US deficit: the End is Nigh (or possibly not)

In these scandal-sodden weeks it's tough to write passionately about deficit reduction. I look up from perusal of Pentagon cost overruns and here's Tristane Banon's mother admitting to consensual, albeit "clearly brutal" sex with Dominic Strauss Kahn amid the filing cabinets in an OECD office and telling the French cops that DSK is a predator comporting himself with "l'obscénité d'un soudard". Before that it was Weiner. Last week it was Murdoch's comeuppance. One distraction after another.

But all the while we have the spectre of Uncle Sam turning into a dead-beat rather than the best credit-risk on the planet.

On August 2, the United States could start defaulting on its obligations as the Tea Party crowd in the House of Representatives refuse to raise the debt ceiling.

On August 3 the lights might start to go out: the US government is scheduled to send out $23 billion in social security cheques to 56 million people. If the checks don't arrive, within a couple of days America's old folk are going without food and can't make the rent. US Treasuries will lose their top rating and the entire credit structure of the planet starts to come unglued.

Goldbugs will be crazed with triumph as the precious metal soars to $3,000 an ounce and hyperinflation roars into life. Next thing you know, greenbacks are being tossed in the trash and we're heading back to a barter economy.

America is in love with Apocalypse. It always has been. Every couple of years someone says the End is Nigh. When I came to America's shores in 1972, Hal Lindsey's The Late Great Planet Earth had just been published. It sold 30 million copies over the next 20 years.

Lindsey wrote that the Antichrist would rule over a 10-nation European Community through the 1970s until the Rapture – scheduled for the 1980s – and the Second Coming.

The next big rendezvous with Apocalypse I remember was New York's brush with bankruptcy in the late 1970s. The air was thick with what-ifs, and remained so until the arrival of the third Christian millennium and a tremendous burst of alarm at the notion that the world's computers would shut down. They called it Y2K and it was a bust.

From there it was a brisk transition to Global Warming, the non-believers' version of the End Times.

Not many people here really think the US government will shut down on August 3. As former assistant secretary of the Treasury, Paul Craig Roberts, writes on our CounterPunch site: "The US government will never default on its bonds, because the bonds, unlike those of Greece, Spain, and Ireland, are payable in its own currency. Regardless of whether the debt ceiling is raised, the Federal Reserve will continue to purchase the Treasury's debt. If Goldman Sachs is too big to fail, then so is the US government."

The essentials of the long-term crisis are simple. For a generation now, the only essential plank for any Republican candidate is a pledge not to raise taxes and to roll back even the modest sums that the rich and the corporations are supposed to send to the US Treasury each year.

The second plank is an equally vehement pledge to keep America strong by throwing money at the Pentagon. Today, the total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70 -75 per cent of the federal budget deficit. America invests in military R&D and production because it's the only game in town; everything else has been exported to low-wage countries.

The Republicans would like to erode and ultimately privatise Social Security and Medicare. These are entitlements funded with a payroll tax. Social Security is solvent. Medicare's impending collapse is regularly and falsely predicted by its enemies.

Democrats offer themselves to poor and middle income voters as the defenders of social programmes, even though Clinton presided over savage onslaughts on social spending and Obama delights in speaking of austerity and sacrifice – the usual overture to another such onslaught.

So the game is simplicity itself: the Democrats want to depict the Republicans as heartless flunkies of the rich, refusing to raise taxes while gutting social expenditures. The Republicans brandish the battle standard of fiscal sanity.

Right now, the Republicans are losing in the opinion polls because many of them are insane and increasingly perceived as such by an American electorate magnificently tolerant in such matters.

The Democrats' fear is that Obama's unceasing public tributes to bipartisanship and the spirit of compromise will end up impelling him to surrender too much to Republican ultras and give away the store.

Don't bet on Apocalypse. These are familiar rituals and no one really wants to toss a bomb onto the dance floor, however much they may swear that the time has come for brutal measures. It seems we have to turn to Dominique Strauss-Kahn for that kind of commitment. ·