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The "bank bail-outs", involving several initiatives | which has been a priority of government economic financed by tax dollars, constitute a component of gov- __ policy since the Reagan era—almost all the revenues ernment expenditure. Both the Bush and Obama bank of the federal government, amounting to $2.381 bail-outs are hand-outs to major financial institutions. _ trillion, would be used to finance the bank bail-out They do not constitute a positive spending injection ($1.45 trillion), the war ($739 billion) and interest into the real economy. Quite the opposite. The bail- | payments on the public debt ($164 billion). In other outs contribute to financing the restructuring of the words, no money would be left over for other banking system, leading to a massive concentration of categories of public expenditure... wealth and centralisation of banking power. A large part of the bail-out money granted by the US __ Fiscal Crisis government will be transferred electronically to various A major crisis of the federal fiscal structure is occur- affiliated accounts, including the hedge funds. The — ring. The multibillion-dollar allocations to the war largest banks in the US will also use this windfall cash budget and to the Wall Street bank bail-out program to buy out their weaker competitors, thereby consoli- backlash on all other categories of public expenditure. dating their position. The tendency, therefore, is The Bush administration's $700 billion bail-out towards a new wave of corporate buy-outs, mergers under the TARP was approved by Congress in October and acquisitions in the financial services industry. 2008. TARP is but the tip of the iceberg. A panoply of In turn, the financial elites will use these large bail-out allocations in addition to the $700 billion amounts of liquid assets were decided upon prior to (paper wealth), together with Obama's assuming office. In the hundreds of billions November, the federal govern- acquired through speculative ment's bank rescue program trade, to buy out real-economy was estimated at an astonish- corporations (airlines, the Both the Bush and ing $8.5 trillion—an amount automobile industry, telecoms, Obama bank bail-outs equivalent to more than 60 per media, etc.) whose quoted . cent of the US public debt, value on the stock markets has are hand-outs to major estimated at $14 trillion (2007). umbled. 1 ial instituti Meanwhile, under the In essence, a budget deficit— financial institutions. Obama budget proposal, $634 combined with massive cuts in billion is allocated to a reserve social programs—is required to fund to finance universal und the hand-outs to the health care. At first sight, it banks as well as to finance appears to be a large amount. defence spending and the military surge in the Middle But it is to be spent over a 10-year period, i.e., a East war. Obama's budget envisages: modest annual commitment of $63.4 billion. 1. Defence spending of $534 billion for 2010, a Public spending will be slashed with a view to cur- supplemental $130 billion appropriation for fiscal 2010 ailing a spiralling budget deficit. Health and educa- or the wars in Afghanistan and Iraq, and a ion programs will not only remain heavily underfund- supplemental $75.5 billion emergency war funding for ed, they will be slashed, revamped and privatised. The he rest of the 2009 fiscal year. Defence spending and ikely outcome is the outright privatisation of public he Middle East war, with various supplemental _ services and the sale of State assets including public budgets, is officially in the order of $739.5 billion. infrastructure, urban services, highways, national Some estimates place aggregate defence and military- parks, etc. Fiscal collapse leads to the privatisation of related spending at $1 trillion+. he State. 2. A bank bail-out in the order of $750 billion, which The fiscal crisis is further exacerbated by the com- is added onto the $700 billion bail-out money already pression of tax revenues resulting from the decline of allocated by the outgoing Bush administration under he real economy. Unemployed workers do not pay the Troubled Assets Relief Program (TARP). The total axes; nor do bankrupt firms. The process is cumula- of both programs is a whopping $1.45 trillion, to be ive. The solution to the fiscal crisis becomes the financed by the US Treasury. It should be understood cause of further collapse. that the actual amount of cash financial "aid" to the banks is significantly larger than $1.45 trillion. Structure of the Public Debt 3. Net interest on the outstanding public debt is This large-scale appropriation of liquid money assets estimated by the Bureau of the Budget at $164 billion — under the bank bail-outs by a handful of financial insti- tea ann betiann cae an $A teen nnn tha aeeblin dake a.neni he which has been a priority of government economic policy since the Reagan era—almost all the revenues of the federal government, amounting to $2.381 trillion, would be used to finance the bank bail-out ($1.45 trillion), the war ($739 billion) and interest payments on the public debt ($164 billion). In other words, no money would be left over for other categories of public expenditure... Structure of the Public Debt This large-scale appropriation of liquid money assets under the bank bail-outs by a handful of financial insti- tutions serves to increase the public debt overnight. When the US Treasury allocates $700 billion to the Troubled Assets Relief Program, this amount in 2010. The order of magnitude of these allocations is staggering. Under a "balanced budget" criterion— 12 * NEXUS Both the Bush and Obama bank bail-outs are hand-outs to major financial institutions. APRIL - MAY 2009 www.nexusmagazine.com