Sunday, May 03, 2009

Taxpayers, Where Is Your Money Going?

Tax dollars are allocated to financing the war and the "bank bailout"

by Michel Chossudovsky

Global Research, April 20, 2009

Excerpts of Michel Chossudovsky's March 2009 article entitled America's Fiscal Collapse.

This is a "War Budget". The austerity measures hit all major federal spending programs with the exception of: 1. Defence and the Middle East War: 2. the Wall Street bank bailout, 3. Interest payments on a staggering public debt.

The budget diverts tax revenues into financing the war. It legitimizes the fraudulent transfers of tax dollars to the financial elites under the "bank bailouts".

The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment.

The "bank bailouts" (involving several initiatives financed by tax dollars) constitute a component of government expenditure. Both the Bush and Obama bank bailouts are hand outs to major financial institutions. They do not constitute a positive spending injection into the real economy. Quite the opposite. The bailouts contribute to financing the restructuring of the banking system leading to a massive concentration of wealth and centralization of banking power.

A large part of the bailout money granted by the US government will be transferred electronically to various affiliated accounts including the hedge funds. The largest banks in the US will also use this windfall cash to buy out their weaker competitors, thereby consolidating their position. The tendency, therefore, is towards a new wave of corporate buyouts, mergers and acquisitions in the financial services industry.

In turn, the financial elites will use these large amounts of liquid assets (paper wealth), together with the hundreds of billions acquired through speculative trade, to buy out real economy corporations (airlines, the automobile industry, Telecoms, media, etc ), whose quoted value on the stock markets has tumbled.

In essence, a budget deficit (combined with massive cuts in social programs) is required to fund the handouts to the banks as well as finance defence spending and the military surge in the Middle East war. Obama's budget envisages:

1. defense spending of $534 billion for 2010, a supplemental 130 billion dollar appropriation for fiscal 2010 for the wars in Afghanistan and Iraq, and a supplemental $75.5 billion emergency war funding for the rest of the 2009 fiscal year. Defence spending and the Middle East war, with various supplemental budgets, is (officially) of the order of 739.5 billion. Some estimates place aggregate defence and military related spending at $ 1 trillion+.

2. A bank bailout of the order of $750 billion announced by Obama, which is added on to the 700 billion dollar bailout money already allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP). The total of both programs is a staggering 1.45 trillion dollars to be financed by the Treasury. It should be understood that the actual amount of cash financial "aid" to the banks is significantly larger than $1.45 trillion. (See Table 2 below).

3. Net Interest on the outstanding public debt is estimated by the Bureau of the Budget) at $164 billion in 2010.

The order of magnitude of these allocations is staggering. Under a "balanced budget" criterion --which has been a priority of government economic policy since the Reagan era--, almost all the revenues of the federal government amounting to $2.381 trillion would be used to finance the bank bailout (1.45 trillion), the war ($739 billion) and interest payments on the public debt ($164 billion). In other words, no money would be left over for other categories of public expenditure.

TABLE 1 Budgetary allocations to Defence (FY 2009 and 2010), the Bank Bailout and Net Interests on the Public Debt (FY 2010)

$ Billions
Defence including Supplementary allocations; $534 billion (FY 2010), $130 billion supplemental (FY 2010), $75.5 billion emergency funding (FY2009) 739.5
*Bank bailout (TARP plus Obama) 1450.0
Net Interest 164.0
TOTAL 2353.5
Total Individual (Federal) Income Tax Revenues (FY 2010) 1061.0
Total Federal Government Revenue (FY 2010) 2381.0

Source: Bureau of the Budget and official statements. See A New Era of Responsibility: The 2010 Budget
See also Office of Management and Budget [note: since February, the amount of the bank bailout figures has been revised]

* The officially announced bank bailouts to be financed from Treasury Funds. The timing of disbursements could take place over more than one fiscal years fiscal years. The actual value of bank bailout cash injections is substantially higher.

The Budget Deficit

These three categories of expenditure (Defence, Bank Bailout and Interest on the Public Debt) would virtually swallow up the entire 2010 federal government revenue of 2381.0. billion dollars

Moreover, as a basis of comparison, all the revenue accruing from individual federal income taxes ($1.061 trillion), (FY 2010) namely all the money households across America pay annually in the form of federal taxes, will not suffice to finance the handouts to the banks, which officially are of the order of $1.45 trillion. This amount includes the $700 billion (granted during FY 2009) under the TARP program plus the proposed $750 billion granted by the Obama administration.

While TARP and Obama's proposed bailout are to be disbursed over FY 2009 and 2010, they nonetheless represent almost half of total government expenditure (half of Obama's $3.94 trillion budget for fiscal 2010), which is financed by regular sources of revenue ($2381 billion) plus a staggering $1.75 trillion budget deficit, which ultimately requires the issuing of Treasury Bills and government bonds.

The feasibility of a large short-term expansion of the public debt at a time of crisis is yet another matter, particularly with interest rates at abysmally low levels.

The budget deficit is of the order of $1.75 trillion. Obama acknowledges a 1.3 trillion-dollar budget deficit, inherited from the Bush administration. In actuality, the budget deficit is much larger.

The official figures tend to underestimate the seriousness of the budgetary predicament. The $1.75 trillion dollar budget deficit figure is questionable because the various amounts disbursed under TARP and other related bank bailouts including Obama's announced $750 billion aid program to financial institutions are not acknowledged in the government's expenditure accounts.

"The aid hasn’t been requested formally, but appears in a line item “for potential additional financial stabilization efforts,” according to the budget overview. The budget office calculated a $250 billion net cost to taxpayers this year, because it anticipates it would eventually recoup some, though not all, of the money expended to help financial companies.

The funds would come on top of the $700 billion rescue package approved last October by Congress. The White House budgets no money for fiscal 2010 and beyond for such aid." (Bloomberg, February 27, 2010)

Fiscal Collapse

A major crisis of the federal fiscal structure is occurring. The multibillion dollar allocations to the War Budget and to the Wall Street Bank Bailout program backlash on all other categories of public expenditure.

The Bush administration's $700 billion bailout under the Troubled Asset Relief Program (TARP) was approved by Congress in October. TARP is but the tip of the iceberg. A panoply of bailout allocations in addition to the $ 700 billion were decided upon prior to Obama assuming office. In November, the federal government's bank rescue program was estimated at a staggering 8.5 trillion dollars, an amount equivalent to more than 60% of the US public debt estimated at 14 trillion (2007). (See table 2 below)

Meanwhile, under the Obama budget proposal, 634 billion dollars are allocated to a reserve fund to finance universal health care. At first sight, it appears to be a large amount. But it is to be spent over a ten year period, -- i.e. a modest annual commitment of 63.4 billion.

Public spending will be slashed with a view to curtailing a spiralling budget deficit. Health and education programs will not only remain heavily underfunded, they will be slashed, revamped and privatized. The likely outcome is the outright privatization of public services and the sale of State assets including public infrastructure, urban services, highways, national parks, etc. Fiscal collapse leads to the privatization of the State.

The fiscal crisis is further exacerbated by the compression of tax revenues resulting from decline of the real economy. Unemployed workers do not pay taxes nor do bankrupt firms. The process is cumulative. The solution to the fiscal crisis becomes the cause of further collapse.

To read the complete report, please click on the title link above.


Crisis as a Means to Building a Global Totalitarian State

by Olga Chetverikova, Strategic Cultural Foundation, April 23, 2009

As the world financial and economic crisis comes into its own, the Western political leaders and elites are seeking to impress on mankind the idea that this upheaval will end up ‘turning the world into something different’.

Even though the picture of the 'new world order’ remains vague and fuzzy, the main idea is quite clear: A single global government, goes the argument, has to be established if we don’t want general chaos to prevail.

Every now and again, Western politicians mention the need for a ‘new world order’, a ‘new world financial architecture’, or some kind of ‘supranational control’, calling it a ‘New Deal’ for the world. Nicolas Sarkozy was the first to say so, while addressing the UN General Assembly in September 2007 (that is, before the crisis).

During the February 2009 meeting in Berlin convened to prepare the G20 summit, this was echoed by Gordon Brown, who said that a worldwide New Deal was needed. We are conscious, he added, that where the world financial flows were concerned, we would not be able to emerge from this situation with the help of purely national authorities alone. We need the authorities and world watchdogs to make the activities of financial institutions operating in the world markets totally open to us. Both Sarkozy and Brown are protégés of the Rothschilds. Statements made by certain representatives of ‘the global elite’ indicate that the current crisis is being used as a mechanism for provoking some deepening social upheavals that would make mankind – plunged as it is already into chaos and frightened by the ghost of an all-out violence – urge of its own free will that a ‘supranational’ arbitrator with dictatorial powers intervene into the world affairs.

The events are following the same path as the Great Depression in 1929-1933: a financial crisis, an economic recession, social conflicts, establishing totalitarian dictatorships, inciting a war to concentrate power, and capital in the hands of a narrow circle. This time, however, the case in point is the final stage in the ‘global control’ strategy, where a decisive blow should be dealt to the national state sovereignty institution, followed by a transition to a system of private power of transnational elites.

As early as the late 1990s, David Rockefeller, author of the idea of private power that is due to replace the governments, said that we (the world) were on the threshold of global changes. All we need, he went on, is some large-scale crisis that will make people accept the new world order.

Jacques Attali, Sarkozy’s adviser and former EBRD chief, claimed that the elites had been incapable of dealing with the currency problems of the 1930s. He was afraid, he said, that a similar mistake would be made again. At first we’ll wage wars, he went on, and let 300 million people perish. After that reforms will follow and a world government. Shouldn’t we better think about a world government already at this stage, he asked?

The same was stated by Henry Kissinger: "In the final analysis, the main task is to define and formulate the general concerns of the majority of countries, as well as of all leading states with regard to the economic crisis, considering the collective fear of a terrorist jihad. Next, all of that should be converted to a common action strategy… Thus, America and its potential partners are getting a unique chance for turning the moment of the crisis into a vision of hope."

The world is being led to accept the “new order” idea step by step to avoid provoking events that are likely to make the universal protests against the worsening conditions of human existence take ‘a wrong course’ and become uncontrolled. The main thing that Stage One managed to achieve was to start a wide-ranging discussion on ‘global government’ and the ‘inadmissibility of protectionism’ with an emphasis on the ‘hopelessness’ of the national-state models for emerging from the crisis.

This discussion is proceeding against the background of information pressures that help to build up human anxieties, fear, and uncertainty. Some of those information actions are the following: WTO forecasts to the effect that 1.4 billion people are likely to sink below the poverty line in 2009; a warning by the WTO director general that the biggest world trade slide in postwar history is in the offing; a statement by the IMF’s Dominique Strauss-Kohn (a protégé of Sarkozy’s) that a world economic crash is impending unless a large-scale reform of the financial sector of the world economy is implemented, and a crash that is most likely to bring in its wake not only social unrest but also a war.

Against this background, the idea to introduce a common world currency as a cornerstone of the ‘new world order’ was put forward. The real masterminds of this long-standing project are as yet in the shadow. Let us note that some or other representatives of Russia are pushed to the fore. This is reminiscent of the situation before World War I, where the Anglo-French circles that possessed some well-elaborated plans for a new division of the world instructed the Russian Foreign Minister to draw up a general program for the Entente Cordiale. It went down in history as the ‘Sazonov program’, even though Russia did not play an independent role in that war and was from the start built into the system of interests of the British financial elite.

On March 19, Henry Kissinger came to Moscow as a member of The Wise Men (James Baker, George Schultz, and others), who had meetings with the Russian leaders before the G20 summit. Dmitry Trenin, director of the Moscow Carnegie Center and participant in the latest US meeting of the Bilderbergers, called that meeting a ‘positive signal’. On March 25, Moskovsky Komsomolets published an article ‘The Crisis and the World Problems’, by Gavriil Popov (currently President of the International Union of Economists) that openly voiced what was normally discussed behind closed doors.

The article mentioned World Parliament, World Government, World Armed Forces, World Police Force, World Bank, the necessity of placing under international control the nuclear weapons, nuclear power generating capacities, the entire amount of space rocket technology, and the planet’s minerals, the imposition of birth-rate limits, the cleansing of humanity’s gene pool, the fostering of people intolerant to cultural and religious incompatibility, and the like.

The “countries that will not accept the global prospects,” says Popov, “must be expelled from the world community.”

Of course, the Moskovsky Komsomolets article conveys nothing new that would enable one to understand the strategy of the global elite. Another thing is important. The establishment of a totalitarian police order and the elimination of national states is being suggested as an open program of action, and what both the liberals, and the socialists, and the conservatives always viewed as ‘new fascism’ is being recommended as the only possible salutary path for the whole of mankind. Someone wants the discussing of these projects to become a norm. In this context, some ‘particularly trusted’ representatives of Russia are pushed to the fore, Russia that will become the main victim of the policy of total plunder should the ‘global government’ become a reality.

The G20 did not discuss the common world currency issue, since time had not yet come for that. The summit itself was a step forward on the way to chaos, because its decisions, if followed blindly, will only worsen the world socioeconomic situation and, to quote Lyndon LaRouche, will “finish off the patient.”

In the meantime, the crisis is being exacerbated, and analysts are predicting an era of mass-scale unemployment. The most pessimistic predictions come from LEAP/Europe 20201, which regularly publishes them in its bulletins and even set them out in an open letter sent to the leaders of the Twenty before the London summit.

As early as February 2006, LEAP was surprisingly precise in describing the prospects for the ‘systemic global crisis’ as a consequence of the financial illness caused by the US debt. LEAP analysts are viewing the current events in the context of the general crisis that began in the late 1970s and is now in its fourth, final and most grave stage, the so-called ‘elutriation phase’, where the collapse of real economy begins. According to LEAP’s Frank Biancheri, it is not simply a recession but the end of the system, in which its main pillar, the US economy, collapsed. “We are witnessing the end of an entire epoch before our own eyes.”

The crisis may lead to some most difficult consequences. LEAP forecasts a rise in unemployment to 15-20% in Europe and as much as 30% in the United States. If the key dollar problem fails to be solved, the world events will take a most dramatic turn. The dollar collapse may take place as early as July 2009, and the potentially decades-long crisis will trigger off “a world-wide geopolitical disintegration” with social upheavals and civil conflicts, with the division of the world into separate blocs, with the world coming back to Europe’s1914, with military clashes, etc. The most powerful popular unrest will take place in countries with the least developed social security systems and the biggest concentrations of weapons, primarily in Latin America and the United States, where social violence is already now manifest in the activities of armed gangs. Experts note the beginning of US population fleeing to Europe, where the direct threat to life is for the time being not so great. Aside from armed conflicts, LEAP analysts forecast power, food and water shortages in areas dependent on food imports.

LEAP experts describe behavior demonstrated by the Western elites as absolutely inadequate: "Our leaders have failed to understand what happened, and show the same amount of incomprehension to this day. We are amid a period of protracted recession, and it was necessary to engage in introducing some long-term measures to cushion the blows, whereas our leaders still hope to avoid a prolonged recession… All of them have been formed around the American pillar and cannot see that the pillar is a shambles…"

But this is not seen by the mid-level leaders, while the top-level world managers are, on the contrary, informed quite well; it is they who are implementing the ‘controlled chaos’ and general disintegration policy, including a civil war and the disintegration of the United States planned for the end of 2009, a scenario that is being widely discussed both by American and world media.

On the threshold of conflicts planned in various areas of the planets, a system is being established that will give a supranational center relying on a large-scale punitive machine total political, military, legal, and electronic control over the population. That system uses the network management principle that allows embedding into any society parallel structures of authority that report to external decision-making centers and are legalized through the doctrine of prevalence of international law over national law. The shell remains national, while real power becomes transnational. Jacques Attali calls this a ‘global law-based state’.

The ruling center of the global law-based state is located in the US. While its fundamentals began to emerge in the 1990s, the fight against terrorism after the 9/11 events has lead to radically new phenomena. The passing of the 2001 Patriot Act not only allowed security services to control the American population and suspected foreigners, but also accelerated the passing of state responsibilities into the hands of transnational corporate structures.

Intelligence activities, trade of war, penitentiary system, and information control are passing into private hands. This is done through so-called outsourcing, a relatively new business phenomenon that consists of trusting certain functions to private firms that act as contractors and relying on individuals outside an organization to solve its internal tasks.

In 2007, the American government found out that 70% of its secret intelligence budget is spent on private contracts and that “Cold-War intelligence bureaucracy is transforming into something new, where contractor’s interests dominate.” For American society (Congress included), their activities remain classified, which allows them to gather more and more important functions in their hands.

Former CIA employees say that nearly 60% of their staff are on contracts. Those people analyze most of the information, write reports for those who make decisions in state authorities, maintain communications among various security services, help foreign stations, and analyze data interception. As a result, America’s National Security Agency is becoming more and more dependent on private companies that have access to classified information. No wonder, then, that it is lobbying a bill in the Congress that is supposed to guarantee immunity to corporations that have worked with NSA for the last five years.

The same is happening to private military companies (PMCs), which have been assuming more and more army and police functions. On a significant scale, it started in the nineties in former Yugoslavia, but contract workers were especially widely used in Afghanistan and other conflict zones. They did the ‘dirtiest’ actions, as was the case during the war in South Ossetia, where up to 3000 mercenaries were involved. At the moment, PMCs are real armies, each up to 70,000 strong, that operate in over 60 countries, with annual revenues of up to $180 billion (according to Brookings Institution, USA) For example, over 20,000 employees of American PMCs work in Iraq along with the 160,000 American military contingent.

The system of private prisons is also growing rapidly in the US. The prison industry complex, which uses slave labor and sweatshop practices, is flourishing, and its investors are based on Wall Street. The use of convict labor by private corporations has been legalized in 37 states already, and it is used by major corporations such as IBM, Boeing, Motorola, Microsoft, Texas Instrument, Intel, Pierre Cardin, and others. In 2008, the number of inmates in US private prisons was about 100,000, and it is growing rapidly, along with the total number of inmates in the country (mostly African-Americans and Latin Americans), which is 2.2 million people, or 25% of all convicts in the world.

After Bush came to power, privatization of the system for transportation and retention of migrants in concentration camps began. In particular, a branch of the notorious firm Halliburton, Kellog Brown and Root (once headed by Dick Cheney), did just that.

The biggest achievements have been made over the last few years in the area of establishing electronic control over people’s identities, carried out under the pretext of counterterrorism. Currently, the FBI is creating the world’s biggest database of biometric indexes (fingerprints, retina scans, face shapes, scar shapes and allocation, speech and gesture patterns, etc.) that now contains 55 million fingerprints. The latest novelties include the introduction of body scanning system in US airports, tracking of literature read by passengers in flight, and so on. A new opportunity to gather detailed information on people’s private lives follow from the NSA Directive N59, passed in summer 2008, ‘Identification and tracking biometry for the purpose of strengthening national security’, and the classified ‘Homeland Terrorism Preparedness Law’.

Evaluating the policy of America’s authorities, ex-Congressman and 2008 presidential candidate Ron Paul said that America is gradually turning into a fascist state, “We are approaching not a Hitler-type fascism, but one of a softer type, which shows in the loss of civil freedoms, when corporations rule everything and… the government lies in the same bed with big business.” May we remind you that Ron Paul is one of the few American politicians speaking for the closing of the Federal Reserve System as a secret unconstitutional organization?

With Obama’s coming to power, the police order in America is getting tighter and tighter in two directions – strengthening internal security and militarization of civilian institutions. Tellingly, having condemned the infringements on individual freedoms done by the Bush administration, Obama has put his own staff under total control by making them fill out a 63-question form that touches upon the most intricate details of their private lives. In January, the US President signed bills that enable the continuation of the illegal practice of abducting people, keeping them secretly in prisons, and moving them to countries where tortures are used. He also proposed a bill called National Emergency Help Center Establishment Act, which stipulates the establishment of six such centers in US military bases to provide help to people who are displaced due to an emergency situation or disaster and thus get into military jurisdiction. Analysts connect this bill with possible disturbances and consider it proof that the US administration is preparing for a military conflict which may follow after the provocation that is being planned.

The American system of police control is actively implemented in other countries, primarily in Europe – through the establishment of American law hegemony on its territory by means of closing various agreements. A big part here was played by US–European talks out of the glare of publicity on creation of the common ‘area of control over the population’ that were held in spring 2008, when the European Parliament adopted resolution that ratified creation of the single transatlantic market abolishing all barriers to trade and investments by 2015. The talks resulted in the classified report prepared by the experts from six participating countries. This report described the project to create the ‘area of cooperation’ in the spheres of ‘freedom, safety and justice’.

The report dwells upon the reorganization of the system of justice and internal affairs of the EU member states in such a manner that it would resemble the American system. It concerns not only the ability to transfer personal data and cooperation of police services (which is already being carried out), but also, for example, extradition of EU immigrants to US authorities in accordance with the new mandate that abolished all the guarantees the European procedure of extradition provided. In the US the Military Commissions Act of 2006 is in force, and it allows persecution or imprisonment of any person who is identified as an ‘illegally fighting enemy’ by the executive authorities and extends to immigrants from any country not at war with the US. They are persecuted like “enemies” not based on some evidence but because they were labeled so by the governmental agencies. No foreign governments have protested against this law which is of international importance.

Soon they will sign the agreement on personal data communication, in accordance with which the American authorities will be able to obtain such personal information as credit card numbers, bank account details, investments, travel routes or communication via Internet, as well as the information concerning race, political and religious beliefs, habits, etc.. It was under the US pressure that the EU countries have introduced biometric passports. The new EU regulation implies the overall switch of EU citizens to electronic passports from the end of June 2009 by 2012. New passports will contain a chip with not only passport info and a photo, but also fingerprints.

We are witnessing the creation of the global electronic concentration camp, and crisis, conflicts and wars are used to justify it. As Douglas Reed wrote “people tend to tremble in the face of an imaginary danger and are too lazy to see the real one.”