The US Cliff, Swamp, Quagmire


Johan Galtung

There is more than the fiscal cliff to meet the naked eye.

Wise people–Borosage, Krugman, Stiglitz–,some of them economists, see neither the fiscal deficit nor the US debt as the key problems, but the lack of growth.  They point to Clinton years and how through growth the Debt/GDP ratio went from a half to a third.  Important, but then there is a fourth consideration: some Americans are suffering out there.  “16 percent” comes up very often, of people and families below the poverty line, not knowing for sure where the food comes from the next day, not having medical insurance–.  Macro-economics is blind to human basic needs, yet there may even be solutions hidden in them.

But after the Clinton years came somebody else; increasing expenditure with enormously costly wars making conflicts even worse, and in addition lowering the revenue by reducing taxes on the super-rich.  That a fiscal deficit would rearits ugly head, fed by such policies year after year, was a foretold conclusion.  Democracy protects the president with a golden parachute, similar to that enjoyed by the CEO of a bankrupt company.  But rightly so: he was elected, even re-elected.  US voters, you asked for it; you got it.

Overdue, but the Congressional votes came: a compromise on ten fiscal cliff factors.  The market reacted “positively” if that is the right word when the finance economy makes a Dow Jones Industrial-DJI leap upwards while the real economy is stagnant–increasing the gap that feeds future crashes.

It was a lazy compromise, meaning by that little new beyond juggling of the old factors.  Major problems like Medicare payments– the US health services, at 17 percent of the GDP, produce less health than the typical EU at 8 percent of GDP–and unemployment insurance were postponed, not solved.  Like, indeed, the debt ceiling.  The New Congress inherits ever more intractable and pressing problems.  One reason is obvious: the fiscal cliff discourse is much too narrow.

Hence, let us bring in the suffering of the people, the missing growth and the debt burden, expanding the discourse for new visions.

There is no Tennessee Valley Authority, TVA, anywhere; only the old stuff, nothing inspiring pointing in new directions.  How about a Municipal Uplift Authority, MUA, as a major federal program; beyond TVA, less concentrated geographically, more inspiring and dynamizing! Hovering over the US municipal map, identifying the municipalities with the highest levels of misery–people below the poverty line, with hunger threatening and no health coverage–is easy.  Lift them up!

Cutting some expenditure and increasing taxes on the rich is indispensable, but limited and limiting.  A huge imaginative program for the 16 percent to lift themselves up by their own bootstraps, with credits for small companies-cooperatives designed to produce food and water, clothing and housing, health and education, all at affordable prices might do miracles.  Carefully monitored MUA should be self-sustaining, and after the credits have been paid generate US domestic demand for considerably economic growth.  16 percent is a major proportion.  An approach more realistic to get the economic wheels turning than hoping to become the major world hydro-carbon exporter by 2030–by then hydro-carbons may be phased out.  Better turn inward, facing the fact: the US and Western world trade dominance is gone.  Outcompeted.

But there are also other approaches and they in no way exclude each other, nor do they exclude the fiscal cliff avoidance compromise.

The US debt is increasing.  The world is flushing with US$s.  States and corporations buy US bonds at low interest–parking $s for some limited time to avoid the costs of buying other currencies–trusting to be serviced by freshly printed $s.  But that cannot last forever, given the many schemes for regional and world currencies based on a mix, not on any single currency. Some parking lots will smolder under the cars: a heavy price for saving on exchange commissions.

With a (flexible) US debt ceilings of $16.3 trillion the major creditor, China, has problems.  Could the two agree on something in return for some debt forgiveness?  Like the reduction of a major US federal expenditure, the $1 trillion military spending?  A creditor is entitled to look at the debtor’s budgets to identity cuts; the debtor is entitled to say “that one has to do with you (and Russia)”, and the creditor to reply, “if so, let us talk; our economy is still smaller than yours, to match you militarily is more of a burden on us; how about bilateral-balanced-controlled disarmament, and we could throw some debt relief into the bargain?”  China might demand no encircling of China militarily, nor any Trans-Pacific Partnership, TPP, bloc excluding China economically.  Who will benefit? Obviously both; relieved of military waste, of a sizable tip of the debt iceberg, cooperating rather than competing in the global arena.

We sense three possible losers: EU, Russia and Japan-Australia, hoping to be favored by one or the other.  But USA-China together matter more; they might even engage in imaginative joint projects for poverty alleviation elsewhere.  Lift up the bottom, create customers.

The two policies, lifting up municipalities and tying debt relief to disarmament, are both rational.  But in the way of rationality stands the arithmetic of Congressional voting, so well adjusted to the arithmetic of the deficit reduction as a hand to a glove; even if the hand becomes paralyzed. They fit too well, blocking for other views.

Some other input is needed if the legislative power has no other game to offer.  The onus is on the executive power.  Could there be a latent FDR-Franklin Delano Roosevelt carrying TVA size policies, hiding in Obama’s second incantation?  If not, poor USA; four more years of the same, downhill.

In the swamp of problems there are bubbles waiting to burst: finance vs real economy, printed money vs real value, debt service vs people service. With sounds of a sucking quagmire a little further on.


Johan Galtung, a professor of peace studies, dr hc mult, is rector of the TRANSCEND Peace University-TPU. He is author of over 150 books on peace and related issues, including ‘50 Years-100 Peace and Conflict Perspectives,’ published by the TRANSCEND University Press-TUP.

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