socialist society. Secondly, the disaster that bankruptcy will bring is immense. I would suspect that many of us will lose our jobs and homes. Lastly, what proof do you have that the machines are rigged. I’m not saying they are not, but I would like to see proof. Remember that paper ballots can be rigged also as we saw in the Al Frankin campaign where they mysteriously found paper ballots after he had lost. Statistically, these “found” ballots were wildly disproportionately in favor of Al Frankin. In other words, statistics say he cheated to win. Our 60th voter.
The so called financial crisis that the self proclaimed Masters of the Universe “didn’t see coming” (like Condoleza Rice never imagined that someone could use an airliner as a missile), is Mana from Heaven; a gift from God! It is our Golden Opportunity to reclaim the MONEY POWER as President Van Buren always wrote it. The term has a double meaning – both the power of money and the dark power that controls it.
The MONEY POWER should be THE number one utility – the Right of the Sovereign – “We the People” in this Constitutional Republic. For MOST of our Nation’s history, this power has been in the hands of a PRIVATE cabal of bankers and international financiers. This stems from the fatal flaw of the Constitution – its near complete silence on what should have been a 4th major article and a 4th branch of government. Thank Hamilton and Morris, as agents of the Rothchilds for that.
Fortunately we don’t need to suffer through a period of anarchy to reclaim the MONEY POWER. The State Bank of North Dakota provides us the model. See free online chapters of her book, “The Web of Debt” and articles about BND at Dr. Ellen Brown’s site http://WebOfDebt.com
For a clear picture of why the MONEY POWER must be in PUBLIC hands and how this power has been repeatedly stolen from US, see Bill Still’s award winning movie, “The Secret of Oz” ( http://SecretOfOz.com ) It makes very clear the most insane aspect of the Establishment farce, fraud and sham that is the FED, IMF, BIS – that we (US) are BORROWING our MONEY from this Crimocracy. We allow them to create this money out of thin air and LOAN it to us at USURY – “backed by the full faith and credit of the US Government” when we could instead create it out of thin air ourselves!
Pat,
I’ve said it before on your site: the collapse of ‘08 was due to the refusal of the Bush administration to regulate the mortgage lending industry. GWB was being guided by GHWB, and he wanted to try to keep the bubble going until after the ‘08 election. It’s that simple.
This is how I, an average citizen, think we can begin paying back our national debt, now $117,699 per citizen:
1) Bring home all our troops from Iraq, Afghanistan, and the over 120 countries where they are neither needed nor wanted. Use special forces to pursue the Islamic jihadists.
2) Scale way back our bloated entitlements, where the money earned by hard-working tax payers is stolen and given to those who will not work and do not pay taxes.
3) Eliminate the Federal Reserve and the “funny money” they print that devalues our dollar.
4) Reduce the enormous, obese size of our national government and give the Constitutional powers back to the states.
5) Balance the budget.
TNS,
If Republicans are able to regain power, something like what you describe is possible; but if Democrats are able to remain in power, they will simply devalue the dollar by printing more. The Republicans are trying very hard to derail this nonsense. A key test will be whether this crappy healthcare reform package is stopped in its tracks. If the Dems are able to shove it through, their next goal will be to legalize 20 million illegal aliens; and if that gets done, we’re fuct.
All the funny money the FED loaned us — which money they created from thin air — can be paid back in kind and in full. Money created from thin air. Once it is paid back, we say thank you very much but we don’t require your ’services’ anymore.