Transfer of Wealth: US Government Debt and the Decline of the Middle Class

Paul Craig Roberts served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as a co-founder of Reaganomics.[1] He is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service who has testified before congressional committees on 30 occasions on issues of economic policy. 

Paul Craig Roberts reviewed The Rule of Empires (2010) by Timothy H. Parsons:

Great empires, such as the Roman and British, were extractive. The empires succeeded, because the value of the resources and wealth extracted from conquered lands exceeded the value of conquest and governance. The reason Rome did not extend its empire east into Germany was not the military prowess of Germanic tribes but Rome’s calculation that the cost of conquest exceeded the value of extractable resources.

The Roman empire failed, because Romans exhausted manpower and resources in civil wars fighting amongst themselves for power. The British empire failed, because the British exhausted themselves fighting Germany in two world wars.

In his book, The Rule of Empires (2010), Timothy H. Parsons replaces the myth of the civilizing empire with the truth of the extractive empire. 

Parsons does not examine the American empire, but in his introduction to the book he wonders whether America’s empire is really an empire as the Americans don’t seem to get any extractive benefits from it. After eight years of war and attempted occupation of Iraq, all Washington has for its efforts is several trillion dollars of additional debt and no Iraqi oil. After ten years of trillion dollar struggle against the Taliban in Afghanistan, Washington has nothing to show for it except possibly some part of the drug trade that can be used to fund covert CIA operations.

America’s wars are very expensive. Bush and Obama have doubled the national debt, and the American people have no benefits from it. No riches, no bread and circuses flow to Americans from Washington’s wars. So what is it all about?

The answer is that Washington’s empire extracts resources from the American people for the benefit of the few powerful interest groups that rule America. The military-security complex, Wall Street, agri-business and the Israel Lobby use the government to extract resources from Americans to serve their profits and power. The US Constitution has been extracted in the interests of the Security State, and Americans’ incomes have been redirected to the pockets of the 1 percent. That is how the American Empire functions.

The New Empire is different. It happens without achieving conquest. The American military did not conquer Iraq and has been forced out politically by the puppet government that Washington established. There is no victory in Afghanistan, and after a decade the American military does not control the country.

In the New Empire success at war no longer matters. The extraction takes place by being at war. Huge sums of American taxpayers’ money have flowed into the American armaments industries and huge amounts of power into Homeland Security. The American empire works by stripping Americans of wealth and liberty.

This is why the wars cannot end, or if one does end another starts. Remember when Obama came into office and was asked what the US mission was in Afghanistan? He replied that he did not know what the mission was and that the mission needed to be defined.

Obama never defined the mission. He renewed the Afghan war without telling us its purpose. Obama cannot tell Americans that the purpose of the war is to build the power and profit of the military/security complex at the expense of American citizens.

The bottom line: In this corrupt empire, wealth is transferred from the US Treasury to the powerful companies that benefit from war. When the unsustainable debt from multiple wars and generous social programs forces a solvency crisis, what will happen? Perhaps Italy and Spain will provide a preview.

The American way of life that we see in TV commercials will soon cost too much for most middle class incomes. Unless the political process reforms itself and energy costs decline in hard-to-fathom ways, America will be humbled — from within. The parasites will kill the host.

Democracy, Politicians, and War

Another wake up call from Atanu Dey, who continues to aim economic intelligence at the leaders of the world’s largest democracies. He wants us to see the light before it is too late. I fear we’re on the razors edge now.

Atanu (India) and I (US) both live in countries where we can criticize the leaders without persecution. We both want free societies to survive and prosper. Acknowledging a problem is the first step to a solution.

Link: Your Vote for My Money

A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.
– Alexander Tytler

Some numbers are well beyond human comprehension. We can talk glibly about millions and billions of this or that but we cannot intuitive grasp what they actually mean. Evolution has equipped us with fine brains but those brains never needed to deal with thousands — leave alone millions — of anything. So we have to do some mental gymnastics to get a fleeting glimpse of what very large numbers represent.

Here’s a way of realizing how large millions, billions, and trillions are relative to a thousand. One thousand seconds passes in less than 17 minutes. A million seconds takes around 13 days. A billion seconds takes a bit over 31 years. We humans live for something between 2 and 3 billion seconds. A trillion seconds is over 31,688 years. We don’t really know what thousands of years mean, of course. Human civilization is not a trillion seconds old.

The US war in Iraq has been estimated to cost around $3 trillion. That is, $3,000,000,000,000. Details are in Joseph Stiglitz and Linda J. Bilmes’ new book, “The Three Trillion Dollar War: The True Cost of the Iraq Conflict.” See The Cold Price of Hot Blood in Salon for more on that. The total cost globally could well be over $6 trillion.

…It is the very nature of democracy that creates the perverse incentives for the politicians to implement policies that help themselves at the cost of immense harm to the country. Those who make the policies enjoy the indirect benefits of the policies — votes from specific groups — without paying any of the costs.

There is another asymmetry. The direct beneficiaries of the policies naturally have a concentrated interest in voting for the politicians. The costs are diffuse and poorly understood by the rest of the population. So while they bear the costs, they do not connect it with the policies and the politicians.

In the final analysis, a country is only as rich or as poor as its collective wisdom allows it to be. The politicians can be expected to make those decisions that are good for them, just like you and I make self-interestedly rational decision in our daily lives. However, we get to play with whatever little money we have; the politicians can play with billions and trillions that do not belong to them. So they are understandably less careful with billions than we would be with our few thousands.

Winning the War on Terror

Tom Evslin at Fractals of Change offers six steps to victory for Winning the War on Terror. These ideas are probably too reasonable to be supported in Washington, where strategy is too often based on cliches and under-the-table profiteering.

Link: Fractals of Change: Winning the War on Terror.

Start a dramatic program to reduce US dependence on foreign oil (and establish US leadership in alternatives). 

Way too much oil money ends up directly supporting terrorists or running schools for future terrorists or supporting absurd monarchies in countries which spawn terrorists. 

End the war on drugs. 

We aren’t going to “win” this one.  Attempts to keep drugs illegal just drive up drug prices and profits for the drug trade.  Terrorists and drug cartels are natural allies.

Partition and leave Iraq.
Time’s up.  I’m still not at all sorry Saddam was toppled.  I still remember that he did not allow the UN inspections required to assure that he did not have WMD.  That was his mistake and not ours.  But creating a democracy in Iraq is a job for Iraqis. 

Take effective action to topple the regime in North Korea.
The most dangerous illusion in the world is that joining the nuclear club puts a country beyond restraint. 

Depolarize our domestic debate on civil liberties.
This debate is much too important for the name-calling it’s degenerated into.

Rename the war on terror.
…much of the world is at war, with Islamic fascists. In fact, no one suffers from radical Islam more than Moslems.  There is no point in being politically correct and not recognizing our enemy.