Mar 18, 2006
The empire has run out of money. Right now, the Bush administration can’t borrow to pay the bills. The national debt hit $8,291,957,000,000-plus on March 13 and growing daily by $2,170,000,000, according to the National Debt Clock, already exceeds the legal borrowing limit of $8,018,000,000,000 ($8 trillion, 18 billion).
Treasury Secretary John Snow has urged lawmakers to pass a new debt ceiling immediately to avoid the nation’s first-ever default. "I know that you share the president’s and my commitment to maintaining the full faith and credit of the U.S. government," Snow wrote. (Wall Street Journal, March 7) Defaulting on trillions in debt is not an option for Congress and the Pentagon.
This year’s $560 billion military budget includes $67.6 billion in emergency spending to feed preemptive wars in Iraq and Afghanistan—up 70 percent from the $334.8 billion the previous fiscal year. (Wall Street Journal, March 10).
Testifying before the Armed Services Committee, Defense Secretary Donald Rumsfeld warned Congress, "No nation, no matter how powerful, has the resources or capability to defend everywhere, at every time, against every conceivable type of attack. ... The only way to protect the American people, therefore, is to provide our military with a wide range of capabilities rather than preparing to confront any one particular threat."
Translation: global war and a Pentagon demand for a blank check.
The insatiable appetite of the Pentagon demands that funds be diverted from entitlement programs like Social Security and Medicare, or from discretionary programs that only make up one-sixth of the national budget. Bush plans the total elimination of 141 such programs. Pro posed cuts in fiscal 2007 will seriously impact Medicare, Medi caid, support for poor children’s, and a host of programs involving the working poor: food stamps, housing, health care and other desperately needed plans that are already inadequately funded. Estimates are that the current budget deficit will exceed $423 billion in a proposed $2.77 trillion budget for fiscal 2007.
To cover the immediate shortfall, the Bush administration has been raiding government funds that have surpluses. One target is a government workers’ pension fund—the G-Fund. Another is the Civil Service Retirement and Disability Fund. The American Federation of Gov ernment Employees and other government-worker unions were not consulted. Treasury Secretary Snow has promised to replace the funds, but the government will replace them with IOUs just as it does with Social Security.
U.S. imperialism is running an IOU economy with a Pentagon global military overload. In a March 10 Wall Street Journal article headlined, "Fed Official Warns of Rising Danger of Budget Deficit," Timothy Geithner, president of the New York Federal Reserve Bank, explained: "Foreign buying of U.S. securities [IOUs] may, by masking the danger of budget deficits, encourage investors to take on too much debt and require tighter monetary policy than otherwise."
Increasing interest rates raises the cost of borrowing and tends to increase price structure and inflation. At the same time it discourages investment, slows down economic growth and sets stagnation in motion. Overproduction aggravates this development. This combination is called stagflation and is a pre-condition to financial collapse, although a capitalist state can temporarily stave off economic crisis by accelerating military-industrial contracts.
Geithner heads the most powerful Federal Reserve district and is influential on the board determining the discount rate. Since June 2004, the Fed has raised short-term rates 14 times to 4.5 percent. Wall Street is betting on another increase in late March.
Militarism and global debt
In his remarks, Geithner singled out China among countries accumulating huge dollar-denominated securities from large trading surpluses. The current monthly U.S. global trade gap is running at a record $68.51 billion. Countries accepting these securities indirectly finance the Pentagon’s pursuit of its world-wide military activities. Any shocks to the U.S economy could lead their central banks to cash in those holdings in favor of other currencies and investments. The fallout for Pentagon spending and the economy would be incalculable.
The merger of the military-industrial complex that President Dwight Eisen hower (formerly General Eisenhower) warned about in 1961 has accelerated the developing crisis. The concentration of military/industrial empires—Halli bur ton, Bechtel, Lockheed Martin, Boeing, and the oil monopolies, which have rigged prices charged to the government—has grown and profited enormously over the years. The Pentagon keeps separate books for the regular defense budget and for emergency war expenses. That’s called cooking the books.
The military’s insatiable demand for more sophisticated military hardware and increased funding for Homeland Security will result in more debt and more borrowing. The constant expansion of U.S. military procurements confirms that Washington is determined that it will not be deterred from global domination, especially over the Middle East, with its vast oil and other resources.
As the U.S. threatens Iran, Syria and Palestine, its share of the world’s gross product is shrinking. In the early 1950s the U.S. controlled more than 50 percent of the world’s gross production. The 1960s saw this share diminish to around 35 percent, and between the 1970s and 1980s to 25-27 percent. Since 2002, the UN reported evidence of global stagnation, but no figures are available for the U.S. share of gross production.
On one hand, the domestic and world economic base of U.S. imperialism is contracting. On the other, there is the continuing and relentless drive for military expansion and imperialist war. They are intertwined and incompatible and will lead to inevitable catastrophe.
An independent, class-wide, mass movement in concert with the nationally oppressed communities at home and abroad can take advantage of this acute contradiction of imperialism.