Government Shutdown and “Debt Default”: Dress Rehearsal for a Privatizatized Federal State System?
The “shutdown” of the US government and the financial climax associated with a deadline date, leading to a possible “debt default” of the federal government is a money making undertaking for Wall Street.
Several overlapping political and economic agendas are unfolding. Is the shutdown –implying the furloughing of tens of thousands of public employees– a dress rehearsal for the eventual privatization of important components of the federal State system?
A staged default, bankruptcy and privatization is occurring in Detroit (with the active support of the Obama administration), whereby large corporations become the owners of municipal assets and infrastructure.
The important question: Could a process of “State bankruptcy” –which is currently afflicting local level governments across the land– realistically occur in the case of the central government of the United States of America?
This is not a hypothetical question. A large number of developing countries under the brunt of IMF “economic medicine” were ordered by their external creditors to dismantle the State apparatus, fire millions of public sector workers as well as privatize State assets. The IMF Structural Adjustment Program (SAP) has also been applied in several European countries.
Will this gamut of deadly macro-economic reforms engineered by Wall Street and the Federal Reserve be conducive to widespread civil disorder across the United States?
While the declaration of a national emergency or martial law is not envisaged, reports confirm that the Department of Homeland Security (DHS) is currently “engaged in acquiring heavily armored tanks, which have been seen roaming the streets.” In the words of Ellen Brown, “somebody in government is expecting some serious civil unrest…”
Flash back to the meltdown of Wall Street in September 2008. In the wake of the economic crisis, a process of fiscal collapse was initiated.
The evolving fiscal crisis had set the stage. It has a direct bearing on the issue of shutdown of the federal government and “debt default”.
The Bush and Obama bank bailouts had led to the appropriation of $1.45 trillion of US tax revenues. This money was channeled to Wall Street under Bush’s Troubled Assets Relief Program (TARP) and Obama’s bailout program initiated at the outset of his first term. This money was transferred to the banks.
Meanwhile, “defense expenditure” in support of a war economy had spiraled: 740 billion dollars had been allocated (FY 2010) to fund a vast process of militarization including America`s wars in the Middle East and Central Asia.
Of significance, there were several other unreported shadowy multibillion dollar bailouts which do not appear in government accounts, not to mention the Pentagon’s black budgets which are not included in the official expenditure accounts of the Department of Defense.
According to Aviation Week in a 2009 report:
“the Pentagon’s ‘black’ operations, including the intelligence budgets nested inside it, are roughly equal in magnitude to the entire defense budgets of the UK, France or Japan, and 10 per cent of the total.” (see Big Increases for Intelligence and Pentagon “Black” Programs in 2010 By Tom Burghardt, May 13, 2009
“War and Wall Street”: Spiraling Public Debt
In the wake of the 2008 financial crisis, a new structure of public indebtedness had been created. Without accounting for the “black budgets” and “shadowy bank bailouts”, reported defense expenditures plus the bank bailouts amounted to a staggering 2.35 trillion dollars. Total revenue in FY 2010 was of the order of $2.38 trillion.
In other words, these two categories of expenditure, namely War and Wall Street “had eaten up” (together with interest payments on the public debt) the totality of federal government revenues.
The $2.35 trillion included the handouts to the banks plus military expenditure and the funding of the multibillion dollar DoD contracts with Lockheed Martin, Raytheon, Northrop Grumman, British Aerospace, et al.
No Money Left Over From the Public Purse to Fund Regular Government Programs
What this warped budgetary structure implied (in FY 2009 and 2010) was that there was no money (i.e. residual funds) “left over” from the public purse (tax revenues and other sources of federal government revenue) to fund regular government programs.
All other categories of expenditure including medicare, medicaid, social security as well as public investments in infrastructure, etc. had to be financed through debt creation (emission of Treasury bills and government bonds), namely through a dramatic increase in the public debt from $9.9 trillion in FY 2008 to 16.7 trillion (October 2013), a staggering increase of almost 70 percent.
In essence, the federal government has been financing it own indebtedness through generous handouts to Wall Street and the military industrial complex.