Friday, April 08, 2005

Nancy Pelosi gets it, too 
This is the first time that a President of the United States has declared that we, the United States Government, will not put the full faith and credit of the federal government behind the Social Security trust fund. What this President is saying is, we have two kinds of debt. Let's see how we get the debt first. It is in deficit spending, so we have to go borrow in order to keep the government going.

So where does he borrow? He borrows from the Chinese. He borrows from the Japanese. He borrows from the trust fund. And what he is saying now to the American worker: "We will honor our debt to the Chinese and the Japanese, but we are treating you differently. We are not honoring our debt to you." These are funds that workers and their employers put in the account to have a trust fund to cover any shortfall that would be there to cover their retirement benefits. And this President is openly declaring that he has no intention of paying the trust fund back what he has taken from it.
via the DCCC's The Stakeholder.

Washington Shocker! Even Congressmen can figure it out! 
Despite the mainstream press ignoring Dubya's speech in Parkersburg on Tuesday, it didn't pass unnoticed in the U.S. House of Representatives. From The Congressional Record:
The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Oregon (Mr. DEFAZIO [Peter A. DeFazio - OR 4th - D]) is recognized for 5 minutes.

Mr. DeFAZIO. Mr. Speaker, well, the President was on the road again today with yet another tightly controlled scripted, so-called town hall, before a carefully screened, invitation audience to tout to his plan to privatize Social Security.

Now, that is not unusual; in fact, the scripted town halls are all so similar that they can save the taxpayers a lot of money if he just stayed at Camp David or Crawford, Texas, and they just replayed the recordings of his earlier scripted, rehearsed town halls.

But the President did say today something extraordinary, in Parkersburg, West Virginia, and suggested something unconscionable. The President said, ``There is no trust fund.'' And then he went on to suggest that our Nation might not honor its debt to Social Security. This is what the President said does not exist.

Let me read from this. This is a Social Security Trust Fund bond, considered the best investments in the world, U.S. Treasury Bond. This is the most privileged of Treasury bonds issued to Social Security, redeemable at any time at full face value, unlike any other bond that they issue. These are the most privileged of their bonds. The President says it is nothing but an IOU. Well, here is what it says: This bond is incontestable in the hands of the Federal Old Age and Survivors Insurance Trust Fund. The bond is supported by the full faith and credit of the United States. And the United States is pledged to the payment of the bond with respect to both principal and interest.

The President questions that? He is questioning whether we are going to repay our most privileged debt to Social Security. We have $7.9 trillion of debt. He is adding to it at a record rate, borrowing $1.3 million a minute. Who is he saying we are going to repay and not repay?

Are we going to repay the Chinese but not the Social Security Trust Fund? Are we going to repay President Bush, he happens to have some U.S. Treasury Bonds in his personal portfolio, but not the Social Security Trust Fund? Are we going to repay other wealthy investors around the world and in the U.S., but not the Social Security Trust Fund? We are going to selectively default on our debt.

Suggesting something like that, if the bond markets believed the President, the dollar would drop to near zero tomorrow, and there would be an economic catastrophe, but they do not believe him. They know this is just politics and rhetoric on his part. There is no intention of the Government of the United States defaulting on its debt.

This year Social Security will collect $170 billion more than it needs to pay Social Security benefits, and they are invested in the trust fund. If what the President said is true, there is no trust fund, and we are not going to honor it, then Congress and the President are perpetrating a fraud of extraordinary magnitude on the working people of America, extorting through taxes $170 billion more than they need to pay current benefits that this President has no intention of repaying. That is unbelievable.

Every minute, every minute, this President and this Congress are borrowing $320,000 of Social Security taxes and spending it on something else. And the President says he is replacing it with worthless IOUs; they are not bonds, they are not investments. He questions whether they will be repaid. He questions the full faith and credit of the Government of the United States of America and its willingness, our willingness, to meet our obligations and our debt.

If what the President says is true, then we ought to give the working people of America, instead of the rich people of America, the biggest tax cut in history. Reduce the Social Security tax, which falls more heavily on working people. More working Americans pay more in Social Security taxes than they do income taxes to the Federal Government.

If he has no intention of repaying that $170 billion that he is borrowing this year of excess Social Security taxes, then we should not collect it under false pretenses. We should give people a big tax break. That would stimulate small business, employment, and put a lot of money in the pockets of working people. I am not advocating that.

But if he does not repay it, he should be advocating it, and instead of trying to switch the game and having an irrelevant debate over a so-called privatization plan which actually makes the funding problems of Social Security worse and would require another few trillion dollars of borrowing, in which I guess people would get these worthless bonds that the President questions.

Now, who is going to buy those worthless bonds? How is he going to continue to run the Government of the United States borrowing $1.3 million a minute if the bonds of this country are worthless?

This is an extraordinary and reckless statement for the elected President of the United States to make.
via Atrios

Tuesday, April 05, 2005

The sky IS falling, Chicken Little 
Today, in Parkersburg West Virginia, George W. Bush made a speech. It'll be ignored by the main-stream media, i.e. dutifullly buried on page A16, and that'll be the end of it, right? So what's the big deal about THIS speech?, you might ask. The big deal is that, in today's speech, he essentially disavowed the debts of the US government. He pointed to ledgers supposedly containing the bonds which back the Social Security trust fund, and said they were mere pieces of paper - IOU's that are intrinsically worthless - and that he Social Security Trust Fund does not exist.
``A lot of people in America think there is a trust - that we take your money in payroll taxes and then we hold it for you and then when you retire, we give it back to you,'' Bush said in a speech at the University of West Virginia at Parkersburg.

``But that's not the way it works,'' Bush said. ``There is no trust `fund' - just IOUs that I saw firsthand,'' Bush said.
Those 'IOUs' are US Treasury debt instruments. While not negotiable, they are still bonds, representing $1.7 trillion of debt that, until today, everyone believed the US government was, eventually, good for.

With today's speech, Bush announced to the world that his adminstration is ready to disavow the full faith and credit of the United States government, and stands ready to stiff its creditors. Whether this year's stiff-ees are Americans expecting their Social Security checks, or the Saudis and Chinese who are currently propping up the the US economy with infusions of credit, the chickens are going to come home to roost. Who will continue to lend money (or be willing to pay taxes, for that matter) to a government that even hints, as Mr. Bush did today, that their investments are worthless?

The Bush administration has been pursuing a weak dollar since it entered office. And they've succeeded. One of the reasons oil is so expensive today is trhat a dollar doesn't buy much on the world market. Combine that with a huge load of import-fueled dollars floating around the world, and where we end up is with Saudi oil dollars and Chinese hard-goods dollars coming back here to buy up our country's IOUs on the cheap. That's how the Republican tax-cuts and the Iraq war are being financed - with Saudi and Chinese debt. This is bad enough; but if they start to believe that those IOUs are not going to be honored - that they're merely pieces of paper in a file - that flood of money will slow to a trickle. If indeed we don't end up in wars over this debt.

If these huge creditors are willing to bite the bullet and try to avoid hot wars over it, their wisest course is to write off their current US debt holdings, stop investing here, move their money, and denominate their goods, in some other currency. They could easily say "We no longer accept dollars - you want to buy from us, bring Euros." I'm sure the EU could live with that - but the United States of America would be flat broke. I wouldn't be willing to bet against the US going to war over something as drastic as that. It's not a pretty picture to contemplate.

Maybe Paul Wolfowitz is now president of the World Bank because the Bush administration knows the truth - pretty soon the US is going to need the World Bank to bail itself out, and no one else would be willing to do it.

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