Feeds:
Posts
Comments

Much has been made in the US propaganda heavy public media about the recently aborted ‘rebellion’ by Russia’s mercenary ‘Wagner’ division led by former fast food restauranteur Russian oligarch, Prigozhin. The US media and neocons in US government are trying to paint a picture the whole affair means there’s a deep crisis in the Russian government and major weakening of Putin’s regime. At least that’s the spin. But western media has not been all that accurate to date in its public portrayal of events in the Ukraine war.In reality, the Prigozhin affair likely has enabled a consolidation of the Putin regime in Russia.

Origins of the Rebellion?

Alternative facts are slowly coming out removing the veil of events that may have led up to Prigozhin’s rebellion.

One such fact is that the Russian Ministry of Defense (MOD) moved to disband the Wagner forces well before the Prighozin rebellion. It announced weeks ago, back in April, it would sign contracts with individual Wagner fighters, paying them even more than Prigozhin, to re-sign up with Russian special forces units. But if they signed a contract with the MOD, then they obviously wouldn’t re-sign up with Prigozhin. That meant Prigozhin would not get paid anything remotely close to the $950M he got from the MOD in 2022-23, and likely lose his other $900B his food supply business to the military he was also paid last year.

Prigozhin’s contracts with the MOD for military services and supplies had already expired in early May 2023 and had not been renewed by the time of his rebellion. In short, Prigozhin the capitalist oligarch–selling military services and food to the MOD–was about to go out of business.

One might ask: was his rebellion therefore a desperate effort on his part to force the Russian government to renegotiate a new deal? Was Prigozhin just another capitalist oligarch maneuvering with the Russian government to protect his cash flow?

Another interesting fact misrepresented by western media is the timing of the Prigozhin rebellion. The Wagner forces were being scaled down in terms of logistics and support by the MOD right after the fall of Bakhmut. It appears they were being pulled out of Bakhmut even before its final fall. And if Seymour Hersh is right, the Wagner was moved out of the front lines and sent to a camp near the Russian city of Rostov-on-Don, the regional Russian army center for the Ukraine war, just after the fall of that city. Unlike the western media’s report, therefore, Wagner forces did not ‘march on Rostov-on-Don’, take over that city from the Russian military by threat of force, and from there embark toward Moscow. They were already posted there at Rostov before they decided to move out on the road to Moscow, and then only 2-3,000 of the Wagner roughly 10,000 force followed Prighozin on the march toward Moscow.

Yet another interesting set of facts now just coming out is that Prigozhin reportedly had met with US/UK intelligence sources in Africa several months ago (where Wagner forces have for some time been engaged). What was that all about? Reportedly Russian intelligence discovered the contacts just days before Prigozhin’s rebellion and march on Moscow. Did that discovery by Russian intelligence just days before precipitate his march on Moscow prematurely? And why did the media in the UK predict a coming rebellion by Wagner in the days leading up to the fact? US/UK intelligence may therefore have apparently known Prigozhin’s rebellion was coming. If so, that raises another set of questions: were they waiting to launch the Ukraine offensive which was repeatedly delayed? The timing of the rebellion with the launch of the Ukraine offensive is suspect. Was it just coincidence? Or something more?

The picture painted by Prigozhin in the media in the weeks leading up to the rebellion was that the Wagner, the allegedly sole victors of Bakhmut, were suffering unusually high casualties in taking that city because the Russian MOD weren’t providing them ammunition or air support. There was even the claim by Prighozin that Russian forces fired on the Wagner while in Bakhmut. As the story goes, that was the last straw for Prighozin and set in motion his eventual decision to march on Moscow.

Just as likely, however, Wagner’s pull out of Bakhmut and relocation to a camp at Rostov-on-Don occurred just as Prigozhin’s contract with the MOD was allowed to lapse and the MOD simultaneously started offering Wagner fighters a better contract to join its own special forces. That coincident series of events signaled to Prigozhin his lucrative $2 billion annual revenue game was up. Those events—not claims of insufficient military support—may have just as plausibly initiated Prighozin’s decision to rebel.

With his forces encamped just outside Rostov-on-Don, Prighozin may then have been tipped off that his contacts with western intelligence were discovered by Russian intelligence. There are reports Russian intelligence discovered his communications in Africa with western sources just days before he started his march north to Moscow. He may have thus sensed he had no choice but to gamble and ‘march on Moscow’ to see if he could cut a new deal for himself. He apparently did cut a deal: Instead of being arrested or worse, he was allowed to go to Belarus in a deal mediated by Belarus president, Lukahsenko. It’s unlikely Prighozin will remain in Belarus, however. He’ll be eventually prosecuted while in exile, according to Putin. Belarus might eventually extradite him back to Moscow–once the Wagner fighters are fully dispersed into the Russian army. Or put him on an airplane to some destination. It’s not likely he’ll remain in Belarus. Where will he turn up? No one knows. Maybe somewhere in the west. Or else a Moscow detention center.

To sum up: like any good capitalist oligarch, in an act of desperation, Prighozin tried to keep his $2 billion business going as the Russian MOD decided to cut him loose. When discovered communicating with western intelligence sources, he then played his ‘last card’ and launched his march on Moscow to try to force a new deal for himself. It was a desperate adventure, a kind of a Russian version of Texas ‘all in’ poker. When his bet was called, however, he was unable to raise table stakes further. Lukashenko had to bail him out with a mediated offer to come to Belarus. So Prigozhin’s no longer a player at the war table. But he’s headed for the parking lot with lots of profits in his pocket. The question is: will he get out of the lot safely with all that cash on him?

The 3rd Ukrainian War Offensive

The demise of Prigozhin and absorption of Wagner forces may represent a new phase in Russia’s ‘Special Military Operation’. It may signal Russia has decided on a primarily defensive strategy to hold and consolidate the four provinces (called ‘Oblasts’) that it formally integrated into Russia back in September 2022. It will allow the Ukrainian army to deplete itself bashing its head against Russia’s deep defense wall in the Donbass and south, launching a desperate offensive without air superiority and at with a 10 to 1 disadvantage in artillery. On its face, the offensive appears quite reckless in a military sense.

After four weeks, the offensive is already going badly, with few gains at great costs in men and material. If Ukraine cannot make real gains by mid-July when NATO next meets in Vilnius, Lithuania, some kind of NATO reassessment of the war might occur. A failed Prigozhin rebellion plus Ukraine’s growing losses in men and equipment with little gained raises the specter that Ukraine cannot ‘win’. The dominant scenario for NATO becomes the need to provide a flow of a bottomless pit of money and equipment, and perhaps even support troops from the west. It’s extremely unlikely European NATO members—except for the most aggressively anti-Russian in the case of Poland and the Baltics—are willing to pay that price.

As this writer has noted elsewhere, no amount of western ‘wonder weapons’ can ensure a Ukrainian victory so long as Russia holds clear advantage in air superiority and a 10 to 1 advantage in artillery and is deeply entrenched in defensive positions. The ground forces of Ukraine and Russia are about equal in the eastern and southern fronts, about 500,000 each facing each other. But offensives require at minimum a 5 to 1 troop and equipment advantage to prevail—notwithstanding the defense having air superiority and artillery advantage as is the case of Russia.

In short, neither side—Ukraine or Russia—has sufficient advantage over the other to mount a successful offensive. Ukraine is reportedly already losing men and material at a 10 to 1 ratio, about 13,000 killed in less than a month.

Russia apparently realizes the relationship of military forces is such that a World War II-like general offensive by either side cannot succeed and has dug in defensively; Ukraine has not. And perhaps it can’t. The NATO/US forces providing the Zelensky regime with billions of dollars and euros and a flow of military hardware (dispersed in small distributions weekly) cannot make a decisive difference in the eventual outcome of the war.

First the media told us that javelin missiles would be decisive. Then it was US provided Himars and M777 artillery. Then Patriot anti-missiles. Then German Leopard tanks. Next it will be US F-16 fighter planes. And then maybe US long range ATACMS artillery capable of hitting the Russian naval base at Sebastopol, Crimea. It’s all somewhat reminiscent of Nazi claims in 1944 of wonder weapons that would turn the tide of war. No amount of hardware can substitute for the lack of sufficient ratio of troops on the ground needed to carry out a successful offensive. Again, that ratio is about even today. Ukraine would need at least 2-3 million men in arms for a successful general offensive. It has about a fifth of that.

Clausewitz vs. the Ukraine War

The principles of warfare explained several centuries ago by the Prussian military theorist of modern war, von Clausewitz, still pertain to the Ukraine War (principles later reaffirmed by Napoleon’s theorist de Jomini, Britain’s Riddell Hardt, China’s Mao, Vietnam’s Giap and others). At the top of the list of those principles are the need for a Concentration of superior forces, Internal lines of logistics and supply, sufficient Reserves, and Mobility and Surprise.

Ukraine’s military no longer has any of these advantages. It enjoyed a temporary advantage in Concentration of Forces and Surprise in its late summer 2022 ‘Kharkhov offensive’. But its temporary forces advantage, and its element of surprise, at that time disappeared when Russia mobilized 400,000 more troops of its own over the winter and concentrated them in the east and south.

Russia itself initially had an advantage in forces when it first launched its early February-April 2022 initial offensive; but that too ended once Ukraine mobilized several hundred thousand more over the summer 2022 and concentrated them on the Kharkhov northern front. With superior concentration of forces in the Kharkhov region last August, Ukraine also caught the Russians by surprise. Ukraine’s army achieved significant military gains in that, the 2nd major offensive of the war. However, that ended when the Russians consolidated in the Donbass and Kherson oblasts and mobilized another 400,000 or so over the winter and spring and then concentrated them in defensive positions. That left a more or less equal standoff between the two armies that prevailed until Ukraine launched its current June offensive, the 3rd in the war.

In its current (3rd?) offensive Ukraine now once again lacks the ability to concentrate sufficient forces for a successful offensive. It needs five times that of Russia’s roughly 500,000 entrenched in defensive positions. Add to that Russia’s artillery and air superiority advantage—and the dribbling out of equipment and ammunition from NATO—and the result is Ukraine cannot mount an adequate offensive. Its current offensive violates nearly all the principles of war.

Its offensive is also historically anachronistic: Ukraine’s current offensive is reminiscent of World War II of armored battalions rushing across open plains. But modern war technologies (drones, smart bombs, missiles, satellite and electronic surveillance, etc.) make maneuvering by armored battalions across open plains virtually impossible, especially when lacking air superiority and artillery advantages.

Modern warfare, whether in Ukraine or elsewhere, is no longer about massive tank and mechanized armor clashes, as it was on the ‘eastern front’ in 1942-44. Those kind of offensives are no longer possible given the development of modern military technologies.

The war on the ground will therefore soon freeze as Ukraine’s inability to break through Russian defenses becomes increasingly evident. Nor will Russia thereafter make the same mistake and launch a similar offensive thus repeating Ukraine’s offensive strategy debacle.

A New Phase in Russia’s SMO?

Russia’s Special Military Operation has moved to a defensive strategy that welcomes Ukraine to break its head against its defensive-in-depth stone wall, back up by air superiority and its 10 to 1 artillery advantage.  Ukraine will eventually begin to run out of men on the ground should it continue to try to advance into deep defenses and without air superiority and at a 10-1 artillery disadvantage. It will therefore halt its offensive by August.

When that happens NATO & US will have to decide whether to openly send in support troops (the presidents of Poland and Lithuania are now in Kyiv discussing just that with Zelensky). If so, these NATO troops will likely occupy non-combat roles in western Ukraine so that Zelensky can release more Ukrainian troops to the eastern front. No doubt Poland also sees this as an opportunity to begin staking out a claim to western Ukraine (formerly Polish territory) should an eventual armistice deal with Russia end up splitting Ukraine like a Korea–which remains a not unlikely outcome.

But if Russia strategically has decided on a defensive strategy and if Ukraine cannot show clear signs of success in its offensive, the US/NATO won’t feed it arms and supplies forever. Russia’s strategy is longer term. It will let Ukraine try to destroy itself on its defensive lines and wait out the political changes that will almost certainly come with the US elections in November 2024 (and in several European parliamentary changes before that).

Biden as LBJ: Historical Parallels

Biden’s war in Ukraine will prove to be a US neocon-instigated geopolitical disaster, just like the neocon instigated wars in Afghanistan and middle east were. Those wars cost the US $8 trillion with little to nothing to show for it. Indeed, perhaps even less than little, as Saudi Arabia, Iran, Turkey, Egypt and others are now tilting economically toward China and the BRICS in trade relations and away from the US dollar by increasing trade in bilateral currencies and gold.

The US’s Ukraine war adventure may thus prove the event that sinks the Biden electoral ship, already taking on economic water from chronic inflation, deeper recession and growing regional bank instability.

Biden’s electoral support fades by the month. The Fed has just signaled central bank interest rates will now continue to rise through the rest of 2023 while inflation in services is likely to remain chronically high nonetheless. Higher interest rates will certainly slow the US economy and precipitate an earlier recession, as many economists now predict. Further Fed rate hikes may also precipitate a worse regional banking crisis by year end and into 2024, as deeper recession and higher costs combine to exacerbate a Commercial Real Estate sector already top heavy with $17 trillion in junk debt–of which no less than $1.7T will need to ‘roll over’ (i.e. be refinanced) within the next 12 months. The Fed in its recent ‘stress tests’ this past week projects a possible scenario of 40% asset price deflation in the Commercial Real Estate sector. That means banks may balk at refinancing much of the existing junk debt. In turn that means bankruptcies, defaults and more bailouts by the Fed and FDIC will be required for a regional banking system already being propped up by the Fed at the rate of $95 billion/week.

It’s hard to imagine how chronic inflation, deeper recession, and possibly worse banking instability converge in an election year, 2024, without a further drop in Biden/Democrat voter support. Meanwhile, opponents will point to the Ukraine war and how the US is throwing away more than $250 billion now to keep Ukraine’s government, economy and military afloat.

Biden is repeating the errors and failure of his predecessor and president, Johnson, in 1968. LBJ’s regime crashed on the rocks of the war in Vietnam. Double digit inflation followed that US defeat, as did the then worst recession since great depression in 1973-75. Isolated cases of financial instability accompanied the inflation and the US had to abandon the Bretton Woods international monetary system in 1973 and allow the US dollar to deeply depreciate. Economic recession was followed by stagnation and political instability.

All that was the legacy for the rest of the 1970s decade, originally set in motion by the costs and consequences of the Viet Nam war. Costly, unwinnable wars have a way of coinciding with economic deterioration and are typically followed by unforeseen political consequences.

Today something similar to the crisis of the 1970s is emerging, albeit perhaps this time even more serious in terms of economic decline and political instability. As in the 1970s, the US economy is experiencing chronic inflation. Recession is on the near horizon if not already here (certainly for the goods side of the economy in manufacturing and construction the downturn has already clearly begun). US imperial hegemony abroad is also under growing challenge. The US dollar is being undermined globally. Meanwhile, financial instability is no longer limited to the weakest individual companies, as in the 1970s, but is a problem now industry-wide (regional banks) and may become so even sectorally and globally (financial system at large).

Today the world has been economically globalized and financialized, and due to technology prone to almost immediate contagion in the event of a major financial instability event. So the situation is even more precarious for Biden’s re-election 2024 than it was for the Democrats in 1968. Despite his legal issues, Trump is already out-polling Biden and the gap is widening, especially among independents.

Some Conclusions

Russia decided weeks ago, apparently back in March, that Prigozhin and Wagner forces’ offensive tactics were unnecessarily wasteful of men and material and had little role to play in its defensive strategic shift. Prigozhin and Wagner served their purpose in the early phase of the Ukraine war. But Prigozhin would not accept this. His ‘business model’ was based on a contrary military strategy. Nor could he accept that his contract was not being renewed and his assets (his best fighters) were being sold off to another buyer (Ministry of Defense). The Russian MOD simply pulled the plug on him and the lights went out on any possibility for another $2 billion revenue for 2023-24!

The deeper meaning of the rebellion is that Prigozhin outlived his usefulness to the Russian war effort. As Seymour Hersh argues, Wagner’s offensive style special operations no longer fit with Russia’s primarily defensive strategy at this juncture. Wagner suffered significant losses in its offensive at Bakhmut, most of which were recently conscripted prisoners Prigozhin had quickly mobilized, briefly trained, and rushed to the front–something it appears Ukraine is now doing as well. Russia’s army isn’t about to continue waste manpower in that way at this stage of the conflict. It doesn’t have to. But apparently Zelensky must if Zelensky wants to continue the inflow of US/NATO arms and money. He must continue his offensive further, at least throughout the summer, and must as well show some results. Yet the principles of war dictate he cannot.

The Prigozhin affair is just a blip in the broader geopolitical and economic picture in which the US/NATO and Russia are engage in an immediate proxy war in Ukraine but are sliding into an even broader political and economic conflict globally. The Prighozin rebellion is just a single event in a war that appears increasingly protracted and unwinnable for Ukraine. The outcome of the war will be determined by economic and political events in the west, not by movements of troops and armor across the plains of eastern Ukraine. That latter scenario is the last war, not likely to be repeated in the world of new and increasingly lethal even non-nuclear military technologies.

Ukraine’s offensive, the 3rd thus far in the war, is a military adventure that violates just about all the major principles of war laid out by Clausewitz and successful military theorists and practitioners the last 250 years.  Either those principles are now irrelevant in the Ukraine conflict, or else Ukraine is doomed to eventual military defeat and thus will never through force of arms recapture its four lost ‘oblasts’. Moreover, the longer it continues an unwinnable war on the battlefield, the more ‘real estate’ it may end up losing.

For its part, Russia has apparently decided not to launch a similar World War II like offensive, sending battalions of armor and men across the open Ukraine plain crashing into an adversary’s defensive in depth wall. Modern military technology has rendered that kind of offensive, reminiscent of World War II, outmoded. Tanks and armor–just like warships at sea as well–are ‘sitting ducks’, as they say. Both sides in the conflict are discovering that the hard way. But, as another saying goes, the generals always fight the last war.

Domestically in the US, continuing the war produces few political gains by Biden’s administration and growing political losses. The war reaps little domestic political gain and in fact risks significant damage for Democrat 2024 political strategy, as the US economy continues to weaken into 2024. Prosecuting the war may be important to the elites within the ‘beltline’ of Washington DC but are of little interest to the American people. The continuation of the war and its economic costs are eerily reminiscent of Biden’s prior Democrat president colleague, Lyndon Johnson, whose political fate also crashed on the rock of a former failed military adventure called Viet Nam.

Jack Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, 2020. He publishes at Predicting the Global Economic Crisis

…………………………………………………………..

(The following is a re-post of the just published article on Prighozin’s rebellion by Seymour Hersh)

Open in app or online

PRIGOZHIN’S FOLLY

The Russian ‘revolt’ that wasn’t strengthens Putin’s hand

Share

The Biden administration had a glorious few days last weekend. The ongoing disaster in Ukraine slipped from the headlines to be replaced by the “revolt,” as a New York Times headline put it, of Yevgeny Prigozhin, chief of the mercenary Wagner Group.

The focus slipped from Ukraine’s failing counter-offensive to Prigozhin’s threat to Putin’s control. As one headline in the Times put it, “Revolt Raises Searing Question: Could Putin Lose Power?Washington Post columnist David Ignatius posed this assessment: “Putin looked into the abyss Saturday—and blinked.”

Secretary of State Antony Blinken—the administration’s go-to wartime flack, who weeks ago spoke proudly of his commitment not to seek a ceasefire in Ukraine—appeared on CBS’s Face the Nation with his own version of reality: “Sixteen months ago, Russian forces were . . . thinking they would erase Ukraine from the map as an independent country,” Blinken said. “Now, over the weekend they’ve had to defend Moscow, Russia’s capital, against mercenaries of Putin’s own making. . . . It was a direct challenge to Putin’s authority. . . . It shows real cracks.”

Blinken, unchallenged by his interviewer, Margaret Brennan, as he knew he would not be—why else would he appear on the show?—went on to suggest that the defection of the crazed Wagner leader would be a boon for Ukraine’s forces, whose slaughter by Russian troops was ongoing as he spoke. “To the extent that it presents a real distraction for Putin, and for Russian authorities, that they have to look at—sort of mind their rear as they’re trying to deal with the counter offensive in Ukraine, I think that creates even greater openings for the Ukrainians to do well on the ground.”

At this point was Blinken speaking for Joe Biden? Are we to understand that this is what the man in charge believes?

We now know that the chronically unstable Prigozhin’s revolt fizzled out within a day, as he fled to Belarus, with a no-prosecution guarantee, and his mercenary army was mingled into the Russian army. There was no march on Moscow, nor was there a significant threat to Putin’s rule.

Pity the Washington columnists and national security correspondents who seem to rely heavily on official backgrounders with White House and State Department officials. Given the published results of such briefings, those officials seem unable to look at the reality of the past few weeks, or the total disaster that has befallen the Ukraine military’s counter-offensive.

So, below is a look at what is really going that was provided to me by a knowledgeable source in the American intelligence community:

“I thought I might clear some of the smoke. First and most importantly, Putin is now in a much stronger position. We realized as early as January of 2023 that a showdown between the generals, backed by Putin, and Prigo, backed by anti-Russian extremists, was inevitable. The age-old conflict between the ‘special’ war fighters and a large, slow, clumsy, unimaginative regular army. The army always wins because they own the peripheral assets that make victory, either offensive or defensive, possible. Most importantly, they control logistics. special forces see themselves as the premier offensive asset. When the overall strategy is offensive, big army tolerates their hubris and public chest thumping because SF are willing to take high risk and pay a high price. Successful offense requires a large expenditure of men and equipment. Successful defense, on the other hand, requires husbanding these assets.

“Wagner members were the spearhead of the original Russian Ukraine offensive. They were the ‘little green men’. When the offensive grew into an all-out attack by the regular army, Wagner continued to assist but reluctantly had to take a back seat in the period of instability and readjustment that followed. Prigo, no shy violet, took the initiative to grow his forces and stabilize his sector.

“The regular army welcomed the help. Prigo and Wagner, as is the wont of special forces, took the limelight and took the credit for stopping the hated Ukrainians. The press gobbled it up. Meanwhile, the big army and Putin slowly changed their strategy from offensive conquest of greater Ukraine to defense of what they already had. Prigo refused to accept the change and continued on the offensive against Bakhmut. Therein lies the rub. Rather than create a public crisis and court-martial the asshole [Prigozhin], Moscow simply withheld the resources and let Prigo use up his manpower and firepower reserves, dooming him to a stand-down. He is, after all, no matter how cunning financially, an ex-hot dog cart owner with no political or military accomplishments.

“What we never heard is three months ago Wagner was cycled out of the Bakhmut front and sent to an abandoned barracks north of Rostov-on-Don [in southern Russia] for demobilization. The heavy equipment was mostly redistributed, and the force was reduced to about 8,000, 2,000 of which left for Rostov escorted by local police.

“Putin fully backed the army who let Prigo make a fool of himself and now disappear into ignominy. All without raising a sweat militarily or causing Putin to face a political standoff with the fundamentalists, who were ardent Prigo admirers. Pretty shrewd.”

There is an enormous gap between the way the professionals in the American intelligence community assess the situation and what the White House and the supine Washington press project to the public by uncritically reproducing the statements of Blinken and his hawkish cohorts.

The current battlefield statistics that were shared with me suggest that the Biden administration’s overall foreign policy may be at risk in Ukraine. They also raise questions about the involvement of the NATO alliance, which has been providing the Ukrainian forces with training and weapons for the current lagging counter-offensive. I learned that in the first two weeks of the operation, the Ukraine military seized only 44 square miles of territory previously held by the Russian army, much of it open land. In contrast, Russia is now in control of 40,000 square miles of Ukrainian territory. I have been told that in the past ten days Ukrainian forces have not fought their way through the Russian defenses in any significant way. They have recovered only two more square miles of Russian-seized territory. At that pace, one informed official said, waggishly, it would take Zelensky’s military 117 years to rid the country. of Russian occupation.

The Washington press in recent days seems to be slowly coming to grips with the enormity of the disaster, but there is no public evidence that President Biden and his senior aides in the White House and State Department aides understand the situation.

Putin now has within his grasp total control, or close to it, of the four Ukrainian oblasts—Donetsk, Kherson, Lubansk, Zaporizhzhia—that he publicly annexed on September 30, 2022, seven months after he began the war. The next step, assuming there is no miracle on the battlefield, will be up to Putin. He could simply stop where he is, and see if the military reality will be accepted by the White House and whether a ceasefire will be sought, with formal end-of-war talks initiated. There will be a presidential election next April in Ukraine, and the Russian leader may stay put and wait for that—if it takes place. President Volodymyr Zelensky of Ukraine has said there will be no elections while the country is under martial law.

Biden’s political problems, in terms of next year’s presidential election, are acute—and obvious. On June 20 the Washington Post published an article based on a Gallup poll under the headline “Biden Shouldn’t Be as Unpopular as Trump—but He Is.” The article accompanying the poll by Perry Bacon, Jr., said that Biden has “almost universal support within his own party, virtually none from the opposition party and terrible numbers among independents.” Biden, like previous Democratic presidents, Bacon wrote, struggles “to connect with younger and less engaged voters.” Bacon had nothing to say about Biden’s support for the Ukraine war because the poll apparently asked no questions about the administration’s foreign policy.

The looming disaster in Ukraine, and its political implications, should be a wake-up call for those Democratic members of Congress who support the president but disagree with his willingness to throw many billions of good money after bad in Ukraine in the hope of a miracle that will not arrive. Democratic support for the war is another example of the party’s growing disengagement from the working class. It’s their children who have been fighting the wars of the recent past and may be fighting in any future war. These voters have turned away in increasing numbers as the Democrats move closer to the intellectual and moneyed classes.

If there is any doubt about the continuing seismic shift in current politics, I recommend a good dose of Thomas Frank, the acclaimed author of the 2004 best-seller What’s the Matter with Kansas? How Conservatives Won the Heart of America, a book that explained why the voters of that state turned away from the Democratic party and voted against their economic interests. Frank did it again in 2016 in his book Listen, Liberal: Or, Whatever Happened to the Party of the People? In an afterword to the paperback edition he depicted how Hillary Clinton and the Democratic Party repeated—make that amplified—the mistakes made in Kansas en route to losing a sure-thing election to Donald Trump.

It may be prudent for Joe Biden to talk straight about the war, and its various problems for America—and to explain why the estimated more than $150 billion that his administration has put up thus far turned out to be a very bad investment.

Given the Fed’s latest rate decision (a pause with threat of soon resuming rate hikes?), check out my June 16, 2023 Alternative Visions radio show discussion & my thesis that US monetary policy faces deepening contradictions & is increasingly inefficient & ineffective:

TO LISTEN GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-fed-s-rate-pause-and-the-growing-contradictions-of-us-monetary-policy/

SHOW ANNOUNCEMENT

What’s behind the Fed’s decision to temporarily halt rate hikes this past week? Then raise rates later again this year? Dr. Rasmus explains the Fed is more concerned in the short run with exacerbating the continuing regional banking crisis than intensifying efforts to slow inflation by raising rates. Fed policy faces a contradiction: raise rates and worsen banking system instability (which the Fed has been offsetting with weekly injections of $95B to stabilize since March), or, not raise interest rates for a while and live with inflation. Rasmus dissects the latest CPI report that shows continuing services sector inflation of 6.3%-6.6%, even as goods inflation has moderated and energy inflation fallen significantly from last year’s highs. Rasmus explains how and why monetary policy faces growing contradictions and is becoming increasingly ‘inefficient’ (i.e. high rates don’t reduce inflation as effectively as in times past, while lowering rates to zero have less effect on stimulating the economy as well. The causes are late neoliberal capitalism’s globalization and financialization. How and why fiscal policy is also facing growing contradictions and why US global economic hegemony is weakening as de-dollarization trends also appear to be gaining momentum.

Listen to my latest 2 short (15 min.) radio interviews on the recent debt ceiling deal, the continuing banking crisis, future Fed rate hikes, and latest inflation and jobs reports. GO TO:

1. CRITICAL HOUR Radio

https://drive.google.com/file/d/1mhytOM5p3Tn1oJ0LxqoFLTzr2Y83ir1G/view

2. BY ANY MEANS NECESSARY Radio

https://drive.google.com/file/d/1iq5bqipZBvbVYD1sIDTIqnCX1gT7C6y6/view

Over the weekend, US House of Representatives speaker McCarthy and president Biden announced a tentative agreement on raising the debt ceiling. The deal—almost certain to pass Congress later this week—represents a typical Neoliberal fiscal policy deal.

Ever since neoliberal capitalism policies were introduced under president Carter in the late 1970s, and subsequently expanded dramatically under Reagan, Neoliberal fiscal policy has been characterized by accelerating Pentagon & war spending; simultaneous cutting of business-investor taxes; acceptance of consequent escalating budget deficits—and in turn US national debt levels; and the use deficit/debt to cap and reduce social program spending.

That Neoliberal fiscal policy mix of tax-spending-deficit policies mix clearly defines the recent McCarthy-Biden deal.

In the roughly two year agreement, extending from the present to the end of February 2025, Pentagon spending will rise by 11% in the 2024 fiscal year which begins October 1, 2023. That 11% is estimated at $885 billion. A further increase in Pentagon spending will certainly take place the following fiscal year, commencing October 1, 2024, but the deal doesn’t say how much further rise in Pentagon spending is projected for that second year.

Pentagon vs. Defense Spending

It’s important to understand that the $885 billion in Pentagon spending is not exactly the same as US defense spending. Around $200 billion more in defense related spending occurs in US government departments in addition to the Pentagon.

For example: all the oil costs for the US military (the largest single consumer of fossil fuels in the world) comes out of the Energy Dept. budget. Veterans benefits spending for past wars comes out of that dept. Then there’s CIA’s spending on mercenary and its own field forces. So too for the State Dept. which finances similar covert military activities. Part of Homeland Security costs can be considered defense. And then there’s the so-called ‘black budget’ of secret US military weapons development that never even gets reported in publications of the US budget or by the US press. That’s been estimated around $75 billion a year. So actual, total annual US Defense spending—in contrast to Pentagon spending alone—is probably around $1.1 trillion a year.

Taxation & the National Debt

Economists estimate that tax revenues, or lack thereof, are responsible for about 60% of deficits and therefore the debt (which is just the accumulation of annual deficits). Tax revenues are reduced as result of tax cutting and/or reduced revenues as a result of slow economic growth when recessions occur—or when post-recession recoveries are weak.

The McCarthy-Biden deal prohibits raising business-investor taxes the next two years. Businesses and investors will thus be assured that their Trump era $4.5 trillion in tax cuts, December 2018-28, will continue. Estimates of the cost of the lost tax revenues caused by the 2018 Trump tax cuts, from 2023 through 2028, will be about $2.7 trillion thus contributing significantly to a further rise in the national debt by 2025.

A Short History of US Debt Trajectory 1980-2025

That the McCarthy-Biden deal has nothing to do with the national debt is obvious from the fact two more years of US deficits, and thus the national debt, are expected to continue to rise by $4 trillion—up from the current $31.4 trillion level. US government debt levels will therefore exceed $35 trillion by the time the next ‘debt ceiling negotiations’ occur. However, neoliberal capitalism is not concerned about rising debt levels per se. (Which means it is not at all traditional ‘liberalism’ in the historical sense of that term).

During the era of US neoliberal capitalism, which extends from 1978-79 to the present, US national debt has accelerated. When Reagan took office in 1981 it was less than $1 trillion. By 2001 it had risen to approximately $6 trillion. Starting 2001 the national debt accelerated sharply under George W. Bush, as Mideast war spending escalated and Bush era taxes were cut by $3.8 trillion simultaneously.

The US national debt further accelerated under Obama. When the latter assumed office in January 2009, the national debt was around $10 trillion. Obama then cut taxes and introduced spending totaling around $787 billion in his 2009 fiscal stimulus program. He subsequently then extended the Bush tax cuts another two years in December 2010, to 2012, when they were to expire in December 2010 after their initial 10 year period. That two year extension cost another $803 billion. Then, outdoing himself, starting in 2013 Obama once again extended the Bush era tax cuts, permanently this time, at an estimated additional lost tax revenue cost of $5 trillion.

Obama thus cut taxes, composed about 80% of cuts for businesses and investors, more than $6 trillion. The tax cuts, the slow economic recovery from the great recession that also reduced US tax revenues, and the $787 billion (plus another $50 billion or so for ‘cash for clunkers autos’ and first time home buyers assistance) spending in his 2009-10 fiscal stimulus programs, resulted in the US debt rising to about $18 trillion when Obama left office in January 2017.

Then came Trump’s $4.5 trillion additional tax cuts passed in December 2017, followed by year one (2020) of the Covid economic shutdowns and spending all of which pushed the national debt level to about $22 trillion when Trump left office.

The collapse of the economy in 2020-21 driving down tax revenues, the further tax cuts in 2020 through 2022, the continuing of Trump’s 2018 tax cuts, the bailing out of businesses in the various Covid economic stimulus bills of 2020-21, the roughly $3 trillion spent on households’ assistance during Covid, the mere 1% GDP growth in 2022 (December 2021 to December 2022) that depressed tax revenues, the funding of the Ukraine war ($200 billion in 2022-23), and Biden’s roughly $1.65 trillion spending on three business investment stimulus bills of 2022 (Infrastructure, Semiconductor & Manufacturing subsidy, and the energy industry misnamed ‘Inflation Reduction Acts), and the steady rise in interest on the debt from less than $300 billion in 2019 to estimated $600 billion in 2023—all converged to accelerate the national debt to its $31.4 trillion current level.

It is perhaps not coincidental that the tentative debt ceiling agreement (the 79ths in US history by the way, extends only to 2025. That’s when the $4.5 trillion Trump tax cuts of 2018 come up for a vote in Congress on whether to make them permanent instead of expiring in 2028. So we can expect another even more contentious debt ceiling crisis déjà vu in about two years.

The McCarthy-Biden Social Program Spending Cuts

As with all neoliberal fiscal policy measures, the deal’s 11%+ Pentagon-Defense spending increase—combined with the absence of any tax hikes in the deal—has meant cuts to social program spending.

The main cut in discretionary social programs is the agreement to freeze all 2024 fiscal year spending at 2023 levels, and in 2025 to allow a mere 1% increase in such spending.

On Monday, May 30 House Speaker McCarthy publicly bragged, when measured in dollar terms, the deal results in $2.1 trillion in social program spending reduction. Biden says it’s ‘only’ $1 trillion. The New York Times estimates the two year deal amounts to a cut in total discretionary spending—defense and non-defense—is 18%. However, since the Pentagon gets a 11% (plus more in 2025) increase, the net discretionary non-defense spending cuts are likely in the 20%-25% range.

Total available funds for discretionary social program spending—like education, transport, health, etc.—in the 2024 fiscal year is capped at $704 billion. But it’s really only $583 billion after $121 billion spending on Veterans is taken out of the $704 billion total non-defense. The US considers Vet spending as spending on social programs but it should be considered Defense spending.
The $583 billion for discretionary non-defense spending contrasts with the $886 billion for the Pentagon alone. Or $1 trillion for Pentagon and Vets. (And still more for other ‘defense’ costs distributed in other departments of the US government).

In other terms of the deal involving discretionary social program/non-defense spending:

An estimated $30 billion in unspent Covid funds is cut. That’s another de facto $30 billion taken out of the economy.

In environment policy, fossil fuel companies are now able to expedite reviews and obtain licenses quicker. And West Virginia Senator, Joe Manchin, gets billions in funding for his gas pipeline in his state.

Republicans get an initial ‘bite of the apple’, as they say, in work requirements for single adults as a precondition for receiving food stamp benefits. The prior age rule for work requirement was raised from 50 to 54, with exemptions for veterans and the disabled. McCarthy did not get his additional work requirement rule for recipients of Medicaid.

Biden gets to keep his $60 of his $80 billion to hire IRS agents. $20B is redirected to other spending. That means only 7200 more agents will be hired during the deal’s two years. The research arm of Congress, the Congressional Budget Office, has estimated if more agents were not hired then continuing tax avoidance and tax fraud would reduce tax revenues by $204 billion. (The CBO has also estimated that failure to raise taxes by ending Trump’s 2018-28 $4.5T tax cuts for business and investors results in a loss of $2.7 trillion in US government tax revenues).

Biden compromised with McCarthy as well on the subject of student loan forgiveness. In addition to preventing any student loan forgiveness, McCarthy wanted immediate restoration of student loan payments plus retroactive back interest added to loans during the Covid period moratorium. In exchange for McCarthy dropping these draconian proposals, Biden agreed to resume student loan payments this August 2023.

Deficits and Debt Continue

Previously it was noted that Neoliberal fiscal policy is fundamentally unconcerned with annual deficits and a rising national debt. That’s no less true in the current debt ceiling deal.

McCarthy may brag that the agreement amounts to a $2.1 trillion reduction in non-defense spending over two years due to the freeze and 1% caps. But the truth is that the annual deficits will continue to rise in the $1.5T to $2T per year range. Independent estimates are the US debt will continue to rise by $4 trillion by the end of the deal. That’s more than $35 trillion by the end of fiscal year 2025. Interest on that debt this year will rise to approximately $600 billion, up from less than $300 billion in 2019.

The causes are obvious: No rescinding of Trump’s 2018 tax cuts (which the CBO estimates will add $2.7 trillion to the debt). Continued below historic average US GDP growth which reduces tax revenues as well. Third, an ever-rising Pentagon and Defense spending trajectory, as the US funds the Ukraine war while preparing for another, even bigger one in west Asia with China before the end of the decade.

Debt Ceiling As Political Theater

The US has raised the debt ceiling 78 times before the current negotiation. This writer has argued the recent negotiations are just a ‘debt ceiling dance’ and predicted it too will be raised, a 79th time. And it has.

It’s virtually certain the deal will be approved by both the US House and Senate and signed by Biden by next weekend at the latest. McCarthy’s margin in the House was a mere 217-215 vote in support of his initial proposals. By agreeing to a two year non-defense spending freeze and 1% caps—or in other words a $2.1 trillion and 18% discretionary spending cut—Biden clearly gave in far more than he needed to. One would have to conclude McCarthy and the Republicans came out ahead in the negotiations.

The House will vote on the deal on Wednesday, June 1, 2023 and will likely pass it. The Senate will take a little longer but will pass it as well by the weekend. Biden will sign by the weekend. Thereafter, both sides will ‘spin’ the deal and exaggerate their claims. They’ll both hide behind a claim that the economic sky would have fallen in had they not agreed. A dubious claim at best.

Then the real negotiations will begin. For the political theater surrounding the debt ceiling negotiations was in fact an attempt to renegotiate the Biden 2024 budget that commences next October 1, 2023. McCarthy simply used the debt ceiling issue to cut programs early. And he’ll come back for a second ‘bite of the apple’ at the end of this summer.

And if Biden’s negotiating performance during the debt ceiling negotiations is any indicator, he’ll get even more concessions from Biden

Jack Rasmus
Copyright 2023

Interested in how the October 2013 debt ceiling crisis ‘came down’? How Obama agreed to massive spending cuts and extended George Bush’s tax cuts for another decade? Here’s some of my Alt Visions shows in October 2013 on the debt ceiling dance

1. https://jackrasmus.com/2013/10/14/the-coming-debt-ceiling-settlement-2-0/
2. https://jackrasmus.com/2013/10/17/my-radio-show-commentary-on-debt-ceiling-deal-2-0/

3. https://jackrasmus.com/2013/10/24/whats-happening-to-the-1-2-trillion-sequester-cuts/

And here’s my December 16, 2013 Summary of the Debt Ceiling fiscal-austerity deal agreed to by Obama and the Republican US House of Representatives’.  DEJA VU anyone?

The US Budget Deal of 2013: Pentagon & Contractors Win; Workers, Vets, Retirees Lose

This past week the US House of Representatives voted 332 to 94 in favor of changes to the federal budget for 2014. The House vote in effect adopted the proposals of the ‘Joint Congressional Committee’, chaired by Teaparty House leader, Paul Ryan, and Senate Democrat, Patty Murray, set up in October as part of the interim agreement between the two parties to end the more than two week shutdown of the federal government that month.

The October interim agreement called for the Ryan-Murray committee to provide budget change proposals by December 2013 for a Congressional vote by December 13, 2013. Last week 169 Republicans and 163 Democrats in the House voted for the Ryan-Murray proposed changes to the 2014 budget; 62 Republicans voted no, as did 32 Democrats. The measure now goes to the Senate for what will likely be a formal vote of adoption, and then in January to a Congressional Appropriations committee in time for meeting the mid-January 2014 deadline date agreed to last October for changes to the federal budget.

The Official ‘Spin’

The deal agreed to this past week by both wings of the single Party of Corporate America (POCA)—aka Democrats and Republicans—has been hailed as a pragmatic, albeit ‘narrow’ agreement that shows the two wings can once again agree on fiscal changes and deficit cut matters, thus ending an era of dysfunction that has characterized US government since 2010. The narrow budget deal, amounting to only $85 billion over the next two fiscal years, 2014-2015, is also being defined as the end of efforts to reach a ‘grand bargain’ on taxes and deficit cutting, as well as the end of the Republican wing Teaparty faction’s ability to disrupt government to promote its own interests and Teaparty candidates in Republican primaries. However, none of these arguments ‘spinning’ the budget deal are accurate.

The disfunctionality may have ended for the interests of corporations, investors, and wealthy Americans, i.e. the 1%, but it hasn’t for the remainder of households, as the details of the recent deal below clearly illustrate. Last week’s Ryan-Murray deal clearly promotes the interests of defense corporations, the Pentagon, and the wealthy—at the direct expense of millions of US government workers, millions more unemployed, veterans, retirees, and tens of millions of Americans on food stamps.

The deal furthermore represents not the reversal of ‘austerity’, as is claimed, but rather a clever restructuring and continuing of austerity in new forms. It reflects a ‘grand bargain’, but a bargain achieved in stages, piecemeal, rather than in an ‘all in’ form that might generate more severe and resentful public political reaction.

Not least, the deal just concluded represents not the ‘taming’ of the Teaparty faction in the Republican wing, but instead the realization by the rest of the two traditional wings of POCA that, in the 2014 midterm Congressional election year about to begin, they had better go slower on austerity in 2014—as they had previously during the 2012 national elections year. The deal is thus a ‘politicians deal’, and neither a fiscal stimulus nor a deficit cutting exercise.

Restoring the Sequester Defense Cuts

In 2011 House Republicans and the Obama Administration agreed to cut $1 trillion in discretionary social spending programs, mostly education, plus another $1.2 trillion of discretionary cuts deferred until 2013 called the ‘sequester’, about half of which represented defense spending cuts.

The 2012 election year that followed was a hiatus in terms of austerity and new deficit cutting. However, once the November 2012 elections were over, both wings of the POCA immediately proceeded to the ‘fiscal cliff’ deal of January 2, 2013, which raised taxes on wage earners while allowing $4 trillion in Bush tax cuts to continue for another decade. However, the fiscal cliff deal of January 2013 conveniently left the matter of the ‘sequester’ spending cuts for a later date, including the $600 billion in defense cuts. That segmenting of tax issues from spending issues, and especially defense spending, was necessary to enable the full passage of the $4 trillion in tax cuts for the rich. A more complicated deal, including spending reductions, would have risked the passage of the tax cuts.

Beginning March 1, 2013, the $1.2 trillion ‘sequester’ spending cuts were allowed in 2013 to take full effect for non-defense spending, while defense spending cuts called for in the sequester were shielded and offset in various ways by the Obama administration, with the concurrence of Congress, during 2013. Pentagon spending this past year continued at the $518 billion level (not counting another $100 billion or so for ‘overseas contingency operations’—i.e. direct war spending). That both the House Republicans and Senate controlled Democrats had every intention throughout the past year to restore the Defense spending cuts called for in the sequester, was evident in the House Budget and Senate budget proposals, both of which called for increasing Pentagon spending to $552 billion in 2014, according to a New York Times front page article of December 11, 2013.

The just concluded Ryan-Murray budget deal is also primarily about addressing (and reversing) those defense spending cuts and continuing to shield defense from current and future spending reductions. Were the sequester defense spending cuts allowed to go into effect in 2014, Pentagon spending would have declined from current $518 billion in 2013 to $498 billion in 2014. The Ryan-Murray budget deal sets Pentagon spending for the coming year at $520.5 billion.

As the Washington Post indicated in a lead article on December 12, with the recent budget deal the US House has temporarily retreated from deficit cutting “in favor of Republican concerns about the Pentagon budget”, with the Wall St. Journal adding on December 13 that the budget deal is “nearly erasing the impact of sequestration on the military”.

That the budget deal is primarily about restoring defense cuts was further evident in that the same day the budget deal was passed by the House, it immediately voted to pass the National Defense Authorization Act, NDAA, thus locking in the restoration of Pentagon spending in 2014 at a level above 2013.

Domestic Non-Defense Spending: Smoke & Mirrors

Advertisements
Report this ad

While the proposed sequester defense cuts have been essentially restored for 2014-15, and effectively removed from further deficit spending cuts in the future (as had tax hikes on the rich with last year’s fiscal cliff deal), the cuts to discretionary non-military spending programs have not fared as well.
The budget deal calls for restoring $63 billion in total scheduled sequester cuts for the two years, 2014-15. Non-defense program spending restoration is reportedly $31 billion of that. It thus appears that a $31 billion increase in non-defense spending is part of the deal. But domestic spending the past two years, 2011-2013, has declined from a total of $514 billion to $469 billion, or $45 billion. The budget deal raises that to $492 billion. That’s $23 billion, not the reported $31 billion.

Moreover, the $31 billion restoration is predicated on the continuation in the budget of the reductions in payments to Medicare doctors and health providers. If the reductions in payments are rescinded, as they have been every consecutive year thus far for more than a decade, then the $31 billion non-defense spending restoration might very well also be taken away or significantly reduced. $31 billion may not in fact, in other words, actually occur.

Apart from the possible $31 billion reduction, what Congress and Obama appear to restore in in the $31 billion discretionary social spending on the one hand, they are taking away—plus more—with the other. This will occur two ways: first by raising $26 billion in fees (i.e. de facto taxes) on consumers and by taking money from federal workers and veterans pensions; second, by taking $25 billion from the unemployed. So the net effect is a reduction of -$20 billion, not a restoration of $31 billion.

The budget deal directly includes increasing ‘fees’ by $26 billion. $6 billion of that comes in the form of raising federal employees’ pension contributions and another $6 billion by cutting military cost of living increases for military pensions. Another $12.6 billion comes from raising government taxes on airline travel. Thus retirees, government workers, and middle class households will pay $26 billion more as part of the budget deal. But that’s not all.

The budget deal cleverly does not include the $25 billion in cuts to unemployment benefits in its calculation of spending $31 billion more in domestic spending. When deducted from the $31 billion, it’s only a net $6 billion in domestic spending. And when the $26 billion in fees (taxes) are added in, that’s a total of -$20 billion in domestic spending.

Another way of looking at it is that $25 billion in cuts to unemployment benefits is that the amount is just about the same amount of restored defense spending cuts. The unemployed are effectively paying for the defense corporations’ continuation of defense contracts at prior levels.

More than 1.3 million workers will immediately lose their unemployment benefits on December 28, 2013. Another 1.9 million who were projected to continue benefits in 2014 will also now lose them. Emergency benefits that up to now included extended benefits from 40-73 weeks, will now revert back to only 26 weeks. This occurs at a time when 4.1 million workers are considered long term unemployed, jobless for more than 26 weeks. Knocking millions off of benefits will likely result in 2014 in even more millions of workers leaving the labor force, which will technically also reduce the unemployment rate. That’s one way to manipulate statistics to formally reduce unemployment, but it’s not a true reduction of unemployment by actual jobs creation, the latter of which is increasingly a problem of the US economy for more than a decade now.

Advertisements
Report this ad

The budget deal conveniently disregards in its calculations the refusal to extend unemployment benefits. But it’s clearly part of the deal. The failure of the budget deal to extend unemployment benefits, and the net -$20 billion in unemployment benefit cuts plus fee hikes, is an indication of the budget deal’s continuing ‘austerity’ focus. But that’s not all.

Another ‘off track’ discretionary spending cuts about to occur involve cuts to food stamps for millions of recipients, scheduled to occur by February 2014. Today one in eight households now receive food stamps, the result of the deep decline in jobs since 2008, the failure to create jobs at a normal rate since then, and the fact that jobs that have been created since 2008 are predominantly low paid. The cost of the food stamp program, SNAP, has doubled to $80 billion during the so-called Obama economic recovery and the abysmal record of job creation the past five years. Both wings of the POCA are concurrently proposing cuts to SNAP, ranging from $24 billion for the Demo wing and $52 billion for the Teapublican (traditional republicans + Teaparty faction) wing. An increase in food stamps that was scheduled for November 1, 2013 has already been put aside. Further reductions are being negotiated that will conclude by February 2014 that will likely reduce food stamp spending by $8-$10 billion over the two year period, 2014-2015 of the recent budget deal period. As in the case of the $25 billion in cuts to unemployment benefits, the $8 billion more in food stamps spending cuts are conveniently ignored in the budget deal calculations.

The real budget deal thus amounts to $31 billion in domestic spending cuts restored from the sequester—offset by $26 billion paid for by government workers, retirees and vets, by another $25 billion paid for by the unemployed, and still another $8 billion by the poor and working poor in food stamp cuts. What the budget deal gives (+$31 billion) with one hand, it takes away double (-$59 billion) with the other. The net result is a -$28 billion reduction for workers, retirees, vets, and the unemployed, while the Pentagon and defense corporations get off free.

Strategic Significance of the 2013 Budget Deal

The budget deal just concluded fundamentally represents a continuation of deficit cutting for the rest of us, while letting defense corporations and spending off the sequester hook. The budget deal ‘narrowly defined’, at $63 billion restoration of sequester cuts, is misleading at best. While defense spending is restored in the budget deal, Republican and Democrat claims that domestic program spending is also restored is a cynical lie. The $31 billion in domestic spending does not include parallel cuts of $25 billion to unemployment benefits and an additional minimum of $8 billion to food stamps. And when the $26 billion in ‘fees’ are factored in—impacting retirees, vets, government workers, and consumers—the net effect is further spending reductions and continued austerity for the rest, while the Pentagon and corporate military contractors are now exempt.

Contrary to the media spin, there is a grand bargain in progress. It’s just dispersed, implemented over the course of several years since 2011 and in stages. It is being rolled out in segments and in phases. The August 2011 deal. The phony Fiscal Cliff deal. Now the budget deal of 2013, in which defense spending cuts area fully restored while a ‘smoke and mirrors’ game is being played with domestic discretionary spending.
With regard to the ‘smoke and mirrors’, politicians are using the ‘playbook’ of corporate management in union negotiations. They are simply ‘moving the money around’—i.e. restoring $31 billion, which is then taken away in other ways at the expense of government workers, vets, and unemployed.

Advertisements
Report this ad

In a broader strategic sense, what the recent December 2013 budget deal represents is that both wings of the single party of corporate interests (POCA) in the US have been pursuing a piecemeal grand bargain strategy. First $2.2 trillion in spending only cuts are enacted in 2011, leaving the issue of $4.6 trillion in Bush tax cuts to the ‘fiscal cliff’ tax deal of December 2012. Once the tax hikes on the rich were moved off the table with the fiscal cliff deal, the focus shifted to getting the defense spending cuts also ‘off the table’ and minimized. The rich got to keep $4 trillion of the $4.6 trillion with the fiscal cliff deal; the defense corporations and Pentagon now can avoid the $600 billion in previously scheduled defense spending cuts. In the meantime, $1 trillion in 2011 social program spending cuts went into effect and continue, the $500 billion in sequester defined social spending cuts also largely continue, and unemployment and food stamp cuts of hundreds of billions over the coming decade are also implemented. That all amounts to austerity continued via implementation of a grand bargain in stages.

And the game of smoke and mirrors is not over. More phases of the grand bargain in stages are yet to come. What remains is passage of a new tax code, which will include hundreds of billions more in corporate tax cuts. The fiscal cliff addressed tax cuts for wealthy individuals, not their corporations. Now the latter want their tax cuts as well. That potentially is on the agenda in 2014.

Then there’s the matter of ‘entitlements’ spending—i.e. social security and medicare. The official ‘spin’ of the current budget deal is that entitlements are not being touched and aren’t part of the deal. Republicans and the Teaparty faction have not demanded additional entitlement cuts in the current deal. That does not mean social security and medicare won’t be cut in 2014, however. Obama’s 2014 budget calls for no less than $620 billion in social security and medicare cuts over the coming decade. Apparently Republicans and Teapartyers considered that sufficient for a ‘first bite of the apple’. But they’ll be back for more in the final stage of the grand bargain by increments. But entitlement cuts will not be addressed further during an election year of 2014. That comes later, and after corporate tax cuts in 2014—which Obama and the Republicans have been both on record proposing for some time.

Jack Rasmus

Jack is the author of the 2013 book, ‘Obama’s Economy: Recovery for the Few’, Pluto Press, 2012, and host of the weekly radio show, Alternative Visions, on the Progressive Radio Network online at PRN.FM. His website is, http://www.kyklosproductions.com, and his blog, jackrasmus.com. His twitter handle, @drjackrasmus.

Listen to my May 19, 2023 Alternative Visions radio show for what’s really going on with the political theater called debt ceiling negotiations.

TO LISTEN TO GO:
https://alternativevisions.podbean.com/e/alternative-visions-the-debt-ceiling-negotiations-dance/

SHOW ANNOUNCEMENT

What’s behind the debt ceiling negotiations? Is June 1 the real deadline date? Dr. Rasmus describes what’s happened to the national debt since 2000 and the causes for its rise from $4T to $31.4T and why interest on the debt is projected to accelerate rapidly to nearly $1T/yr by end of this decade. How much have the declining share of tax revenue contributed to the annual US budget deficits and thus the national debt? War and Defense spending? Social program spending? Rasmus reviews the various fiscal policies since Covid—3 Covid relief spending plans in 2020-21 followed by 3 business subsidy and investment plans in 2021-22 by Biden. Why the debt ceiling negotiations are really a cover about how much social program spending to cut in the next federal budget beginning October 1, 2023. Once the debt ceiling is raised again, what’s the prospect for further budget deficits and still more increases in the US national debt?

Watch my recent (May 14) presentation to the Niebyl Proctor library on the consequences for the working class of the current accelerating introduction of Artificial Intelligence applications: Topics include: What actually is AI? How AI means the loss of millions of simple decision making jobs and for millions more reduced hours of work, further compression of wages, and de-professionalization of work. Evidence from Goldman-Sach Bank’s May 2023 report predicting loss of 300m jobs from AI by 2030 and other business sources. What occupations most heavily impacted?  How Neoliberal Capitalism since late 1970s has been steadily intensifying labor exploitation and why AI is the latest phase of Neoliberalism’s acceleration of exploitation. The presentation concludes with raising questions about how AI Technology poses important challenges to traditional Marxist analysis of labor exploitation.

To Watch the YouTube hour video + Q&A GO TO:

https://www.youtube.com/watch?v=zuFB7owd_Xk

Recent advancements with ‘Generative AI (e,g, ChatGPT) signify a qualitative leap in AI software machines that is about to radically change capitalist product and labor markets. Investors are now planning hundreds of billions of dollars in new investment in AI product applications.  Goldman Sachs bank just predicted AI to impact 300 million jobs (wiping out some, changing others, reducing hours of work for many others and lowering wages).  If interested in AI & its future impact on the working class, join my video presentation tomorrow to the Niebyl-Proctor Oakland, CA, library Sunday, May 14, 10:30am-11:30am (pst). Q&A follows at 11:30.

Link: https://us02web.zoom.us/j/81133350622?pwd=dUUyUWppbWt6djVTaElISUhocXpSUT09

Major Themes: How Neoliberalism has resulted in a constant intensification of exploitation of workers the past 4 decades. How AI tech change is about to accelerate labor exploitation further. (+ Implications of ubiquitous AI software machine technologies for Marx’s theory of exploitation, his key derivative concepts of ‘organic composition of capital and falling rate of profit tendency, and the 19th century labor theory of value).

The dollar is one of the key lynchpins of the US economic empire. Since the advent of Covid, sanctions on Russia & China, the Ukraine war, and the growing bifurcation of the global economy, developments have intensified toward a shift from the US dollar as global reserve and trading currency. How much is hype, wishful thinking, and actual fact? Listen to my April 29, 2023 Alternative Visions radio show where I discuss this important topic. (Also latest developments in the crash of First Republic Bank as of April 29 and predictions)

TO LISTEN GO TO:
https://alternativevisions.podbean.com/e/alternative-visions-de-dollarization-continued-banking-crisis-updates/

Watch my April 18, 2023 hour long YouTube interview on ‘What’s Next for the Economy’, with the ‘This is Revolution’ group, addressing topics of global ‘de-dollarization’, Fed interest rate monetary policy, inflation, growing US deficits & debt, sanctions and Ukraine war, US banking crisis, recession, US geopolitical strategy in Ukraine & Taiwan, and related topics.

TO WATCH: Go to https://www.youtube.com/watch?v=eokafbspLEI