Obama Redirects From A Broke US Government By Playing The Class Warfare Card, Focuses On "Millionaires And Billionaires"

Tyler Durden's picture

In what appears to be an increasingly tenuous attempt to redirect focus from terminal federal government failure through the imposition of yet another round of class antagonism, Barack Obama, as part of his earlier address to the nation, stressed that more revenue "must be part of any deficit-reduction deal" and criticized Republicans for protecting tax breaks for "millionaires and billionaires" in the process even invoking users of corporate jets (despite that fact that he himself boasted using the $56,000/hour taxpayer funded Air Force one to travel the 110 mile distance between Washington DC and Williamsburg, VA). As the WSJ puts it: Obama "staked out his position in budget negotiations, which have reached a critical phase and increasingly appear to hinge on which side wins the public-relations battle." Well-aware of the dead end trap that Bernanke finds himself in namely that monetary policy alone is now (or ever) powerless to fix the economy (although it sure would do miracle for the Russell 2000... and hyperinflation), and that a fiscal stimulus is currently unpassable, Obama dragged out the strawman, suggesting "that some initiatives designed to stimulate the economy in the short term should be included in a final deal, singling out a yearlong extension of the payroll-tax break for employees, which expires in January." The bottom line is that as the $4 trillion budget cutting goal is completely unattainable (something the Republicans have claimed is a priority in allowing a debt ceiling hike, yet which is nothing but a PR bluff), Obama has instead once again resorted to what he does best: foment class antagonisms within America, by singling out the rich versus the poor. Ironically, as a WSJ commentator puts it so eloquently, "Obama clearly wants all Americans brought down to a shared level of misery --- except, of course, our federal overlords who will continue to demand their own personal jets, international family travel at taxpayer expense, lifetime health benefits while being excused from the ravages of ObamaCare, and of course their recurring exemptions from all other laws that they impose on us lowly serf taxpayers. Obama wants class warfare? Well he got it: Americans vs their elitist, corrupt, irresponsible, thieving government." One can hope that the final outcome of said warfare here will be more effective than any and everywhere else, where said "governments" continue to dangle the carrot of (insolvent) entitlement program elimination should the population dare to change the status quo.

The WSJ summarizes Obama's speech:

"You can't reduce the deficit to the levels that it needs to be reduced without having some revenues in the mix," Mr. Obama said at a news conference on Wednesday that spanned a wide range of topics from the economy to gay marriage and Afghanistan and Libya.

"Deficit reduction, debt reduction should be part of an overall package of job growth over the long term," Mr. Obama said. "I think that it makes sense, as we're looking at an overall package, to see: Are there some things that we can do to sustain the recovery, so long as the overall package achieves our goals?"

"Democrats have to accept some painful spending cuts that hurt some of our constituencies and we may not like, and we've shown a willingness to do that," he said. "So the question is, if everybody else is willing to take on their sacred cows and do tough things in order to achieve the goal of real deficit reduction, then I think it would be hard for the Republicans to stand there and say that the tax breaks for corporate jets is sufficiently important that we're not willing to come to the table and get a deal done."

Senate Minority Leader Mitch McConnell (R., Ky.) reiterated Wednesday that a deficit-reduction package must contain big spending cuts and no tax increases or additional spending to stimulate the economy.

And while Obama was pumping up the rhetoric on the non-golf tour, and attempting to regain a shred of credibility with a general public that has long since lost all interest in both the hope and the change, Tim Geithner was waxing philosophically yet again and threathening with eternal damnation all those who dare oppose America's replacement of one tapped out credit card with another.

Below is Geithner's full response to a Jim DeMint letter from May 26 in which the republican made the all too clear observation that a US default is purely in the eyes of the tax evader.

Dear Senator DeMint:

I am writing in response to your letter of May 23, 2011, regarding the statutory debt limit. President Obama is strongly committed to restoring fiscal responsibility, and he has put forward a specific framework and set in motion a process to work with both parties to accomplish this critically important objective. Although agreement has not yet been reached, we have made progress toward that objective, and I welcome the statements by leaders of both parties making clear that the debt limit must be increased in order to protect America’s creditworthiness.

The debate over the debt limit can seem esoteric, but a failure to resolve it in the near term would have painful implications for people in every walk of American life. It would have a serious impact on members of the Armed Forces who depend on paychecks to feed and house their families. Social Security recipients who subsist on their monthly benefits, veterans who rely on the government for their retirement and health care needs, and small business owners or employees who provide goods and services to the country.

In your letter, you suggest that the debt limit should not be raised, and instead the federal debt be “capped” at the current limit. You further propose that after the government’s borrowing authority id exhausted in August, the United States should for some indefinite period pay only the interest on its debt, while stopping or delaying payment of a broad swath of other commitments the country has made under the law.

I have expressed my concerns about this idea before, but I will restate them to be clear: this “prioritization” proposal advocates a radical and deeply irresponsible departure from the commitments by Presidents of both parties, throughout American history, to honor all of the commitments our Nation has made.

The debt limit applies to past decisions of Congress. Increasing the debt limit is necessary to allow the United State to honor obligations previously authorized and appropriated by Congress. You explained this well in 2010 when you said:

You don’t have much choice if you charge something on your credit card. You have to pay it, and that’s effectively what this debt limit is … we’ve already spent the money. The question is now, do we shut down the government, or do we fund what we’ve already done.

Increasing the limit does not increase the obligations we have as a Nation; it simply permits the Treasury to fund those obligations Congress has already established. As James A. Baker III, Secretary of the Treasury under President Reagan, informed Congress in 1987:

I should stress that defaulting on already outstanding, validly incurred obligations has far graver effects than halting operations of the Government when spending authority is allowed to lapse, such as when there is a delay in action on appropriations. A failure to pay what is already due will cause certain and serious harm to our credit, financial markets and our citizens; it is not remotely similar to a lapse in authority to incur new obligations. (Emphasis in original.)

The statutory debt limit is not and never has been, as you argue, a “budget enforcement mechanism” that can be used to implement spending reductions by selectively defaulting on obligations previously approved by Congress. Our Constitution provides that “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.” When Congress determines that certain commitments in the law should be altered or terminated, those decisions must be effectuated through enactment of legislation, not by attempting to coerce the Treasury to renege on existing legal commitments.

Even if the idea of “prioritization” were not so unwise, it would not be a mere exercise in “belt tightening,” as you suggest. The United States in now required to borrow approximately 40 cents for every dollar of expenditures. Your proposal would require cutting roughly 40 percent of all government payments. These deep cuts would be felt by all Americans, and they would risk throwing the economy back into recession.

You are also mistaken when you state that the Treasury has “prioritized” payments in the past. This is false. Never has the Treasury failed to meet any obligation as a result of a debt limit impasse, nor has Treasury ever “prioritized” payments. Congress has never failed to raise the debt limit when necessary. It is true that there have been failures at time to enact appropriations legislation, and this has caused temporary government shutdowns. Specifically, the 1995-1996 furloughs and suspensions of programs you refer to were caused by appropriations lapses, not a failure to raise the debt limit. But as Secretary Baker explained, there is no comparison in either cause or effect between a shutdown and a failure to increase the debt limit.

At its core, your letter is based on an untested and unacceptably risky assumption: that if the United State were to continue to pay interest on its debt — yet failed to pay legally required obligations to its citizens, servicemen and women, and businesses — there would be no adverse market reaction and no damage to the full faith and credit of the United States. Again, this idea is starkly at odds with the judgment of every previous Administration, regardless of party, that has faced debt limit impasses.

“Prioritization” also fails to account for how payments on principal would be made if investors were to lose confidence in U.S. creditworthiness. In August of this year, for example, more than $500 billion in U.S. Treasury debt will mature. Under normal circumstances, investors who hold Treasuries purchase new Treasury securities when the debt matures, permitting the United States to pay the principal on this maturing debt. Yet in the scenario you advocate, in which the United State would be defaulting on a broad range of its other obligations, there is no guarantee that investors would continue to re-invest in new Treasury securities. In fact, some market participants have already indicated that they would be disinclined to do so. As one of the major ratings agencies concluded in a recent report, failure to pay non-debt obligations “would signal sever financial distress and potentially imminent debt default,” prompting the U.S. sovereign rating to be place on “Rating Watch Negative.”

If investors chose not to purchase a sufficient volume of new Treasury securities, the United States would be required to pay the principal on maturing debt, and not merely the interest, out of available cash. Yet the Treasury would be unable to make these principal payments without the continued confidence of market participants willing to buy new Treasury securities. Your proposal assumes markets would be unconcerned by our failure to pay other obligations. But if this assumption proved incorrect, then the United States would be forced to default on its debt.

I understand that you have a different view of what would happen if the United States were unable, for the first time in its history, to meet its legal obligations. Nevertheless, I hope we can all agree that we should not and must not gamble with the full faith and credit of the United States. The consequences of miscalculation are too grave. The full faith and credit of the United States is too precious an asset to risk. If you are wrong in your prediction, to quote then-Secretary Baker, “Future generations of Americans would have to pay dearly for this grave breach of a 200-year old trust.”

Ultimately, the notion of “prioritizing” payments is futile because the debt limit must be increased regardless of which spending path is adopted. There is no credible budget plan under which a debt limit increase can be avoided. In addition, a failure to enact a timely increase in the limit would have the perverse effect of increasing the government’s borrowing costs and worsening our fiscal challenges.

For all of these reasons, the idea of “prioritization” has been rejected by every President and Secretary of the Treasury who have considered it. It is unwise, unworkable, unacceptably risky, and unfair to the American people. There is no alternative to enactment of a timely increase in the debt limit. As President Reagan wrote in 1983:

The country now possesses the strongest credit in the world. The full consequence of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and on the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass the legislation before the Congress adjourns.

I appreciate your attention to this important issue and I look forward to working with you and other Members of Congress in the weeks ahead.

Sincerely, Timothy F. Geithner

(incidentally, the bolded text above is an admission by the Treasury Secretary that the US financial system is a ponzi).

Zero Hedge will shortly present a technical update from the perspective of US debt, on just what is so magical about the August 3 date that everyone keeps referencing.

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mynhair's picture

Carl Sagan, the Squirrel ain't.

I'm all in favor of 'raising revenue' by canceling the ethanol farce, and the wind fiasco.

Rodent Freikorps's picture

Squirrels are conservatives, dammit.

ratso's picture

Class warfare in America is real.  Whenever workers in America complain about income disparities they are accuse of class warfare.  Whenever unions complain about being destroyed by crony capitalist politicians they are accused of class warfare.  American billionaires and their corporations expect the working men and women of America to pay for their luxurious life style without complaining.  Standards of living and standards of education are being destroyed for the average American so that the rich can get richer. The capitalist controlled media keeps awareness at a minimum - no real news - no real facts just sit-comes and Jerry Springer.

BRING OUT THE CAKE.

Bob's picture

Like this is an entirely different world from the one Greece exists in.  The Trader Community seems a tad compromised . . . altogether apart from its tragically broken market. 

yakmerchant's picture

Wow Lenin would weep in joy after your speech comrade.  Capitalist controlled media?   Really?   America's MSM is starting to make the Pravda and TASS seem less censored.   Government is in bed with your evil rich people! Billionaires can't "make" working men and women do crap without the gun of the goverment.  It's called Facism and you are falling for their stupid socialist promises.     

Hugh G Rection's picture

Just don't go after the Trillionaires.  What would we do without the Rotschild Banking Cabal.

hedgeless_horseman's picture

Fascism is having its turn, but this time without the Nazis, and with the world's reserve currency.

Plan accordingly.

jeff montanye's picture

and a first step is to realize that the opposite of whatever obama, geithner, et. al. say is closer to the truth.  only what they do has useful informational content.

p.s. yak it may be called facism but it's spelled fascism.

Oh regional Indian's picture

HH, the Nazi's never died out, you know that. The current US military prowess is based almost in it's entirety on Operation paperclip. But that is a can of worms.

We are living the 4th Reich, mercifully, the hubris and SS (Short Sighted) bomb is about to go off on it.

Tick tick... and about time too.
ORI
http://aadivaahan.wordpress.com/2011/06/28/thoughts-and-a-heads-up/

Mr Lennon Hendrix's picture

 

RTA Bonesmen were the original Nazis.  Harrimans, Bushes, Rockefellers, etc.

Oh regional Indian's picture

Zigackly LH. it's an old, old game. Prescott B., and then onwards before and after.

In reality, from my reading of history, we are looking at the final chapter in the life of the Holy Roman Empire.

ORI

dolly madison's picture

+1  I only hope it is the final chapter.

Oh regional Indian's picture

Indeed Dollym.

Sure feels like it. World gone insane.

ORI

Drachma's picture

In my reading of history, the Great Work was planned long before the Holy Roman Empire. We are witness to but one ending age of the Platonic Year, known of course to ancient sky-watchers long before Plato. History does not begin at Sumer. As planned, what the Architects have built, they will destroy with the skill of a 'thousand points of light'. Just a thought.

Cheers.

SMG's picture

+1 trillion.  You are correct sir!

SamuelMaverick's picture

+1.  I am getting tired of the same old marxist socialist class warfare playbook. 

Things that go bump's picture

Buffett said that his class was winning.

FalseConsciousness's picture

Does government control big money or does big money control government.  Come on man.  It's obvious.  

Baptiste Say's picture

Does government control big money or does big money control government.

 

That's a bit of a chicken-egg question. One thing for sure is that government through bailouts, through ZIRPs, through IP law and through regulation that requires large scale resources to comply with creates big money for a select few and hampers the small businessman.

onthesquare's picture

Reptiles were laying eggs millions of years before chickens were even thought of

i-dog's picture

-8 junks! Well said!

ZH seems to be filling up with Marxist junkers rather too quickly.

[edit] -10 junks now, already! Sunstein must must have them working night shift again.

yakmerchant's picture

10 junks is my new record.   The spelling mistake must have really upset people.

 

i-dog's picture

Nope. It's the truth that gets their amygdalae firing...and they think that by 'junking' then nobody will believe you. Whether DHS trolls or ostriches, the thought process is the same.

pcrs's picture

You nailed it, you can tell from the 10 junk flags by Hillary's 'techno experts', with their multiple personality social media software.

yakmerchant's picture

Operation Metal Gear is online already?  I was hoping it was angry hippies over at Media Matters.

Frankie Carbone's picture

Kneejerk much? Fact is, capitalism did best when it had a robust middle class, a bona fide chance of mobility among the classes, and an equitable enough distribution of the pie where everyone felt that they had a stake in the prosperity of their community, their state and ultimately their nation. 

This is not a stable form of capitalism. Hell, it's not even capitalism. It's a crony corporate oligarchy. 

Next time you get all Bill O'Reilly reflexive on us either tie that knee down or have a cold steak ready to put on you eye after your knee jerks into it. 

Jesus, so many of us are programmed to respond, not think. 

Drachma's picture

What's ironic is that the London-schooled and financed Marx was the one that developed the concept of 'capitalism', as opposed to 'free-enterprise' (big difference). For those who believe in the egalitarian and utopian myths of Marxism, I suggest a reading of 'Wallstreet and the Bolshevik Revolution' by Anthony Sutton. Marx was a frontman, as was Trotsky and his ilk. Recall what Lenin said about his pal Armond Hammer, "He's my favorite capitalist"[paraphrase]. It's all about control and they play both sides in a game of synthesis through thesis and antithesis. There are no heroes, only frontmen for the dominant minority.

Michael's picture

Let's just all try to get this fucking strait right here right now.
It's not about the Poor and Middle class vs the Rich, as the dead stream media and the ruling class want it to be.
We are making our current fight about Sector Warfare!
It's public sector ruling class vs private sector.
For all those morons out there, get it fucking strait!

Aristophanes's picture

Not only that, but this slimeball already did exactly what he is condemning here.  He priotitized debt payments when he stole from the bond holders of GM to pay off his union cronies.

He is starting to sould desperate and is getting tangled deeper in his lies.  Wouldn't it be a shame if he goes down in history as the first president not just impeached, butfound guilty of treason against the American people?

(impeachment is impossible with a wholly corrupt government and judicial system unless the rats start turning on each other--not that that is an unlikely scenario either)

dark pools of soros's picture

do you know shit? the unions took more cuts than the bondholders - what fables you spew

Urban Redneck's picture

No the unions did NOT take more cuts than the bondholder.  The unions wound up with GM equity (and more of it) after bankruptcy, and the billions in debt for the previous bailouts of the unions was forgiven. 

 

To be on par with the GM bondholders, the UAW plans would have been turned over to the PBGC - because they too are bankrupt, just as when countless steel companies and airlines in this country have failed.

pcrs's picture

The normal agreement with bankruptcy is that the assets get sold, the debt holders get payed first and the stoch holders 2nd.

In practice the taxmax comes first, because they control who the gun of state point to. WIth GM indeed bond holders got shafted.

Chrysler was another one:got a huge government loan and recently payed it back early, Obama declaring it a win for the government. Chrysler could do this after surprisingly good numbers came out. This might be related to the gigantic gvt flaat replacement order for new cars they got. That is indeed what Mussolini called fascism.

Aristophanes's picture

I also like the part about "justly incurred debts".  Does he mean the ones to the robo-signing extortionist banks, or the ones to fuel the military-industrial complex for unjust wars?

CrazyCooter's picture

No, no. He is talking about Fannie/Freddie. You know, the debt that isn't officially counted as a liability (yet).

Regards,

Cooter

Tater Salad's picture

@ Michael, spot fukin' on bro!

Well said!

Michael's picture

A libertarian query;

How many Obama wars does it take to make a democrat head explode? 5 no. 6, 7?

This is not a riddle or joke question. I really want to know.


by Michael
on Thu, 06/30/2011 - 03:00
#1414688

Excuse me, USA Obama act of war #6 has commenced, 7,8,9?

U.S. Drone Targets Two Leaders Of Somali Group Allied With Al Qaeda, Official Says

http://www.washingtonpost.com/national/national-security/us-drones-target-two-leaders-of-somali-group-allied-with-al-qaeda/2011/06/29/AGJFxZrH_story.html

Michael's picture

What do I know about markets?

I've been studying markets for the past 35 years, it's one of my  hobbies. Really, it's my hobby.

That being said, I guess the Northern European banks will be going on a buying spree with that 100 billion Euro being added to Greece's tab.

OK boys, lets go get some of those assets for pennies on the dollar with all this free first use loot courtesy of Greece.

Anyway Greece is a really cool laboratory experiment we can see in real time.

Will Greece be the first great country of the Earth to capitulate and fall prey to the International Banking Cartel? This was their plan all along wasn't it? Then to move on to consume many more countries on the planet?

It'll be interesting to see in real time how this experiment turns out.

Michael's picture

Who writes on paper for all to read US Foreign Policy?

The Council on Foreign Relations(Not an agency of the  federal government) (CFR) that's who.

I said in a previous thread Glenn Beck is an Israeli ass-licker. Virtually all people in Mainstream Media TV and in Print are card carrying members of the CFR, ie Israeli Ass-Lickers.

Who writes US fucking foreign policy? Israel, that's who. Their Israeli lobby, the biggest lobby in Washington DC, makes sure of that. We may as well call it Israel/US Foreign Policy.

So why should we trust MSM reporters, again?

For those who remember the previous conversation;

http://www.zerohedge.com/article/glenn-beck-only-four-outcomes#comment-1407504 Lets see if this comment gets deleted. Snark.

 

Fred C Dobbs's picture

No one junked you.  Are people starting understand?

onthesquare's picture

Michael

The US is not the only culprits in the war games. Eh

and lets not forget the North American Terrorist Organization who are buying more, made in USA, bombs these days than they have ever bought.

Remember the victors write history. Give is 50 years over which time we change the education (brainwash) protocols and Mount Rushmore will have some new faces. Obama, Hitler, Napoleon.

cosmictrainwreck's picture

peasants/serfs over-lorded by the Mandarin bureaucracy, or something like that... just not as severe (yet)

dolly madison's picture

"It's public sector ruling class vs private sector."

No, it's about bankers and corporate elite controlling our government (and other governments) and sucking the US and its people dry (and other countries).  It is not caused by capitalism or socialism, but by corruption.  Don't be fooled by the Right vs. Left stuff.  That is just a show to make us feel like we have a vote, and to keep us arguing among each other instead of realizing who is behind the trouble. 

Our government works for the bankers and the corporations against other countries, and these days they are working together against us too. 

narnia's picture

ratso, you are very confused as to cause & effect and the real war on the middle class.  the big coporatist enterprises are the government.  the banks are the Fed, Fannie, Freddie, FDIC & a gazillion other government agencies. the military industrial complex is the state department. the big agricultural & pharm compaines are the FDA, the USDA, the DEA, ObamaCare, Medicare & the AMA.  the oil compaines are the interior department.  the big investors are the SEC.  the big energy companies are the EPA.  the unions are the education complex & the national labor relations board.  the global compaines are our trade representatives in NAFTA & the WHO.  I can go on and on.

what you should learn is that big government (which controls virtually all of our economy at this point) is the instrument to define classes.  as long as it is big enough to be corruptible, it will be corrupted at the expense of the average stadard of living.  as long as the Fed exists, it will devalue the currency at the expense of the lower & middle class.  the only way to stop them...  dismantle the enterprise.  obama wants to give the government more power.  go figure. 

FalseConsciousness's picture

what you should learn is that big government (which controls virtually all of our economy at this point) 

 

No, government keeps it from collapsing into oblivion, at behest of capital owners.  You know, the ones with the most capital, the capitalists.  Not that they can hold it off too long, but they will try.  

 


MachoMan's picture

Sort of.  At this juncture, the government has been wholly captured.  The problem we as plebs run into is whether or not to reduce the size and scope of the government.  On the surface, it would seem a simple exercise; if we reduce the size and scope of the government, then price discovery can occur, competition increase, and the glass ceiling imposed by regulation might be lifted.  However, in practice it is not so simple...  the wealth gap lies in the tall grass, waiting to pounce on its unsuspecting traveler victims.  The "head start" created by utilizing the spoils of the wealth gap may very well prohibit the "normal" (conceptual) function of markets.

In short, we are left with a quandry...  the only way to narrow the wealth gap is through the strong hand of the government...  but, in giving the government the power to confiscate wealth and narrow the gap, we firmly plant and water the saplings of our own demise and servitude.  There must be a "safeguard" built in... 

In order to best understand the perspective of "capital owners" you have to understand the concept of limited liability organizations and diversification FROM them...  while they may retain significant amounts of wealth inevitably tied to the monetary system, they are also vehicles of pillage and plunder whereby large amounts of wealth are siphoned to private coffers...  and, subsequently, converted from the ether into real assets.  I think it would be fair to assume that a collapse of the economy would disproportionately (generally) hurt those with the most capital therein...  however, in doing so, the wealth gap may actually INCREASE...  sure, the pie is smaller, but the amount we get may even be relatively smaller than before.  At this juncture, the most prudent of the principal actors have hedged both ways and converted from the ether a significant amount of their holdings...  which will translate well into the subsequent currency/economic regime...  (there is little/no way for those without capital to convert anything to carry through to the next regime).

My proposal is to let private lawsuits work their way through and contemporaneously flog the regulatory pony to enforce its laws and utilize its fangs and giant paws to claw back ill obtained gains (illegally obtained, all others are for private causes of action).  Once this process is complete, we may slip into the night gracefully...  without this...  we will never have any closure...  and it must be done on the front end or we risk not having enough collective bargaining power to implement it post collapse...  this is our quandry.  If we can turn back the clock of moral hazard, then our children may have legitimate existences, built upon the fruits of their own labor...  if not, then we damn everyone [especially the prudent].  (and the latter seems to be our desired course of action).

[PS, sadly speaking, if the largest financial institutions are government dependents, you've got sovereign immunity issues (at the very least, the same concept applies as to why they should have immunity), given it will be the public coffers that make good on their lawsuit losses (and hence why they should NEVER have gotten any money to start with)].

dolly madison's picture

"as long as it is big enough to be corruptible, it will be corrupted"

 

As long as it is few ruling the many, it will be corruptible.

Oh regional Indian's picture

True. And an interesting thought popped up. Since everywhere we look, the world is trying to breed/train Leaders... that automatically implies a silent willingness of the masses to be led.

ORI