Cutting the Deficit: Sacrificing Workers to Save the Rich

“There’s class warfare, all right, but its my class, the rich class
that’s making war and we’re winning” – Warren Buffet

By James Petras

November 29, 2010 “Information Clearing House” – The most important and popular social and tax programs in the United States are threatened by a self-styled “Bipartisan National Commission on Fiscal Responsibility and Reform”. Appointed by President Obama on February 18, 2010, co-chaired by two longstanding champions of Wall Street: ex Senator Simpson (R, WY) and former Clintonite White House Chief of Staff Erskine Bowles. The Commission Report issued November 10 proposes to slash social security payments, reducing recipients to poverty, raise the retirement age to 69 ensuring that millions of workers will die before they can retire, or enter retirement in ill health; reduce or freeze cost of living increases through inflation indexes which understate by half the rises in food, gas, hospital and education. The Commission proposes deep cuts in Medicare, increased Medicaid co-pays and slashing $54 billion from graduate medical education. The Commission proposes to eliminate tax breaks including deductions for home mortgage interest payments while taxing employer provided medical insurance.

The same Commission Report proposes to reduce capital gains and income taxes for the rich by up to 24%.
President Obama and the Republican leadership praised the Commission and wants “to give them space to work on it”.

The so-called crisis of Social Security is a result of the Republican and Democratic governments siphoning off payments into the general fund. The forthcoming shortfall (2030) can be easily remedied by lifting the payroll tax ceiling, for the rich, taxing all earned income. Medical costs can be reduced by 50% by replacing the for profit corporate health insurance and pharmaceutical corporations with a non-profit national health system, similar to successful programs in Europe and Canada.Both Medical plans and Social Security can be easily funded by imposing a 1%sales tax On the sale of stocks and bonds.

The deficit proposals put forth by Obama’s Bipartisan Commission threaten to push the one-third of retirees who depend mainly on their social security payments into the food kitchens or destitution. The added cost and reductions in health care will increase the mortality rate among working families. The increase in retirement age will result in “work until you die”, with no time for leisure, travel or grandchildren. It is time to send a message to Washington: cut Social Security and Medicare and home interest deductions and you will visit Washington on your own time.

Millions face shrinking Social Security payments

WASHINGTON – Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise. The trustees who oversee Social Security are projecting there won’t be a cost of living adjustment (COLA) for the next two years. That hasn’t happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

“I will promise you, they count on that COLA,” said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. “To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal.”

Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

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REVENUE BREAKDOWN – Obama’s Spending Spree

REVENUE BREAKDOWN – Obama’s Spending Spree

By Stephen Wellman
June 5, 2009

 

This will cover spending and tax revenues for the week starting June 1, 2009. It was a busy week for the US TREASURY and one of the highlights was Tim Geithner’s meeting in China. Laughing students aside, he had a tough act to sell! Yet he kept to the same script the US FED and US TREASURY have been saying for decades now their mantra of STRONG DOLLAR … STRONG DOLLAR. Its their mantra but not their practice.

BLS WAGES

BLS data for wages that was released on June 4th to NO FANFARE … The FANFARE that moved the DOW that day was for the small dip in unemployment claims. Meanwhile if you read the hidden details, like I do, you see that there has been some massive hour cuts for American workers for the Q1 2009. That reflects perfectly with my collapse scenario for the US PAYROLL WITHHOLDING TAX REVENUES. If workers work less hours then there will be less tax revenues. Even here in Hawaii Governor Lingle is making State employees take mandatory three day furloughs(no pay) every month in order to cut costs.

What stuck out was this report on the MANUFACTURING SECTOR:

Manufacturing

Productivity decreased at a 2.7 percent annual rate in the manufacturing sector during the first quarter of 2009, reflecting a 21.7 percent decrease in output and a 19.5 percent decrease in hours (tables A and 3). These were the largest-ever declines in the output and hours series, which begin with data for the second quarter of 1987. Over the last four quarters, manufacturing productivity fell 3.2 percent, the largest four-quarter decline in the series (tables A and 3). This contrasts with the 3.7 percent average annual increase from 2000 to 2007. In the durable goods manufacturing subsector, output declined 31.0 percent and hours fell 23.0 percent, yielding a productivity decline of 10.4 percent. In nondurable goods industries, productivity rose 1.9 percent as the decline in output of 11.6 percent was less than the 13.2 percent decline in hours.

Hourly compensation in manufacturing grew 13.4 percent during the first quarter of 2009, reflecting a 15.8 percent rise in durable goods industries and a 10.1 percent rise in the nondurable goods industries (seasonally-adjusted annual rates). Real hourly compensation, which takes into account changes in consumer prices, increased 16.1 percent for all manufacturing workers. Unit labor costs rose 16.6 percent in manufacturing during the first quarter of 2009, after increasing 17.1 percent in the fourth quarter of 2008. Over the last four quarters total manufacturing unit labor costs increased 12.0 percent, the largest increase in the series.

These moves represent the BIGGEST moves since 1987. So things are falling off a cliff for America’s manufacturing base. I have also reviewed this same info for the State Of California and it is confirmed. The biggest drops in payroll for California are Construction and Manufacturing. The reports don’t really say why, but I imagine it is due to closing doors or moving out! Interesting the two sectors which show the least decline in employment are mining and healthcare. Healthcare in California is stable.

So productivity decreases while wage costs increase. Hummmmm??? NEXT!

US TREASURY DAIIY STATEMENT

Well on June 3rd, 2009, the US TREASURY spent $22.332BIL USD on Social Security benefits in 24 hours. That put our SPEND RATE up to 6.00. The US TREASURY only took in $7.559BIL USD in tax revenues on June 3rd and out of that $7.449BIL was from US PAYROLL TAX REVENUES. How much tax did the US corporations pay? $52mil. Those rich people with their Estate taxes only paid in $3mil USD that day.

Here is the LINK to the US TREASURY DAILY STATEMENT for June 3, 2009.

So how much have we spent on Social Security for FY 2009 so far? Around $385.7BIL USD and how much on TARP? Around $321.4BIL USD … not much difference. But on UNCLASSIFIED we have spent way over what we spend on Social Security at $413.6BIL USD. Between OTHER and UNCLASSIFED we have spent a combined total of $1.777TRIL USD and the media is dead silent. There’s so much money in the system on a daily basis the US TREASURY can’t even line item it!

TRUST FUND IOUS IN LAYMAN’S TERMS

There has been much talk about how the US TREASURY “borrows” from the Social Security Trust Fund. If only that were the only Trust Fund they hand IOUs to!

On every US TREASURY DAILY STATEMENT is a term called GOVERNMENT ACCOUNT SERIES. First TABLE III-B refers you back to TABLE III-A where there is a breakdown of both “marketable”(bills, notes and bonds) and “nonmarketable”(intergovernment debt). As anyone with eyes can plainly see the vast majority of “debt” is in the “Government Account Series” line item in the “non-marketable” section of both TABLES III-A and III-B. Just think of that BIG number as the UNFUNDED LIABILITY number for US CONgress to borrow from the Social Security and Medicare Trust Funds and many other trust funds you probably have never heard of. This is the magic hocus-pocus of IOUs that are suppose to be repaid in our lifetime.

So this stuff is “ON-BUDGET” and “OFF-BUDGET”. The “OFF-BUDGET” debt did not start until 1937 during the Great Depression, under FDR, but it has steadily grown since then just like everything that BIG GOVERNMENT does. Once again both DEMS and REPS have been guilty of growing the gross DEBT; both are experts at fiscal irresponsibility.

Back to the Government Account Series. These are non-marketable securities, implicit debt, guaranteed by the US government. They are mainly TRUST FUNDS. This chart of TRUST FUNDS is from the Financial Management Service, a bureau of the US TREASURY. I think it is important to get a perspective on just how widespread this addiction to SPEND has become. It has infested all manners of solvent entities and turned them into IOU ridden wards of the state.

The following TABLE FD-3 is only reported monthly, so March 2009 is the last data point.

Here is the LINK to the website that publishes these tables. Click on “Federal Debt”.

You can see that the US government owes these Trust Funds a total of trillions.

I found this statement from the FMS … “Government account series (FD-2)—Certain trust fund statutes require the Secretary of the Treasury to apply monies held by these funds toward the issuance of nonmarketable special securities. These securities are sold directly by Treasury to a specific Government agency, trust fund, or account. Their rate is based on an average of market yields on outstanding Treasury obligations, and they may be redeemed at the option of the holder. Roughly 80 percent of these are issued to five holders: the Federal Old-Age and Survivors Insurance Trust Fund; the civil service retirement and disability fund; the Federal Hospital Insurance Trust Fund; the military retirement fund; and the Unemployment Trust Fund.”

The BIG FIVE!!

I’ll bet they are “special”! I just hope we never find out just how “special” they really are!

There are also “marketable bonds” as per Table III-B of the US TREASURY DAILY STATEMENT. Every BOND issued by companies or governments has a “Redemption Value” upon maturity whereby the company, or in this case the government, pays to redeem it.

So in the end should the US TREASURY count these securities or “IOUs” when they borrow from a multitude of Trust Funds? The idea is that these “IOUs” will be made good when they are due or “mature”. So in theory as these IOUs mature the government must print money to pay them if there are no tax revenues to cover them. I personally am not counting on getting any checks from Social Security by time I retire. I also doubt I am going to have Medicare, but instead some Third World version of UNIVERSAL HEALTHCARE that is tantamount to a Medicare default.

Just because all this is listed on the US TREASURY DAILY STATEMENT don’t get the idea that all these numbers add up and make sense … THEY DON’T! Try to add up the OTHER total with the breakdown that is listed for OTHER, it never adds up.

This is the stuff that the GAO has been complaining about for decades now and is the main reason that David Walker(former GAO Chief)quit.

So next time when you hear someone compare the US government to ENRON, you’ll know why. More to the point you’ll know where ENRON got all their ideas from! Yet the S&P gives out their AAA rating … AAA is virtually worthless in my opinion, but then again I am not CHINA or the millions of people out there sitting in cash on the sidelines using Treasuries or FDIC accounts. By the way the US government even borrows from a trust fund entitled “Deposit Insurance Fund”. Hummmmmm??? I wonder if that is related to the FDIC.

All this info is available to the public so feel free to do your own research. When was the last time any of this was discussed in the SITUATION ROOM or on SQUAWK BOX or on OPRAH? Nobody wants to know the real truth and even after going on 60 MINUTES, David Walker walked away completely convinced that the US CONgress is just that … a CON!

None of this data supports a STRONG DOLLAR POLICY. Strangely enough it all comes from the same entity that Tim Geithner heads, the US TREASURY.

Gold is the only durable hedge against this enormous monetary fraud of the irredeemable currency Ponzi scheme.

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY …