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Lonnie Hicks

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The World Debt Crisis and the US Debt Situation: A Backgrounder

11/21/2011 2:56:00 PM

by Lonnie Hicks

For all the talk about the US debt situation and the world financial situation we Americans are seldom given the plan and simple truth about what caused this debt.

Similarly we are never told who benefited from the accumulation of this debt and who got rich off of it.

American media obscures the facts of the matter.

So I have below connected these dots so as to make things clear about where the debt came from and how banks and the monied classes got rich off of it-- creating the income inequality we see today.

For those interested in understanding the current world debt situation, I also have links below which gives you articles and videos in easy to understand small size chunks.

First, we can look at the US debt as a proportion of our gross domestic product, the GNP is the value of all the goods and services a country produces in one year. In the United States GNP is now about 14 trillion dollars per year.

Now we want to know what percentage of that GNP is debt, who or what caused it and who benefits from this debt and who lost.

The total debt is about 15 trillion dollars and here is where it came from:

1-40% was caused by is caused by the Bush Era tax cuts-- 6 trillion dollars.
We gave tax cuts to billionaires on the theory that if we did so they would be job creators.

Well we see how that turned out.

And these tax cuts are still in effect to this date and we gave the rich these tax cuts while fighting two wars and with recession loaming. The rich kept the money and spent in overseas investing in Asia and Europe and India and left us Americans back home getting poorer and poorer each year.

They took some if it and loaned it back to us,  (who gave them the money in the first place) at high credit card rates and bank fees and for shady mortgages. (There is no justice in this crazy system.)

Now this was the first step in income inequality, Bush tax cuts took from us the poor and gave money to the rich and wall street in the form of these huge tax cuts.

Now if the rich are paying less and less taxes over the last thirty years their tax rate jumped down from 91% to the current 35%. This is literally subsidizing the rich.

And if these rich have been paying less and less in taxes, the middle class has had to make up for what the rich were not paying, and that is why the middle class in this country is going broke. We have been subsidizing the rich.
So this is the major reason we have a deficit in this country. Not from spending too much, but because we have given away tax payers money to the rich-not from "overspending."

And moreover, with these so-called "austerity" programs, the middle class is now going to have to pay for all the losses the rich have incurred as a result of taking our money and gambling with it and losing. They lost it and then turned around and got tax payers to pay for those losses (with our money) by getting bail-outs-again from our money.

You see there is no justice here at all.

2-The second biggest source of the so called deficit is the two wars in Iraq and Afganistan--about 10% of the total debt or 1.5 trillion dollars. But note who benefits financially from these wars, large companies, contractors and those who make tanks, planes and then we blow them up and have to make more. War is profitable for the rich, not us middle class types. Now when the veterans come home the tax payers have to pay medical bills, housing costs, pensions--that is we pay the bills for war while the rich get all the profit from war.
Americans simply have been brainwashed to the extent they don't see this.

3-The third component of the deficit is the money it cost for the bank bail out, (TARP) and the losses of Fannie Mae and Freddie Mac. These are government agencies which back and pay for fully 80% of all mortgages in the United States, this is done of course with tax payer dollars. The banks loan the money but don't have any risk if things go bad--all they do in send the bill for losses in real estate to the US government if you and I don't pay, straight to Fannie Mae and Freddie Mac, that is to us taxpayers, who then have to pay the bills. The real estate bust from 2008 resulted in these two tax-payer funded agencies going bankrupt. They are bankrupt today and we middle class tax payers have to foot this bill while the banks simply walk away from all the losses and get our houses through foreclosures as well.

This analysis is not for the faint of heart.

25% of the deficit or 3.75 trillion dollars comes from this source and again the banks and the rich walked away from the housing debacle taking the profits with them and leaving us with the bill.

4- 5% of the deficit 750 billion comes from the money spent on recovery and stimilus packages to clean up the mess the rich have made.

5-The remainder of 3 trillion is interest and loans we have had to make to finance this debt.

Now it is clear who got rich off this deficit and who has been made poor. That is why there is income inequality in this country and the story is much the same for most of the western world. The rich get rich off the poor and the middle class. This is the second time this has happened since 1929 in the United States.

So there you have it--the world is not fair.

To see all this in a chart check out the CNN report and chart in the link below. There is good information there also on the Super Committee

Now for background on the world situation the most up to date analysis has been done by the BBC. They have done a pretty good job of putting together articles which cover the situation in the western countries.

Notice what is not there: an analysis of China, India, and Germany, because these countries don't have the debt that the other countries do.

Notice as well that the BBC people don't seem to understand that American debt was driven by just two factors: The Bush Tax Cuts and the two wars TARP (the bail out to the banks) and debt assumed by Fanny Mae and Freddy Mac 

 See links below for details.

  Pretty grim huh?

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