President Barack Obama’s recent address to Congress started with a promise that he would speak freely and candidly. He acknowledged that the confidence of the American people has been badly shaken as the recession gains momentum, job losses mount, and certainty in the future erodes. He promised the American people that the nation would rebuild and recover stronger than ever.
But even as Obama received plaudits from his media friends for doing his impression of a straight-shooting pragmatist, his diagnoses and proposals belied his true nature as a partisan liberal ideologue. Obama’s speech was full of misrepresentations, omissions and a dangerous willingness to overstep the boundaries of what the federal government’s role ought to be in our society.
The hyper-centralization of everything—from education and health care to our banking system and energy policy—is gradually shifting us towards a cradle-to-grave sovietization of our entire economy, instituting a debilitating dependency of individuals on government for everything in their life.
Obama recognized that lax credit streams from irresponsible bankers were responsible for the housing bubble, but what was missing in his address was a recognition that ALL bubbles, whether dot-com, biotech, or housing, are ultimately lax-credit bubbles, a symptom of predatory malinvestment.
The Glass-Steagall Act (GSA), passed during the height of the great depression, was the cornerstone of the American banking regulatory system for more than 65 years until 1999, when Larry Summers, then Treasury Secretary under President Clinton, lobbied for it to be repealed. This same Larry Summers is now the Director of National Economic Council and Obama’s closest economic advisor. The repeal of GSA enabled financial markets to engage in legalized fraud under the guise of Structured Investment Vehicles, a type of fund in the ‘shadow banking system’.
From 1999 to 2008, the credit default insurance market skyrocketed from virtually zero to more than $50 trillion while the entire stock market barely doubled from $11.2 trillion to near $20 trillion. This unprecedented leveraging of the U.S. economy was the handiwork of Summers and his cronies. The infamous sub-prime mortgage market fattened from a tiny 4.5% of all mortgage lending to a monstrous 33% by the time the crisis peaked at the end of July 2008.
Obama did not say a single word about the Glass-Steagall Act, its repeal, or whether it will be reinstated. Media propaganda claims that Republicans were in favor of deregulation and the Democrats were against it, but in reality the repeal was a bi-partisan effort, merrily signed into law by President Clinton during his second term.
Instead, Obama’s address was all over the place, bouncing from infrastructure, to tax cuts, to welfare, to energy, to health care and education. And while it’s true that these challenges must be dealt with, we must first recognize the two core problems which threaten our ability to answer these challenges in the long-term.
First, any solution is going to require funding, and if these first weeks of the administration are any indication, the funds will be made available by increasing the money supply as well as foreign and federal debt. Given the shrinking role of the real economy, particularly the manufacturing sector, this reckless move will lead to the long term destabilization of domestic economy and a precipitous decline in our standard of living. Obama’s plan to cut the deficit in half by the end of his term is a charade—he’s already added $1.2 trillion to our national debt just to satisfy his congressional cronies. Any promise to not do so again is hollow.
The second problem is the gargantuan, all-pervasive federal bureaucracy which has become a permanent Washington D.C. fixture. Truth be told, issues like education, health care, and welfare programs should be dealt with at the local level, not by some Washington special interest group. A more responsible way to tackle our economic problems is to lower federal taxes and let states and counties develop their own solutions rather than force the country into a one-size-fits-all federal straitjacket.
If Obama truly wanted to be progressive, he could have cut the number of tax brackets from seven to three, so that the federal taxes for bottom 90% wage earners could be uniformly reduced to no more than 5%, for the next 9.9% to no more than 15% while the taxes for the top 0.1% wealthy could be raised to 90%. Cutting capital gains tax for small businesses and reducing the corporate tax for high-tech and clean energy enterprises, coupled with shrinking the size of federal government (already at 21% of GDP) would ensure freedom and social justice.
The two elephants in the room which Obama did not, and perhaps never will, address are congressional oversight of the Federal Reserve and overseas military spending. All malinvestment and credit bubbles are a result of our secretive fractional reserve banking system. Free from accountability, the Fed neither discloses its operations to Congress nor does Congress exercise any control over the trillions of dollars that the Fed adds annually to money supply. Obama’s rhetoric of disciplining and oversight of Wall Street shamelessly ignores this fundamental reality.
While Obama was quick to honor the service of our brave soldiers and rail against cold-war era weapons systems, his rhetoric cloaked the fact that now we have more than 700 military bases in more than 60 countries around the world.
This hyper-extension of U.S. military power is reminiscent of the evil empire against whom we spent half a century in a titanic struggle. In the address, there was no plan on bringing our troops and war machine home. No plan to dissolve cold-war era NATO. No plan to divest our vast colonial holdings in Europe and Asia and save hundreds of billions of dollars without altering our primacy or destabilizing the balance of power.
We cannot succeed in the Middle East unless most American and foreign troops, seen as colonial occupiers, are withdrawn from that region. A few thousand American peacekeeping troops could be deployed in Cyprus, Bahrain, Egypt, and Jordan to provide a security envelope for Israel and protect the vital shipping lanes in the Persian Gulf, the Red Sea, and the Mediterranean until a workable solution to Arab-Israel conflict can be found and the enduring problem of international terrorism can be resolved. In the Pacific our presence in Guam and Okinawa is all we need to buffer China. The resources saved could easily be used to reduce the federal debt, expand our industrial production, and make our military stronger.
Obama’s address was high on false hopes that reckless spending without cutting our overseas empire is a panacea to our current problems and future prosperity. It fell short on real change.