Why a National Debt of 100% of GDP has Never been a Cause of Austerity

We hear all the time that we are deeply in a debt crisis with the national debt at grossly unsustainable levels, and that is why we have austerity and cannot afford the provisions of the People’s Charter. Is that so? Michael Meacher at his blog (michaelmeacher.info/weblog/) has given us some historical data that makes nonsense of those claims:

• At the end of the Napoleonic wars government debt was over 250% of GDP
• Just before World War I it was about 30%, rising to 175% by 1918
• It was still 125% at the start of World War 2, by the end of which it stood at 230%
• It then fell to no more than 25% by 1990
• Since then rose to almost 70% by 2010
• Following the banking bail-out it has risen now to just under 90%.

So the national debt when the welfare state and the national health service was introduced in the period of the post war Labour government under Clement Attlee was over 200%, and now it is less than half that. Now we cannot afford luxuries like welfare, but in the period of genuine austerity after a devastating war, we could. It follows that we can again, and we can afford the provisions of the People’s Charter, especially as we shall be getting rid of useless drains on the UK tax take like a nuclear submarine and absurdly generous taxation terms for the rich. Support the People’s Charter.

China’s Competitive Advantages Grow While the US Borrows War Bucks!

Writing in the current issue of the International Journal of Sustainable Strategic Management, Jack McCann of Lincoln Memorial University, in Tennessee, says that China has witnessed an average annual growth of about 10% for nearly two decades and has been uniquely stable in the present world economic crises. Indeed, China’s merchandise trade has been growing three times faster than world trade at about 14%. China currently produces nearly two thirds of the world’s bicycles, a third of its television sets and air conditioners, and half of the world’s microwave ovens. China has become the world’s second largest oil consumer after the US. McCann says:

On paper, globalization poses the long term potential to raise living standards and reduce the costs of goods and services for people everywhere. … China’s pool of cheap labor may dominate world labor markets for decades, giving it a monopoly on cheaply manufactured goods

Globalization has wrought new opportunities for many nations. China is no different from how the US was, and how any other nation is in attempting to make the most of its advantages, cultivating friendships with third party countries. Meanwhile shamelessly greedy US politicians try to support enormous war spending without frightening the rich with taxation! Instead the US trade deficit with China increases year after year into the hundreds of billions of dollars. What will happen if the Chinese decide to release the dollars they hold on to the market? The dollar will be devalued and the US bankrupted.

So tax the rich to pay US workers for what they do best—make excellent products that the world wants to buy. Rebuild our decaying cities and infrastructure. Use our technical knowledge to improve labor productivity at home, instead of outsourcing abroad! Compete!

US Credit Worthiness, Tax Hikes and the Balancing of the Federal Budget

Krishna Tummala, director of Kansas State’s public administration program and professor of political science simply explains the reason for the nation’s burgeoning debt:

People demand more services but are not always willing to pay taxes. The politicians promise more services without telling them the cost and that they must be paid for. Instead, they use the so-called painless way to go about this by allowing deficit budgets. This means not only the politicians must educate themselves on the issues, but their constituents as well.

He adds that the argument that the federal government should live like we do, within our means, is hypocritical. The personal debt of Americans is close to $2 trillion, so effectively we all live in debt. The federal government just is behaving like we do. Moreover, it has the responsibility for the common welfare and general defense, as the Constitution requires. Yet state governments, 48 of which require a balanced budget by law, are favorably compared to the federal government. But state governments differ in their budgeting compared to the fed. The federal government has only one budget, but each state has two, a current account and a capital account. Only the state’s current account—effectively its day to day running costs—must be balanced. The capital account is the place for major project expenditures, and they have to be carried forward annually.

The federal government borrows money through Article I of the US Constitution, and had it not been able to, it could not have borrowed $15 million from Britain in 1803 to complete the Louisiana Purchase. It doubled the size of the country, made it possible for it to be united coast to coast, and without it, it perhaps would never have become the world power it is. Now the national debt is $14 trillion, but it is not owed to the British. The Chinese have around $3 trillion of it.

People who want a balanced budget, many of them Republicans, have to realize that it will need taxes to be raised. Cutting expenditures will not be enough, and will shut down the country first. But Republicans will not condone tax hikes because the people with the money are leading Republican donors. So, cooperation between the parties has been lacking, only quarreling, a lot of posturing and little dialogue. The deadline for increasing the debt ceiling is 2 August, with the country’s credit worthiness at stake. If the debt ceiling is not extended, the country will default, hitting the economy of the whole world, everything now being so interconnected.

The country’s credit worthiness underpins the financing of debts. Foreign countries must have confidence in the US economy or they will not be willing to lend. Of course, credit ratings agencies such as Moody’s and Standard & Poor’s can evaluate the soundness of the US economy but the ratings agencies were giving excellent ratings to the financial sector “before it went belly-up”, Tummala wryly concluded!

Is the Wagon Rolling Against the Robbing Rich?

Amid the recent fiscal carnage in Washington several studies of the US have been published concerning the situation of the average American. First, IMF economists analyzed the US public deficit and debt levels, and their relation to the demands aging Baby Boomers will place on the government’s Medicare and Medicaid healthcare programs, while the birth rate lags at a record low:

The United States is facing an untenable fiscal situation due to the combination of high fiscal deficits, an aging population and rapid growth in government provided healthcare benefits.

IMF study, An Analysis of US Fiscal and Generational Imbalances:
Who Will Pay and How?

To “go a long way in returning the United States to a fiscally sustainable path”, the US government must cut the entitlement programs and especially healthcare—among the most expensive in the world—that face rapidly rising costs in coming years. Americans will have to pay more taxes and the government will have to cut spending on Baby Boomers—those Americans between about 45 and 65—and their immediate heirs.

To eliminate all current deficits and long term shortfalls on social plans for the current generation “would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent”, and “delay in the adjustment makes it more costly”.

Unless currently living Americans pay more in net taxes or unless government spending on current generations is curtailed, future Americans will face net tax rates that are about 21.5 percentage points… higher than those facing current newborn Americans.

Of course, the IMF is an arm of US foreign policy, or rather, an arm of the international policies of the US uber rich class who rule the world for the sole purpose of making themselves richer than their already obscene levels of riches. The IMF always makes the people pay whenever the rulers of any country get its finances in a twist by their greedy machinations. The ruling clique in the US are among the main beneficiaries usually. It is time they paid! Normally, they pay least, often nothing!

But the average Yankee seems amazingly placid, or gets worked up over the wrong enemy, all too often supporting the greedy manipulators because they are all too easy to fool. Often, they seem to think that they are themselves among the uber rich, but less than a single percent of the population are. That one percent have gotten three times richer in real terms over the last 30 years, while the average Yankee has got poorer once inflation is accounted for.

Not surprisingly, more Americans say that their financial situation is worse not better in recent years. For the first time since 1972, 31.5 percent of Americans are “not at all” satisfied with their financial situation compared with 23.4 percent who are “pretty well” satisfied (General Social Survey, NORC, University of Chicago).

Americans are also more insecure about employment. A record 16.4 percent thought it “likely” (fairly or very) that they would lose their job or be laid off. As few as 52.2 percent thought it “not at all likely” that they would lose their job or be laid off, easily the lowest confidence ever recorded by the GSS. Those who thought their standard of living was “much better” or “somewhat better” than their parents declined.

The General Social Survey—which NORC has conducted for forty years based on 2,044 interviews—is a biennial survey that gathers data on contemporary American society to monitor and explain trends and constants in attitudes, behaviors, and attributes.

On top of these, American “happiness” has been measured and took some blows, but some American stoicism shone through here. While only 28.8 percent of Americans, the lowest percentage since 1972, were “happy”, another 14.2 percent were “not too happy”. Happiness was hit mainly because of the economy and people’s own finances. Even so, 85.8 percent of Americans were “happy”.

Not all aspects of happiness fell during the downturn. 97 percent of marriages were judged to be “happy” (very or pretty), and 86.0 percent of Americans claim to be “very satisfied” or “moderately satisfied” with their work, a steady average since 1972.

If anything, it suggests that the average American lives in a cocoon. They are concerned for themselves and their immediate family, and are satisfied that they are not being repossessed like the family over the street, and still have a job to hang on to. Despite the hugely vaunted Christianity of the Christian nation, the average American is indifferent to his neighbour, as long as he’s all right.

The motto is not “Do unto others as you would be done by”, it is “I’m all right, Bud, You look after yourself”.

Fortunately, recent proposed cuts in public services have been firmly rebutted by encouraging united strength and purpose. Is the US sleeping Leviathan waking up? Let’s hope so, then you smug financiers, corporate bosses, bankers and bought men will have to watch out! Once enough of the people stop being taken in by the great Washington Repucrat-Demoblican farce, then the wagon of unity may be rolling, and the callous and greedy exploiters of the rest of us will be crushed by its irresistible momentum.

How the Bankers’ Greed is Ruining the US Internationally

The United States has slipped from second place to 13th out of 34 countries in the number of students enrolled in university, and it is stagnating in science teaching—in 17th place—and doing poorly in math, in 25th place. In contrast, more Chinese are enrolling in universities, which means there will be more scientists in China than there are in the US, driving up Chinese scientific output, said Penn State professor Caroline Wagner at the annual meeting of the American Association for the Advancement of Science (AAAS).

At a time when the greed of bankers has forced United States and Europe to make severe cuts in government spending on social services, but also on support for industry and science, China has significantly increased spending on science and technology, said Denis Simon—a professor at Penn State University who is also the science and technology adviser to the mayor of the Chinese city of Dalian—at the AAAS meeting. Simon said that the Chinese hope to spend around 2.5 percent of gross domestic product (GDP), the sum of a nation’s annual output, on research and development by 2020.

In the United States, Republican lawmakers are talking about trimming a billion dollars from the National Institutes of Health (NIH), the world’s largest public research institute, and slashing funds for other science and research agencies, negating the billion dollar boost President Barack Obama proposed for science and health research in his 2012 budget. Republicans want to make Joe and Jane pay in poorer wages and conditions for the trillion dollar US deficit, much of which was incurred by the treasury in bailing out moribund banks “too big to fail”. Knowing that, the mainly Republican banksters milked their bonus scam—collecting huge bonuses for selling and reselling junk bonds in a type of Ponzi scheme which inevitably would collapse, but not before bankers and financiers had lined their pockets at the expense of the taxpayer.

The Republicans also want to slash funds for education by some $5 billion, even though Education Secretary, Arne Duncan, has warned that the United States must better educate its kids, especially in science and math, or risk becoming uncompetitive in the global economy.

Another sign that China is moving to the top of the science league, the number of quality scientific papers coming out of the country—measured by how often they are cited in other studies—is growing exponentially. How often a peer reviewed scientific paper is cited by another scientist is a key measure of quality. The proportion of Chinese papers being cited is up, while the proportion of citations of US and European papers is down. China already produces more research papers in the fields of natural science and engineering than the United States, which as yet remains in total the biggest producer of scientific papers in the world. But Wagner warned:

On current trends, China will publish more papers in all fields by 2015.

Who are the “Mindless” Ones?

UK Students Protest Vigorously Over Political Liars

Yesterday the Liberal Democrats in the UK’s Con-Dem coalition government voted to increase university tuition fees by 100 to 200 percent. Some did vote against and a few abstained, and even a few Tories voted against the outrageous measure, but sufficient members voted for it to ensure a government majority of 21 in the House of Commons. The Tory House of Lords, newly packed by Tory leader, David Cameron, with a load of Tory time servers, will back the motion.

Students are so outraged at this that they have started a campaign to register their utter disapproval by confronting the state, and particularly, that section of the coalition, the Liberals who solemnly pledged before the election that they would not support the Tory proposals for higher university fees under any circumstances. Liberal leader, Nick Clegg, says the pledge was a mistake because the Treasury is worse off than he and his party had reckoned. It therefore cannot be honored.

Indeed, there can be no honor among thieves and Clegg had his own excellent education because he is from a long line of them. His family are among the country’s rich, he had a private education at Westminster school, and went to one of the UK’s best universities, Cambridge, because his father was a banker, and his varied family background includes Ukrainian nobility. He is, in short, not without a few quid to his name.

Now, having joined the coalition government led by another rich Tory, David Cameron, he has decided that the country can no longer afford free, or even cheap, university education because the Treasury is deep in debt, and the country has to fill it and meanwhile service its borrowing requirements—we have to borrow from the banks to pay the interest on our debts, and so we cannot afford public services like free education any more!

The Banks—Robbers!

The students, however, unlike many trades unionists and Labour Party supporters are intelligent enough to realize the public purse is empty because we have given all our money and more to the banks to bail them out of insolvency when they were on the verge of collapse two years ago through speculative investments meant to further enrich already super rich financiers, and line the pockets of their agents the bankers simultaneously, through the enormous bonuses they paid themselves for robbing the rest of us.

All of this done under the innocent and admiring gaze of the pathetic supporters of the criminal New Labour Party of one T Blair, otherwise known as T Bliar, who is now coining it for his neoconservative takeover of the British traditional trades union and socialist party on behalf of the big criminals who bribed him to support the US Bush administration in its greedy adventures, and are now faithfully rewarding him with their spare change.

Students know it, and are young enough and angry enough to want to do something about it, unlike most of the British working class who are gulled into a zombic stupor by a media controlled by the same class of megarich criminals feeding them mindless reality TV, soap operas and a “get rich quick” celebrity culture that blurs the distinction between fantasy and reality for many. The students, after sleeping for almost fifty years, are now waking up to the state of the nation. We are not broke, but we have been robbed in a blatant scam, and the students of the future are among the ones who will have to pay for the heist.

Note thet these mindless students are not protesting for themselves. Most of them will have graduated before the measures are brought in, but the university under-graduates have been supported by many school pupils and students of pre-university sixth form colleges, who know they will be affected by the government class-laden legislation. Class-laden? Young people from poor families will hesitate getting into massive debt before they even start on their adult careers, and the assurances of grants and special measures for the poorest does not impress them. They are sops to get the measures passed, and need be worth nothing more than the Liberal “pledge” to oppose such acts. That was plainly worthless!

Mindless MPs

Yesterday’s demonstrations ended up chaotic, and the culprits are being called names by the media—“mindless” and “thugs”. It is the media pundits who are mindless, and the idiotic MPs who think they can gull the people forever. The students are showing that is not the case. Unjust societies fall apart because people will not put up with it, and the British are beginning to realize how they have been tricked. It is simply that they have lost the will or the courage to publicly demonstrate their diaproval, but students are leading the way.

The students are not “mindless”, it is liberal MPs like the local empty-headed idiot, Don Foster, who represents the rather posh city of Bath. Someone threw a rock through his window, and Mr Foster responded that he did not enter politics to win a popularity contest but to change things. He seemed quite oblivious to the fact that he actually stood as an MP in a popularity contest—it is called democracy! MPs are elected when they gain the popularity of the electorate, and that popularity is based on what they promise to do.

The half witted Foster, reneged on his promise and merely had a brick through his window. Next time, if the electorate are learning anything, he will be evicted. The local MP for this constituency of Somerton and Frome, David heath, a Liberal Democrat, who has had a narrow majority for several elections can hardly expect to remain in his seat in parliament now that he too has voted against the students’ and the country’s best interests. These two and their fellow opportunists will doubtless by then have abandoned all pretence of being Liberals and will have joined the Tories.

Mindless Media

Media pundist are never “mindless”. They write their columns and usually have sufficient ego not to want to humble themselves even when proved to be wrong. One of them, on Murdoch’s TV tried to bombast an NUS spokesman into condemning the NUS organized demonstrations, but the young man admirably stood his ground despite the anchor man speaking over him, and attempting to harass him into slipping up. The demonstrations had been taken over by “anarchists”! It is a general assertion made by media pundits trying to make out that demonstrations are fundamentally vehicles for what they also like to call “rent a crowd”, professional rioters. Quite where these professionals hide or make aliving when there are no riots to lead, is hard to figure, but they always emerge mysteriously when a demonstration gets out of hand. No one ever seems to figure that it is frustration and anger at being duped by professional careerists called policemen and politicians.

No one ever considers either that, it being in the interest of the state apparatus to discredit demonstrations by introducing petty but violent acts, they have undercover agents provocateurs actually causing and inciting trouble. Any self respecting professional rioter, having broken into Millbank or the Treasury building would have set them both on fire, but these professional anarchists only set fire to a few placards and wooden staves in the streets. These professionals could hardly expect to get employed again, could they?

Mindless Police

Certainly the police professionally anger crowds by their so-called “crowd control” techniques. They “kettle” crowds or sections of a large crowd—confine them by force—into a narrow space and refuse to allow them to pass. This naturally causes immense frustration when people want to relieve themselves or to go for food or drink. Yesterday, a section of the crowd were induced to cross Westminster Bridge to escape the kettle, but then were stopped half way across and confined for hours in the narrow space of the bridge. The police are meant to be the guardians of the right of lawful citizens to move along the Queen’s highways, but they wilfully break the law themselves, with the result that violence is the only way to escape. Innocent people have died in these kettles, and a young man needed a three hour brain operation yesterday after a baton attack. It goes without saying that any rogue policeman will be innocent.

The police too are “mindless” because the media are forever highlighting violent protests but ignore peaceful ones. A peaceful “candle lit” vigil across the bridge in the South Bank was hardly mentioned by press or TV. So the provocation of the police and their plain clothes agents might actually be giving the publicity that will arouse the sleeping giant of the British public and their generally compliant trades unions from their slumbers.

The Effective Tactic—Destabilization

If Parliament relies on demonstrations being forever peaceful, and therefore of no consequence so it can simply ignore them, it is making a big error, one it has often made before. The present situation is plain to anyone who thinks just a little. The rich get richer even when the country is, they tell us, broke. Only last week, Ireland had to go cap in hand for a large multibillion Euro loan to bail out its own banks. This week the Irish banks are handing out tens of millions in bonuses, just as British and US banks have done. The banks and their employers, the super rich financiers, gleefully put up two fingers to the world, while the people have to scratch about to pay their mortgages and rents, aye and taxes, if they can. That is why the students are angry, and why we all should be angry too. It is why we should support them and ignore the whingeing special pleading of the press and the broadcast media.

Listen! The richest 1 percent of the world’s population owns over $200 trillion. No need to guess where most of the 1 percent live. Maybe as little as 5 percent of this largess would solve the world’s economic problems, but Obama has just caved in to the rich man’s lobby in the US called the Republican Party, and most of the world’s leading developed countries have bailed out their banks while putting the burden of their empty treasuries on the people, not where it should be, on the minority who own as much as the rest put together. Governments ought to be joining together to ensure the rich are taxed and pay it.

Curiously many, the most intelligent among the rich, do not mind it as a temporary burden! Those rich people not among the “mindless” realize that their riches are most secure in a stable world, and corporate and financial greed is now destabilizing the world. That they do not like. It follows in all logic that the best way to get the rich to pay their fair share towards economic stability is to threaten instability. That is what “mindless” students are doing.

Greg Philo: Privatize the National Debt

Britain is the sixth richest nation in the world. Total personal wealth in the UK is £9 trillion, and the richest 10% of the British people—about a million wealthy families—own £4 trillion of it, with an average per rich family of £4 million. The bottom 50% of the British people own just 9% of the wealth, the least wealthy being the bottom 10% of households who are in debt—they owe more money than they own.

Yet we are in such a crisis, having emptied the treasury to prop up the banks, and to pay the £ million bonuses the parasitic banking community take whether we like it or not, that we are all to suffer the worst cuts in public services ever! The media sing in chorus “we are all in it together”, but does it seriously sound as though we are, with such a vast inequality of wealth distribution?

The economy has already recovered sufficiently for the banks to have started making obscene profits again, and to have already returned to giving themselves financial commendations in the shape of fatter bonuses than ever, and the country is already richer than it was before the financial crisis, despite the media bleating. Maybe it is because the economy meant is that very wealth I made account of in the paragraph above. With stock markets rising, banks making profits, cash bonuses and champagne eqally profusely flowing, the sector of the economy that covers the rich are indeed looking up, and the reason is that the rest of us are having to count the cost!

There is no popular mandate for Con-Dem policies that will radically reduce growth, put up unemployment and affect the bottom 6 million people hardest—those who have no wealth at all. The Con-Dems are doing this though their popularity is already steeply in decline, and Labour has already gone ahead of the other parties according to a recent poll. The consequence of what they are doing is likely to be serious social unrest. The British people are not passive and it is a myth that they will accept policies that they see as profoundly unfair. The consequences of unfair policies is revolution—as a minimum, mass demonstrations, strikes, popular unrest and perhaps rioting.

Professor Greg Philo of the Glasgow University Media Group says the answer is plain, and he has checked it out via public opinion surveys and interviews with wealthy people. He proposes a one-off tax of just 20% on the wealthy decile. This tax of 20% on the very richest people in Britain would raise £800 billion—a fifth of the total £4 trillion they own. That is enough pay off the national debt and dramatically reduce the deficit, since interest payments on the national debt are a large part of government spending.

Nor would this rich segment of society actually have to produce the money immediately, if at all! Voodoo economics? Not at all. If the richest 10% assume liability for the £ billion national debt, it would be cleared from the governments accounts, reducing the deficit instantly to a manageable size. That would instantly relieve the pressure on markets which would soar, and the stock and bond owners, including the banks would immediately be presented with remarkable gains which would go a long way to returning to them the money they have agreed to pay out. Indeed, they can pay their 20% tax in installments out of the earnings they would be making, and even if that were not sufficient to pay off all of their 20%, they could simply agree to pay it along with their death duty.

Philo's group commissioned a YouGov poll of over 2,000 people to test attitudes to the tax and found it was an extremely popular proposal. 74% of the population approved (44% strongly), and agreement was spread right through social groups. Only 10% did not approve. Those in the higher income brackets were more supportive than the less well paid of the wealthy class. They were the ones who realized the measure would turn out to be beneficial for them as well as the country, not merely in the immediate returns they would get, but also in their desire to keep society on an even keel. They knew that unrest, strikes and riots would reduce confidence and profits, and that the poor are the ultimate consumers, and stripping them of the little they have will just depress markets. Even if they were unable to recover all of the 20%, they knew they were wealthy enough not to actually miss the loss.

A problem for the British and US economies is that much of the nations' resources have been directed into inflated property values, which is where many of the bonuses ended up. Extra houses is buried money. It is not liquid and is inaccessible. The tax would re-circulating some of it once the government had no need to cut services, as public spending, stimulating growth. Unemployment resulting from the proposed cuts would be avoided, extra benefits would then also be avoided, and tax revenue would not fall.

At present, we have a lot of billionaires resident in the UK who pay no tax at all. There is quite a separate call for them to pay their just taxes. If people have substantial assets, want to live here and to be British, then they will have to pay their bit. The public will have little time for non-doms, exiles or what will be seen as unacceptable attempts at avoidance. This proposal is similar, but is a mere one off necessity. The Revenue offices know who have the wealth and collecting it ought not to be a problem. The main problem indeed is likely to be the extent of privatization of revenue collection. That, most sensible Britain’s will think, should not be in private hands. Already it has led to absurd mistakes and injustices, so it should be returned fully to the civil service.

The absurdity of privatizing many of our public services is itself a symptom of the desperate need for reliable sinks for the surplus capital swilling around the world. It should be used to put people into work, not to squeeze even more unneeded capital out of them.