Transcript: Thom Hartmann & Professor Richard Wolff: S&P Downgrade of U.S. Debt: What It Means. 8 August '11
Thom Hartmann: Welcome back, Thom Hartmann here with you. Welcome back to America’s number one progressive talk radio program, three years in a row now.
Richard Wolff, Dr. Richard Wolff is on the line with us. Professor of economics emeritus at the University of Massachusetts, Amherst, currently visiting professor of the graduate program in international affairs at the New School University in New York City, author of numerous books, including “Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About it." His website RDWolff.com (with two F’s). Professor Wolff, welcome back.
Richard Wolff: Thank you very much for inviting us.
Thom Hartmann: Thank you. Your take on what Standard & Poor’s did on Friday. And I’d love to get your take on why it is that this one sentence in page 4 of the S&P report, and I’ve read the whole thing, and it seems to be the only place where one party is called out for anything. They mention republicans and democrats once or twice but. “We have changed our assumption on this," they’re talking about whether or not the Bush tax cuts are going to expire, saying that they won’t expire. “We have changed our assumption on this because the majority of republicans in congress continue to resist any measure that would raise revenues, a position we believe congress reinforced by passing the act."
Why has the media not hung this around the neck of the republicans, A, and B what do you think about this whole thing? It’s all yours.
Richard Wolff: Okay. Well I think they haven’t hung it around the republicans because unfortunately the republicans are not the only ones in this society who seem to think that raising revenue, particularly on corporations and the rich who have had their taxes cut the most, is some sort of inappropriate act even to think about, let alone to do. And so, even when an agency that’s part of the problem tells us about it, it’s kind of invisible.
But to go back to your bigger question, about the Standard & Poor. I’m a little amazed at even some of my friends in the United States in the progressive side of things, for being focused on the fact that Standard & Poor’s is not the greatest company in the world, it surely isn’t. That it has made terrible mistakes in the past, it surely has. But that’s not really terribly relevant to evaluating what they said this time. And what they said is a perspective that is perfectly reasonable and is already shared and has been shared by almost everybody else who does this kind of thing. And that runs as follows.
The United States government budget is being looted. We are basically in a society which keeps cutting taxes, which is how the money comes into the government, while having the government do big expensive projects which costs more. And you don’t need to be a rocket scientist to understand that if you cut back the money that is flowing to the government and demand that it spend more at the same time, you’re going to break that budget, you’re going to put the government in an impossible situation where it ends up making the expenditures everybody wants, above all republicans and democrats, and since it can’t raise the money by taxes, it goes and borrows.
Let me give you just very concrete. The three big items in the last ten years that have broken the budget. Number 1: massive tax cuts on corporations and the richest Americans, starting shortly after the year 2000. Basically with the Bush administration. Number 2: the decision around the same time to make a war on terror, whatever exactly that means, all around the world, four very expensive interventions in Iraq, Afghanistan, Pakistan, and now Libya, costing a fortune.
Thom Hartmann: Tripled our Pentagon budget.
Richard Wolff: Right. And Finally, when our private capitalist system melts in 2007 and 2008, republicans and democrats who both voted for the tax cuts back in the year 2000, 2001, who both voted for the escalations in military expenditure, fell all over themselves to throw trillions of dollars at banks, insurance companies, and large corporations, to “stimulate" us back into a healthy economic system. Well the big expenditures on military and bailouts, coupled with the tax cuts on corporations and the rich forced the government to borrow the difference. To borrow the money it could no longer raise in taxes, which both parties supported by everything that they did.
So now suddenly we’re surprised that Standard and Poor’s says oh my goodness the borrowing of the United Sates particularly over the last four or five years of this crisis has taken the national debt to the point where it’s equal to our total output of goods and services per year, which we haven’t had before, other than in a war time situation back in World War II, basically. So that’s a bad sign. And the deal that was struck last week guarantees at least trillions, with a t, of more borrowing in the next several years which of course makes that problem worse. There is nothing unusual or atypical about a rating agency looking at that situation and saying we don’t like what is happening here.
And the basic purpose of this, which people should learn from, is that it’s kind of political judgment. The more the United States government borrows, the more it has to spend paying the money back, or even if it doesn’t do that, paying interest to the folks who have lent the money, who tend, of course, again, to be the rich and the corporations and several important foreign governments. And if you keep borrowing your interest costs will sooner or later rise and then you get that problem. The government is going to have to take taxes, paid by the American people, and use more and more of them to pay the creditors. That’s a dollar for the creditor that’s not available to help your kid go to college on a Pell grant, not available for social security and Medicare and Medicaid, not available to help cities and towns not have to savagely cut the things they do for us.
And sooner or later, and this is the real point of the Standard & Poor decision. Sooner or later, creditors have to worry that there will be a rise up of angry people saying, in America, we don’t want our taxes to keep being used for the creditors, the rich, the large corporations, and the foreign governments…
Thom Hartmann: Which it seems to be what we’re seeing in London right now.
Richard Wolff: Absolutely. That is what we see in Greece, and it’s what we see in Portugal. Those countries’ credit ratings were lowered for the exact same reason. They were borrowing sums of money that meant their governments would have to impose austerity on their people to free up the money that used to be used for hospitals, schools, highways, and instead, ship it off to foreign creditors in the main or to the richest people in their own society, and that’s not politically sustainable in those countries, and it’s not sustainable here. And so creditors are being told by Standard & Poor, “Watch out, trouble is coming," as you yourself, Thom said, a few moments in your own program, social tensions, that’s what this downgrade is about. The prospect of them hurting creditors.
Thom Hartmann: So, Professor Wolff, we have about two minutes left. What should America do and what should we, as citizens be doing?
Richard Wolff: Well the first thing we should recognize is if we want to avoid all of the trouble being created now and signaled down the road, we have to, among other things, get the budget of the United States government into some kind of less credit dependent, less debt, etc. And that means not being silly by deciding you can only do that in one way. There are two ways to improve the budget. Increase the revenue and decrease the expenditures. And then you have to do that in an equitable, democratic way. The first thing is to go back at least part of the way to the level of taxes we used to levy on corporations and wealthy people. I’m not proposing anything to go beyond, just go back to what we used to do when our government wasn’t in the terrible shape it is.
Thom Hartmann: Right. I’m looking at 1961, 47% was the percentage of profits corporations paid in taxes, now it’s 11.1%.
Richard Wolff: Exactly. And the highest tax bracket on individuals in the ‘50s and ‘60s was 91%. Today it’s 35%. These are staggering cuts. If you went even a major way in that direction to correct that, you would drastically alter. And then we ought to look, at course, at the war, and we ought to look at the wild amounts of money we spend on healthcare in this country, that other countries don’t. That’s the way to go about it. The problem can be solved, but the political force to get that to happen, that’s what we need to create.
Thom Hartmann: So, Americans of good will and some intelligence here need to get active and involved, politically involved.
Richard Wolff: Absolutely.
Thom Hartmann: Professor Wolff, Richard Wolff, RDWolff.com (with two F’s). Thank you sir.
Richard Wolff: Thank you very much.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.