United States | Lawrence van Rijn - Law Lord to be

I stumbled upon a small piece in the Guardian by Dean Baker (at http://www.theguardian.com/commentisfree/2013/feb/08/us-deficit-obama-grow) this morning. He wrote it in 2013, yet in light of several events this story still holds some visible issues, even though I completely disagree with it. It was however a nice piece to read. Dean Baker is the co-director of the Centre for Economic and Policy Research, which means that he has degrees in economy and I do not. So, why do I disagree?

This view comes through the following quotes. “First, the United States has large deficits because the collapse of the housing bubble sank the economy“. That in itself does not sound incorrect, yet when we look at the definition of ‘deficit’, we should accept this simple one: “The amount by which expenses exceed income or costs outstrip revenues“. So how is this housing bubble a US deficit problem? Houses are built through real-estate people, developers and such. So, there is a little truth in there. As these people made a huge loss, they would not be paying any taxation, which means the US is not getting money through taxation, which means that they get less money for their budget. So, in that regard we are all fine. The linked 2008 economic downfall was due to several idiots (or geniuses depending on your viewpoint) in Wall Street and Financial districts who were playing with all kinds of mortgage based hedge funds and in that way ‘lost’ about 8 trillion dollars, which comes down to devaluating 32 million houses from newly built to the instant value of $0. This comes down to the housing value of 27% of the US households became null and void with the instant snap of the fingers.

So, yes, we can agree that this impacts the deficit as taxation goes down, however should we consider that part of these events is because the US treasury failed completely? Consider that there was a recognised housing bubble at the time that Henry Paulson (who was at that time the big boss of the US treasury). The deficit grew to such an extent because the elements were not properly monitored. So in this view the quote “First, the United States has large deficits because the collapse of the housing bubble sank the economy” should be “The United States diminished its income as the US Treasury did not act preventive, proactive and in a timely fashion in regards to the housing bubble“.

The second quote we see by Dean Baker is “Second, if we had smaller deficits the main result would be slower growth and higher unemployment“. Well, that is one bubble we can pinch through. If taxable amounts increase deficit goes down, if expenditure goes down, then so does the deficit. Neither forces us into the view that this will result in higher unemployment rates, neither prove that there will be a slower growth.

This all depends on the application of the tools available. Yes, taxing extensively is a massive downturn, but is that the approach that should be taken? Am I against taxing the ultra-rich? That depends on the way taken. I do not think it is fair to just tax the rich, yet removing some of the tax shelters would be a very acceptable approach. Consider the following quote by the NY Times (at http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html)

“In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent“. This is less than people making $36,251 – $87,850, they pay 25%. So, there is a massive imbalance here, which leads to the approach that a smaller deficit could be gotten by properly addressing a flawed tax system.

This is where we get to the news of January, (at http://www.theguardian.com/world/2014/jan/04/bill-de-blasio-new-york-mayor-inaugurated), where a quote is given that reads like an incorrect act. “But the most controversial element is to extract an extra $530m (£323m) in taxes from those earning more than $500,000 a year to pay for universal pre-kindergarten education and after-school programmes“, so New York wants to get a little more cash. I have mixed feelings, yet I do understand this move when the top 1% of the people in New York makes up for 39% of all income. Those objecting to this better understand that the tax increase amounts to an annual rise of $973 for those making a million a year, which is less than the price of a coffee a day. My issue is the fact that tax deductions allow for millionaires and billionaires to pay 4% less than those on an average income, which adds up to massive amounts of dollars. Dealing with these factors will not slow growth, it will not lead to a higher employment rate, it will however allow for a smaller deficit as the US grows its collected income from tax donations.

The third quote by Dean Baker was “Third, large projected long-term deficits are the result of a broken health care system, not reckless government ‘entitlement’ programs“. In my view it is both. I have a hard time speaking out against certain entitlements. Not because they exist, or should exist. The reason is that the 2008 crash left a massive population in an unfair position. A large group of people lost their house and homestead and these people had to be protected in some extended form. The fact that those who caused it walked away with amounts in that year would be beyond what the victims would earn in an entire lifetime is just obscene. Consider that in 2008, the year of the crash, Merrill Lynch handed out over 3 billion in bonuses (at http://www.forbes.com/2009/01/28/wall-street-bonuses-business-wall-street_0128_bonuses.html) and it happened just before they merged with the Bank of America. When we look at this all, we see entitlements, who largely impacted the US government due to what should be seen as high stakes poker games played by the commercial sector, which was loosely ignored by the US treasury. When we see the broken health care system, it seems that there is an issue there. We see the massive amounts of issues on all kinds of newscasts where we see that Obamacare will cost the people. Their premiums will double and in some cases triple. Now, on the side of the people there is outrage. I get that, but look at it from the other side. Does this mean that for decades, the people got medical care, whilst not getting properly charged for it? It is nice and easy to lash out at President Obama on this, but is this his fault? The actual costs, the investigations and as such the in-activities would play into the hand of President Obama. I might just casually ask whether the US treasury should have looked at this. Was this an area that had been ignored for way too long?

So in the end, Dean Baker makes one point that holds ground to some extent.

So why was I looking into this article 405 days (actually 4926 hours and 17 minutes) later? This is all due to an article that the NY Times published (at http://www.nytimes.com/2014/03/20/business/us-current-account-deficit-is-smallest-in-14-years.html). Let’s not get fooled here. This article is about trade deficit, not the US deficit or the US debt. The quote “Big gains in exports and overseas investment income narrowed the United States’ current-account deficit in the fourth quarter to the lowest level in 14 years“. So for one quarter they were only short a little north of 80 billion. It reads like when you have debt, flaunt it!

The valid question that you the reader might have is how the articles and the issues are linked. Well, they are not, but the issues of data behind them are. We are offered information by those who should give us clarity and information, yet, we have been ‘bamboozled’ for some time with an overly deep view in information, so the overview is gone for nearly all readers. When you want something to pass unseen, you just make sure that you give the people everything. It is something some researchers do. When the initial results lead to that one question, you just give them all 1247 result tables; there is a high chance that the certain question ends up not getting asked.

The last point to leave you with is the small issue that is playing thanks to some Ukrainian disagreements. How will these numbers impact when the acts of the EEC and the US will result in Russia closing the gas tap to Western Europe. As the Dutch NOS reported earlier this week, the Rotterdam Harbours are ready to switch and get their energy through the provision of liquid gas from the USA, the trade deficit will get smaller even still, yet the 20% hike the consumers in Europe face is something the people will only read about after the fact.

The US has a long way to go, with a national debt of well over 17,500 billion and a total debt of around 61,350 billion, being short by 80 billion seems like a pinch not worth mentioning, yet consider that the US is forecasting an total income of 3 trillion (before expenses), in 2013 the deficit ended up being $680 billion, which makes it unlikely that 2014 is a turning point for now, which means that the total deficit will grow for at least one more year. Then and only if severe cuts are found, it will still take up 70 years for the national debt to be gone, there is no way to predict how long the total debt of 61 trillion will take. So when you read all the upbeat articles on how there are three issues with the deficit remember, it will take 3 Generations (3G) to get rid of the national debt, the USA, now a 3G nation, how happy can anyone in the free world be for the foreseeable future?

This is a story I find hard to write. Is it a story? That will always depend on your point of view. You see, there is a danger to blindly sight with one person, one group or one vision. We all have it. We think of a certain path being the only one and as such treading of that beaten path is always a dangerous one because we as people do not walk off the path. Some know the horrors that this beaten path protects us from.

This is the story of Israel and an ally, who due to impending bankruptcy had to make a leap of faith. This is how I see the Iran issue. Let me be clear. I have nothing against Iranians. I remain in the belief that Ahmadinejad was an utter idiot and as such no trust could go to Iran. The image of its current President Hassan Rouhani is entirely different, yet, I still have an issue with the dangers to Israel. No matter how good Rouhani is. He will be up for re-election and after two terms, what will Iran get? Will it get another Ahmadinejad? Until the Muslim nations all acknowledges the existence of the state of Israel, giving them nuclear abilities is just too dangerous in many cases. In my mind Ahmadinejad wanted immortality, to be remembered in prayer for all eternity. To get that, he only needed to destroy Israel, something that could be achieved with only one successful nuclear missile strikes. Would Ahmadinejad do this, if he had nuclear abilities during his reign? In a heartbeat! Now, I am fully aware that most Muslims are not like this. But it only takes one elected one to take that step. This is a very real danger! So, I personally do not expect that Hassan Rouhani is like that at all (it is just the image I have of that man). But if we consider that to be elected in Iran, that three of several elements are: administrative capacity and resourcefulness, a good past record, trustworthiness and piety. If Ahmadinejad passed these, then who else will be able to pass these checkpoints?

So what is this about debt?

Well, the US has too much of it and it needs billions each day to stay afloat because the US cannot get a grip on its spending. With an oil filled Iran, the US will be willing to do business and it desperately needs money! If you doubt that reasoning, then consider the Cuban issue. Why after decades is there still so much pressure, both economically and technologically? Consider this pdf from the US military: “Policy Options for a Cuban Spring” (at http://usacac.army.mil/CAC2/MilitaryReview/Archives/English/MilitaryReview_20120630_art014.pdf)

I wonder if this stand-off approach would be there if there were large oil fields under Cuba. A Cuban response, even though I find it slightly too ‘propagandistic’ (is that a real word?) is at http://www.cuba.cu/gobierno/alarcon-tvi.html, where it states as they quoted US senator Warner “The current policy treats Cuba more cruelly than Iraq and North Korea, where US embargoes are less restrictive.” I cannot vouch whether that was said, whether that person quoted it, but there seems to be a ring of truth in the sentence. It seems that Iran still supports Hamas, a known terrorist organisation, but as this endangers Israel and not the United States, the US will deal with Iran. So, is this an act of betrayal against its long term ally Israel? That depends on several matters, but that is how many would see it. That view is endorsed even more if we consider that Cuba is still under the heaviest of sanctions.

So is the US being sanctimonious? Considering the pressures that remain it does look that way. Whatever you think of the Cuban regime that is in place. It has been there for 50 years. So, the approach of half a century that did not work has to change. There are additional questions. This quote gives one view “Human rights advocacy groups have criticized Castro’s administration for committing human rights abuses. Human Rights Watch stated that his government constructed a ‘repressive machinery’ which deprived Cubans of their ‘basic rights’ “. Another view could be that the US had strangled Cuban Economy for half a century and as such certain developments could never take place. It is possible that my view is the wrong one, yet as we see how the pressure on Iran is now faltering, where they endured economic sanctions less than half the time Cuba had, additional questions must be asked. Israel has been placed in a dangerous situation and I wonder what promises John Kerry will make on his visit when serious questions will be asked of him. I wonder if the Cuban situation will enter the discussion at some point.

As for my added label of ‘sanctimonious’?

Consider that the US Tax evasion law (FATCA) which was initially supposed to start in January 2013, has now been delayed until July 2014. There is an interesting read (at http://www.deloitte.com/assets/dcom-unitedstates/local%20assets/documents/tax/us_tax_fatca_faqs_061711.pdf). So as Reuters reported another delay (at http://www.reuters.com/article/2013/10/29/usa-tax-fatca-idUSL1N0IJ1N020131029) the question becomes, who does the US government serve? More and more evidence comes to light that it is not all US citizens, but mostly the Rich and corporate ones. So when things get out of hand, consider the reason why things got out of hand and not just the ‘who’ dropped the bomb (if that happens). Those who allowed for the dangers will have plenty of blood on their hands and history must record and openly name and shame those involved too.

It could be the only true historical manifest to stop greed (nothing else seems to work).

There is a third side to this, if America would be willing to allow for indirect terrorist support (Iran supporting Hamas) through economic windfall, then are we not obliged to pronounce the US bankrupt? If freedom is only gotten through ledgers and by approval of the banks and the wealthy, then how free are US citizen really?

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