STAFF NEWS & ANALYSIS
Austerity Comes to America
By Staff News & Analysis - April 12, 2013

The Scary Message for Everybody in Obama's Budget … Most Americans will ignore the dickering over the federal budget that President Barack Obama wants Congress to pass this year. But there's an important message for just about everybody in that budget: The pain is going to get worse. It would be easy to conclude that Washington has imposed enough austerity on the U.S. economy already, given the tax hikes and spending cuts that have already gone into effect this year. Those measures, if they stick, will reduce the national debt by perhaps $2.5 trillion during the next decade. But that's not enough. – U.S.News & World Report

Dominant Social Theme: The US must go through a European-style austerity.

Free-Market Analysis: People don't seem to realize that a Greek-style austerity is being imposed on the US. It is actually an International Monetary Fund oriented solution. Taxes and regulations increase and public benefits go down. The only part not being applied currently is a massive program of privatization.

Both Republicans and Democrats are responsible for the current debacle that will not do much to increase US productivity but will, in a fiat money environment, do a great deal to retard growth and ensure the US remains mired in its Great Recession.

There will be bright spots, of course, as the Fed has printed too much money not to have some impact. As we've pointed out before, the financial industry and large corporations benefit from the money-printing as does the stock market.

But it takes a very long time for those funds to find their way into the general economy, and then when they do they are likely to create as much price inflation as employment. Here's more from the article:

Budget experts say Congress needs to cut the debt by at least $4 trillion, plus figure out ways to rein in the mushrooming cost of the biggest budget-busting programs: Social Security, Medicaid and especially Medicare. Budget measures up till now have done nothing about those so-called entitlement programs, but Obama is finally seeking some reforms.

The changes Obama is calling for are less drastic than those advocated by Republicans such as Rep. Paul Ryan of Wisconsin, chairman of the House Budget Committee. Among other things, Ryan's plan would transfer a major portion of Medicare costs to individuals, as a way of making the whole program more affordable. But Obama would still change entitlements in ways that would have a direct impact on people enrolled in them, in many cases reducing benefits and requiring enrollees to spend more of their own money.

Obama, for instance, wants to reformulate the way cost-of-living increases for Social Security payments get calculated. Many experts say switching to a so-called "chained" consumer price index would be a more accurate way to measure inflation. But in general it would mean lower cost of living increases for Social Security recipients. For a typical retiree, a 1 percentage point reduction in the cost-of-living increase would cut Social Security payments by about $150 per year.

Relatively minor adjustments might be enough to make Social security more stable, but Medicare is a bigger problem. Obama wants to make some administrative changes in the program that might lower payments to healthcare providers, while also reducing benefits or raising premiums for wealthier Medicare patients. But on its current course Medicare is headed for insolvency, and Obama's moves probably wouldn't be enough to change that. At some point, bigger cuts will be needed, with most seniors likely to pay more.

The next several months in Washington will be dominated by news coverage of political posturing on the budget. Democrats and Republicans will accuse each other of selling out seniors and pandering to favored interest groups. We all know the drill, which is why so many people will tune out the overwrought rhetoric.

People may "tune out" the rhetoric but in doing so they are probably also blinding themselves to the imposition of a monetary regime that will increase the pain for the average individual, make income disparities a good deal more sharp than they already are and continue to retard any hope of a "recovery."

The easiest way to restimulate the economy would be to greatly reduce the reach of the Federal government (including its myriad spying agencies) and the power of the Federal Reserve. Taxes should be cut to a minimum and, most importantly, the military-industrial complex should be extensively pruned.

Instead, taxes are going up, Homeland Security is regularly expanding and the US is involved overtly or covertly in more wars than ever.

Because common sense formulas for prosperity are never reported by the mainstream media, we end up with a narrative that confuses people and a program that gradually strips them of prosperity.

IMF austerity never works, nor was it ever intended to work. It was a globalist invention designed to denude middle classes and concentrate power at the very top. This is happening today in the US but too few notice or understand the fullness of this program or its implementation.

After Thoughts

If it continues, the US will be hollowed out as efficiently as Greece.

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