July 2011, Week 4


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Tue, 26 Jul 2011 22:22:39 -0400
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Obama Hits The Trap Running

By Steve Max 
Progressive America Rising
July 26, 2011


Would anyone not have thought President Truman insane had he gone before the nation in 1945 and said, "I have had experience running a small business, and based on what I learned selling neckties I have decided to drop the atomic bomb on Japan."

Yet, when House Majority Leader John Boehner proposes to drop
the bomb on the American economy based on his experience
selling plastics with the Nucite Sales corporation of
Cincinnati, no one thinks it all odd, least of all President
Obama. In last night’s response to Obama’s televised address
to the nation, Boehner referred at least twice to his own
small business experience as the source of his knowledge that
government, like small business, must live within its means.

The trap that Obama and many Congressional Democrats
constantly fall into is that they act and talk as if
Republicans are normal and this is a rational situation.
Obama consistently tells the public what a fine fellow
Boehner is, how they share the same goals of deficit
reduction, how they agree that the nation must live within
its means, and how the only differences are over the way to
achieve their common goals.  The sad thing is that for Obama
this likely goes beyond being nice, he probably believes it.

Democrats need to start speaking the truth. The economy of
nation states is nothing like a small business (or any size
business,) and the federal budget is not remotely like your
family budget, another oft spoken Republican falsehood.
People who ignorantly think such things, the President should
say, are not fit to be the nation’s decision-makers because
it is too dangerous.  In addition, it is an outright lie that
cutting government spending will create jobs. It is a lie
that taxing the rich is bad for business. It is a lie that
raising the debt ceiling discourages investment. Republicans
never believed any of this when they were in power. They are
lying now and they know it.

The idea that the federal budget is not like your family
budget is particularly difficult to grasp because it is
counterintuitive.  Back when cars were first invented, many
people turned their stables into garages. This contributed to
the popular notion that if your car wasn’t working properly,
a few days of rest in the garage would help it.  People
couldn’t quite grasp that while the car and the horse served
similar functions and even occupied the same building, they
operated on totally different principles.

The federal government is not a family or a business, it is
the administrative committee of the entire nation.  While it
must indeed live within its means, as the Republicans say and
the President concurs, the potential means is the entire
social surplus.  That is the value of everything produced in
America minus the portion that people live on, the portion
spent on business expenses, the portion needed to maintain
the infrastructure, and the portion needed for future
investment.  What is left over is the social surplus.  How
the social surplus is divided between private profits, public
services and governmental administrative costs is entirely a
political matter.  Actually, the amount of the social surplus
isn’t calculated by anyone, perhaps because that would raise
too many questions about who owns it, but it exists, it is
huge and it is the means within which we must live. And, as
noted, whether it goes to Medicare or to the richest 400
families is a political problem, not an economic one.  When
Boehner and the Republicans insist that government must live
within its means like any family or business, what they are
really saying is not that we have reached the objective limit
of the social surplus©, but rather that they will decide what
the means are, and the rest of will live within them.
Measures such as the money supply, the federal budget and the
debt ceiling are arbitrary political constructs that are not
based on actual economic limits. In 2010 when the Federal
Reserve thought it necessary to stimulate the economy, it
basically printed $600 billion. The money wasn’t in the
budget and it wasn’t borrowed, it was just created showing
how flexible the situation really is. §

The federal budget is a good example of this. There is
certainly a deficit, but the amount is a function of how the
bookkeeping is done.  Surely, having run a small business,
Rep. Boehner knows that businesses and almost all state
governments have capital budgets for buying structures and
equipment.  When a business buys a computer, a machine or a
warehouse, it is not considered to have lost money. Rather it
has exchanged one asset (cash) for another of equal value (a
truck.) After the transaction, its net worth on the books is
the same as before. Not so with the federal budget, which
treats buying a computer as if it were the same as giving a
corn subsidy to agribusiness. Never mind that the corn
subsidy is just money gone, but the government now owns the
computer which should be considered an asset.  If federal
bookkeeping methods were the same as in Boehner’s business,
the deficit would be far, far less.

The point is that many of the financial measures that we tend
to consider as reflections of objective laws of nature (you
must live within your means,) are really our own inventions
as a society, and we have great, though not unlimited,
latitude in which to change them.  What they are actually
reflections of is the balance of class forces within the
political structure and they are designed to set the
framework in which the owners of wealth can become even

The fact is that if the Republican goals in the debt ceiling
debate were actually based on true economic principles and
that debt really causes unemployment, then we would all be on
their side and telling them not to compromise with Obama.
Instead of saying that he shares their goals, the President
needs to explain how they are simply wrong. Otherwise he will
continue to muddle in the consensus trap.

ª The actual reasons were equally as dubious, but that is
another story for another time. Meanwhile see "The Decision
to Use the Atomic Bomb" by Gar Alperovitz.

© For example, that we are eating more radishes than can be



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