The Political Junkies
archived: 16 - 22 Apr, 2006 Back Next
UPDATED: April 20, 2006
THE BANKER COMETH
President Hu Jintao of China is touring the United States. The initial stop in Washington State at the home of Bill Gates was described as a “Chamber of Commerce” meeting.
As Republicans entertain President Jintao and the photo ops are published, Americans should consider these facts (emphasis added):
China is rising fast and is expected to eclipse the United States economically in the future - its gross domestic product is tipped to overtake that of America by 2045.
While Mr Bush has only given Mr Hu an hour of his time for a state lunch, the global balance of power is changing and in future meetings, the Chinese will set the timetable.
The rise of China is posing awkward questions for the US, along with the realisation that its days as the world's economic superpower are numbered.
Some analysts see America entering a period of "managed decline" not unlike that which Britain has experienced since the end of the Second World War and the end of empire. . . .
China has already overtaken Britain and France to become the world's fourth largest economy and Mr Hu's visit to Washington represents a culture clash on a global scale. . . .
What China repeatedly calls its "peaceful rise" represents a major challenge for the US economy, for its political position and for its role as global policeman.
China, with its endless supply of goods and its thirst for energy, has contributed more to global growth than America in recent years, and Beijing is well aware of this. Mr Hu's visit to America is about boosting China's prestige, earning respect for the world's fastest-growing major economy and matching some of that financial muscle with real political influence. . . .
More than half of all industrial goods are made in its factories. The production and export of these goods, their prices kept low by Beijing's manipulation of the renminbi currency, has generated the cash behind China's growing economic power. . . .
For the Bush administration, the key issue is a huge trade imbalance which is turning ever more political. Cheap Chinese exports are flooding the US market and costing American jobs.
In anticipation of Bush’s formal state dinner with President Jintao, Bush told a class of school children:
Learn your math or watch your job go to China or India. With this modern US version of the Indian parents' nighttime admonition to sleepless kids about Gabbar Singh, president Bush cranked up a new maths initiative in US schools to try and retain US leadership in science and technology. . . .
"It's important to understand if children don't have those skill sets (in maths and science) needed to compete with a child from India, or a child from China, the new jobs will be going there,"Bush told students and teachers at the Parkland Magnet Middle School for Aerospace Technology outside Washington DC.
Somebody obviously forgot to tell the President that a Chinese worker earns 5 to 10% of an American worker’s wage.
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UPDATED: April 18, 2006
THE GHOST OF WOLFOWITZ
On Monday, the price of crude oil closed above $70.00.
Crude for May delivery closed up $1.08 at $70.40 a barrel, a record closing high.
The price increase reflected worries about a possible gasoline shortage during the summer driving season as well as lingering concerns about supplies from Iran and Nigeria. Traders continue to express concern that Iran will use oil as a weapon in the dispute over its nuclear ambitions.
Chad is also entering into the picture. While receiving little attention in the American press, Chad has announced that it will cut off oil supplies Tuesday:
[Chad’s] Oil Minister Mahmat Hassan Nasser told The Associated Press in an interview Saturday that the [oil] pipeline would be shut down unless the international community ensured Chad received its oil royalties by midday Tuesday.
Chad's oil exports — 160,000 barrels per day — are small by international standards and have a high sulfur content, reducing their value. But Deby appeared to be gambling that any threat to the world oil supply, no matter how small, will bring attention to his plight and free up needed funds to finance his government.
The warning came a day after Deby announced that he was severing relations with neighboring Sudan and threatened to expel 200,000 refugees from the Darfur region if the international community did not do more to stop what he claimed were Sudanese backed-rebels from destabilizing his government before the May 3 presidential election.
In January, the World Bank froze an escrow account with $125 million in oil royalties in London, Nasser said. It also cut $124 million in financial assistance after Chad changed an oil revenue law passed in 1999 as a condition for the World Bank's support for the pipeline.
Nasser said the funds must either be released or the operators of the pipeline must compensate the Chadian government.
The law required two-thirds of oil revenues to go toward improving living standards in one of the world's poorest countries. It also required 10 percent of proceeds to go into a savings fund to be used when Chad's oil reserves are exhausted.
But the National Assembly amended the law in December. It doubled the money going to the government's general budget, freed money in the savings fund and added security — buying arms and equipment for the military and other security forces — to the programs that received over two-thirds of the royalties.
Nasser said Chadian officials met twice with World Bank representatives seeking to unfreeze the funds, but without success. He said that without payment, the government would have to shut down the pipeline, which flows through Cameroon to the Atlantic Ocean.
"The government has the right to act as it sees fit if obligations are not met," Nasser said. He said such a move would not harm his government, but would hurt other businesses and Cameroon, which have been collecting revenues from the oil.
World Bank officials were not available for comment.
And, who is now President of the World Bank? One of the principal architects of the war in Iraq:
PAUL WOLFOWITZ
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JUNKIE: TPJ Editor Michael Carmichael has a raft of stories in his section of TPJ today that are not dominant in the American mainstream media. They are stories that you should know.
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ECONOMIC TSUNAMI
TPJ has been ringing the alarm that Bush’s federal deficits and failure to address the ever growing balance of trade deficits is having profound economic consequences for every American. David Walker, Comptroller General of the United States, is continuing to describe the economic forces now at work as a “tsunami.” His stark assessment:
To hear Walker, the nation's top auditor, tell it, the United States can be likened to Rome before the fall of the empire. Its financial condition is "worse than advertised," he says. It has a "broken business model." It faces deficits in its budget, its balance of payments, its savings — and its leadership.
The consequences of our every burgeoning national debt will have a deep impact on the standard of living:
Without major spending cuts, tax increases or both, the national debt will grow more than $3 trillion through 2010, to $11.2 trillion — nearly $38,000 for every man, woman and child. The interest alone would cost $561 billion in 2010, the same as the Pentagon.
Consider these costly facts:
Prescription-drug coverage under Medicare takes effect Jan. 1. Its projected cost, advertised at $400 billion over 10 years when it passed in 2003, has risen to at least $720 billion. "We couldn't afford" it, Walker says of the new law.
The leading edge of the baby boom hits age 62 in 2008 and can take early retirement. The number of people covered by Social Security is expected to grow from 47 million today to 69 million in 2020. By 2030, the Congressional Budget Office projects, Social Security spending as a share of the U.S. economy will rise by 40%.
The bulk of Bush's 10-year, $1.35 trillion tax-cut program is set to expire at the end of 2010. But Congress is moving to make the reductions permanent. That would keep tax revenue at roughly 18% of the economy, where it's been for the past half-century — too low to support even current spending levels. "We can't afford to make all the tax cuts permanent," Walker says.
Baby boomers begin to reach age 65 in 2011 and go on Medicare. Of all the nation's fiscal problems, this is by far the biggest. If it grows 1% faster than the economy — a conservative estimate — Medicare would cost $2.6 trillion in 2050, after adjusting for inflation. That's the size of the entire federal budget today.
Bush fiscal policy has resulted in the highest national debt in the history of the United States, 9 Trillion Dollars, and growing:
When President Bush took office five years ago, the national debt was at $5.6 trillion; since then, big budget surpluses have collapsed into huge deficits, and the debt has shot up nearly 50 percent.
Republicans have had to raise the amount that the United States can borrow to meet this ballooning debt in four consecutive years of the Republican administration.
What are the consequences of Republican economic policy?
Higher interest rates.
Lower wages.
Shrinking pensions.
Slower economic growth.
A lesser standard of living.
Higher taxes in the future . . . .
Less savings.
More consumption.
Plunging stock and bond prices.
Recession.
While most Democrats view the gathering economic tsunami with dread, radical Republicans view their spending unabashed spending spree as the ultimate opportunity to drastically reduce or cut Social Security and health care. As one astute commentator sees the Republican game plan:
A massive federal deficit, it is hoped, will justify to the public the wholesale privatization of social security, medicare, prisons, schools, water, the Federal Aviation Administration, Amtrak, welfare services, public power utilities, the federal postal service, etc., etc., etc. Visit the websites of any of the major right wing think tanks from which this administration has drawn its highest officials, and you will find entire sections of archived documents and books arguing the case for privatization of nearly the entire public sector.
From the American Enterprise Institute to the Heritage Foundation, from the Hoover Institution to the Cato Institute to the Reason Foundation, privatization has been a prime objective of the right for the past 25 years. The National Center for Policy Analysis (NCPA) even provides a handy list of potential targets for privatization.
There are plenty of examples of the Bush administration's attempts to push privatization, such as their effort to change federal funding rules for public water utilities, making such federal funding contingent upon proof that the utilities each have a privatization plan in place. Amtrak, Social Security and public schools are explicitly in their sights. Education factories such as Edison Schools are the preferred Republican solution to education. . . .
The pursuit of federal insolvency increases the financial pressure on all elements of the public sector, making the argument for privatization theoretically more compelling. Indeed, Bush and company would read their election to a second term as a tacit mandate for their privatization agenda, and the consequences for the commonweal would be devastating. . . .
The Bush administration's pursuit of federal bankruptcy on behalf of their largest corporate sponsors, who will be the primary beneficiaries of privatization, represents an all out assault on the idea that the federal government should represent the commonweal and act as a wise custodian of our collective resources. We see instead a vision of a global battlefield where scarce resources go to the strongest and to those who already have.
Democrats should be busy making this case to every citizen in their community. The simple question for voters is:
HAD ENOUGH?
RELATED ARTICLES:
BUSH’S “BETTER DAYS” ECONOMY (2003)
NEOCONS: “SHRINK, SHIFT & SHAFT” (2004)
SIMPLY IRRESPONSIBLE (2004)
FISCALLY REPUBLICAN (2005)
THE $166,000 RECKONING (2005)
FIRST TIME (2005)
TPJ ACTION ALERT – DARFUR
The situation in Darfur is becoming more desperate. A rally is being organized in Washington, DC on April 30.
As a part of the rally, the organizers are trying to have one million post cards sent to President Bush. Organizers already claim they have several hundred thousand post cards.
TPJ is asking its readers to email a post card to President Bush demanding that the US take action to stop the genocide that is under way. Here is a link to postcards that can be downloaded for friends, family and neighbors sign. Then send them and mail them back to the organizers before the April 30 Rally to Stop Genocide.
Chad has just announced that they are considering expelling the 200,000 Darfurian refugees in their country as Chadian rebels are using Sudan as a base to attack the government in Chad. Chad has been responsible for the refugees, but with insufficient assistance from the international community.
Please click here for more information:
The United States Holocaust Memorial Museum is sponsoring a webcast on April 17 to discuss what can be done to stop the genocide. Click here for their schedule:
Act today.
$3.00
In June, 2005, TPJ featured an article with the prediction of Boone Pickens, an American icon in the oil industry, of $3.00 per gallon gas within a year. Specifically, Boone noted:
Oil prices marched to new nominal heights, closing near $60 a barrel even as the president of OPEC said Monday the group will consider raising its output ceiling by half a million barrels as early as this week. . . .
Gasoline prices in the U.S. average about $2.13 a gallon, an increase of more than 40 percent over the past two years . . .
"The economy has accepted $50 oil. We accepted $2 gasoline too," said oil tycoon Boone Pickens, who runs a billion-dollar hedge fund that invests in energy commodities and equities.
"I think within a year from now, you're probably looking at $3 gasoline and you're probably looking at something over $60 for oil." -- Lincoln Journal Star
Pickens called it correctly. Oil is now at about $70.00 a barrel and retail gasoline prices are at $3.00 a gallon at the pump in some places:
Certain areas of Southern California have already broken the $3-a-gallon threshold, and it appears that all areas will be above $3 as soon as next week. . . .
The rest of the US may see $3.00 before much longer:
Crude prices approached the record high of $70.85 per barrel earlier this week, said auto club spokeswoman Rose Rougeau. That was amid concerns that shipments from Iran, Nigeria and Iraq might be jeopardized by security threats.
The effect is much larger than just gasoline. Higher energy prices mean that prices for products and the transportation of those products rise too. Rising prices equate to inflation. In order to guard against inflation, the Federal Reserve will continue to increase interest rates to slow spending. (The Federal Reserve has continued to raise rates, now reaching 5%, the highest rate is some years.) As gasoline, energy, prices move even higher there are more interest rate hikes in store for Americans.
It is TRIFECA BUSH ECONOMIC POLICY; more money out of your pocket for gas, more out of your pocket to pay the higher cost of goods and more out of your pocket for everything you buy on credit cards and mortgage loans.
HAD ENOUGH?
Last Update: 04/22/2006