From Volume 8, Issue 8 of EIR Online, Published Feb. 24, 2009

United States News Digest

Peterson Pushes Social Security, Health Care Cuts

Feb. 20 (EIRNS)—An unconstitutional scheme to force Congress to implement deadly cuts in Social Security and health-care entitlements is being promoted by the Peter G. Peterson Foundation, going into the Feb. 23 White House Fiscal Responsibility Summit.

There is no indication that President Obama or his administration have adopted the Peterson scheme for a Fiscal Future Commission or Task Force, which would effectively remove the powers of taxation and spending granted to Congress by the Constitution, and give them to the commission, which would make recommendations, and require a simple up-or-down vote by Congress.

Going into the summit, the Foundation bought ad time on the Sunday television talk shows, warning of a claimed $56 billion in unfunded retirement and health-care obligations, and calling for an "action-oriented bipartisan commission" to avoid the looming catastrophe.

In a Feb. 19 interview on CNBC, former Comptroller General of the United States David Walker, now President and CEO of the Peterson Foundation, called for scuttling normal Congressional procedures. "We can't go through regular order," Walker asserted. "The regular order is broken.... You have to have an extraordinary process."

Both Peterson and Walker are expected to attend the White House summit, which will include Administration officials, Congressional leaders, and experts in Social Security, health care, taxation, and the budget.

LaRouche: Throw Schwarzenegger Out Now!

Feb. 19 (EIRNS)—After months of posturing and bullying, California Duce Gov. Arnold Schwarzenegger has a state budget on his desk, awaiting his signature. As with every past budget of the Arnie era, it includes elements of "creative accounting," such as postponing payments into the next budget year, extensive borrowing, and overly optimistic projections, combined with dismantling of state services. As with the budget agreement of September 2008, which Arnie claimed solved the state's budget crisis, this new one will unravel shortly after it is signed.

Referring to Schwarzenegger as the "Sultan of Flab," Lyndon LaRouche's response was to call for the ultimate cutback: "Throw Schwarzenegger out now!"

The budget deal was crafted to cover a shortfall of more than $40 billion, covering a period from today until July 1, 2010. To balance the budget, the legislature agreed to $14.3 billion in tax increases; $15.1 billion in spending cuts; and $11.4 billion in borrowing. The borrowing may be reduced, as might some of the cuts, depending on the expected allocation of Federal funds from the stimulus package. One of the problematic aspects of this agreement is the borrowing, as California has been repeatedly downgraded as a credit risk, to the point of having the lowest credit rating of the 50 states, meaning, the cost of borrowing will be high. Of course, under Arnie, the debt is sacrosanct, so, every other program will be sacrificed first.

The other major problem with the bill is that it fails to acknowledge that its implementation will only make things worse. Recent executive decisions by Schwarzenegger, such as the unpaid two-day-per-month furlough of state employees, which means a reduction in wages of over 9% per employee, will continue, along with earlier cuts in the social safety net. The additional $15.1 billion in cuts will hit health care and education hard, and will further cut programs for the elderly, disabled, and poor. Unemployment in the state is officially approaching double-digit levels, adding to the costs of government, while revenues continue to plummet.

Another serious problem is how Arnie's mis-governance has made the state increasingly dysfunctional. There were promises made by the Senate Democrats to win over the final Republican vote needed, which virtually every Democrat opposes, including one which calls for a Constitutional change to establish open primaries in future state elections. While the Democrats agreed to this as a necessary evil, in order to pass the budget, it is another example of Schwarzenegger using California's disastrous system of recall and referendum to circumvent deliberation by elected representatives. This system of recall and initiative bears a significant part of the blame for the current impasse, as it was this system which made Arnie governor, through the recall of former Gov. Gray Davis, and added large amounts of spending mandates to the budget by popular referendum, bypassing the vetting process of legislative deliberation.

Obama Calls Turkish President and Prime Minister

Feb. 18 (EIRNS)—The White House announced today that on Feb. 16 President Barack Obama had warm and productive phone conversations with Turkish President Abdullah Gul and Prime Minister Recep Tayyip Erdogan. Both discussions were wide ranging. The President emphasized the importance of the U.S. alliance with Turkey, and said he looks forward to working with both Gul and Erdogan on a broad agenda of mutual strategic interest. In both calls, the leaders discussed a number of issues, including U.S. support for the growing Turkish-Iraqi relationship, cooperation in Middle East peace efforts, and the U.S. review of Afghanistan and Pakistan policy.

Erdogan announced at an Ankara press conference the following day that he is looking forward to meeting President Obama at the G20 meeting in London in April.

Obama DOJ Recalls Stevens' Prosecution Team

Feb. 17 (EIRNS)—In what calls a "surprise move," the Department of Justice has filed a motion to remove the entire team of prosecutors involved in the case of former Alaska Sen. Ted Stevens (R). This comes as a result of the revelation (through FBI "whistleblower" Chad Joy) that the government's lead witness in the case, former VECO CEO Bill Allen, was having an affair with an FBI agent during the investigation. The Bush DOJ, under Attorney General Michael Mukasey, had refused to supply documents and "other materials" relating to these charges, leading Judge Emmet Sullivan to rule that four DOJ lawyers (now removed) were in contempt of court.

Sullivan's next ruling will be on whether to allow the defense to directly question the FBI and DOJ officials involved, sometime in mid-April.

Frank Puts Kibosh on Bill Curtailing Derivatives

Feb. 16 (EIRNS)—A bill to ban the sale of "naked" shorts, effectively eliminating a $28 trillion a year "industry" in speculation in credit default derivatives almost passed the House Agriculture Committee (chaired by Rep. Collin Peterson, D-Minn.) after a week of hearings and debate. The bill that actually did pass on Feb. 13, would allow the Commodities and Futures Trading Commission to ban trading in "naked credit default swaps" "under certain circumstances," and with the President's consent, as well as provide for criminal prosecution of violators. Peterson was forced to backtrack on his original legislation, after Wall Street rebelled at his proposal, first forcing him to acknowledge that the proposed ban was not permanent, then to make it optional.

There has been an ongoing battle for control/oversight of this speculative market, with Peterson on one side, and Rep. Barney Frank (D-Mass.) on the other. Peterson's Agriculture Committee has oversight of the CFTC, while Frank's Financial Services Committee oversees the Securities and Exchange Commission, each of which, technically has responsibilities for this market. The SEC has twice (once in July 2008, then again in October) temporarily required short-sellers to purchase the shares before the contract date, with the latest restrictions due to expire in July of this year. Peterson complained that this "blinking light" from the SEC was not adequate oversight.

In announcing his bill, Peterson said he understood that it "upset many on Wall Street," but that the banks had "enjoyed political advantage for decades," and that they failed to make a case for derivatives during the hearings.

Pennsylvania May Be First with Single-Payer Health Insurance

Feb. 15 (EIRNS)—Pennsylvania's HB 1660/SB 300, is the state's version of the Federal HR 676, Rep. John Conyers' (D-Mich.) Federal bill for Medicare for All health insurance. It could become the first in the nation to be implemented.

OpEdNews columnist Kate Loving Shenk reports that some 22 Republican legislators have signed on to an Economic Impact Study for the program, a prerequisite for the bill itself to come to a vote. Gov. Ed Rendell has said repeatedly that he would sign legislation establishing a single-payer system that would provide health coverage for all Pennsylvanians, and do away with private insurance companies' ability to say who should live. Conyers plans to go to Pennsylvania to organize for the legislation. A 2008 poll showed that some 68% of Pennsylvanians favor such a program. Lyndon LaRouche endorsed Conyers' HR 676, and aggressively campaigned for its passage.

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