The Last Picture Show

President Barack Obama’s Fiscal Year 2009 Budget

[The Last Picture Show was a 1971 film depicting the decay of small town America. It took place in the fictitious town of Anarene, Texas.]

We hear a distant tune reminiscent of America’s high and lonely places and the sound of a dry wind blowing. It’s March 2010 in the tiny West Texas town of Anarene. Nothing much happens here any more. The last business shut down a couple of years ago. It was a cement plant that went broke after the housing bubble burst and the banks stopped lending. The kids out of high school drive their jalopies from one end of Main Street to the other past boarded-up storefronts.

Some of the grown-ups carpool to low-wage jobs in a city 50 miles down the road. The elderly have had their Social Security eaten up by the high price of food but still get by on Spam and Kool-Aid. There used to be a movie theater, but it too closed a few months ago. Not a single person went to the Last Picture Show.

But there is change in the air! President Barack Obama, who was elected president a couple of years ago, is in the middle of his fiscal year 2010 budget. The 2009 budget had a deficit of $1.75 trillion, a number no fool could even have imagined before the crash of 2008. The projection for 2010 is $1.17 trillion, due to the government’s hopes for an economic recovery. But the jury is out on whether a recovery will ever happen.

Some say the banks are starting to lend again, though no one at the Anarene State Bank knows anything about it. Some say the city down the road is getting a plant to make blades for those new wind turbines. The Anarene high school got funding for an adult training course on writing resumes. The Nightly News says, “America is coming back.”

I wish!

So what is really going on here?

Well, President Obama’s 2009 budget has attracted a lot of attention. $1.75 trillion? That’s not federal spending. That’s new federal debt!

A good measure of fiscal policy is federal government tax revenues. Revenues for 2009 are projected at $2.19 trillion, off 13 percent from a year ago, due to the recession. With the huge bank bailouts and Obama’s $787 billion economic recovery program, 2009 expenditures are estimated at $3.94 trillion, an increase of 33 percent over 2008.

Then there’s the interest taxpayers must pay on the national debt, which will likely reach $600 billion in 2009. Of course almost 100 percent of all new federal debt is financed by foreigners, mainly China.

But don’t worry, the recovery program will succeed, and the economy will start growing again. THE GOVERNMENT PROMISES! Obama’s budget forecasts such a strong upsurge in economic activity by the end of 2009 that the net for the year will be GDP growth of 1 percent. (Yes, that’s what it says.)

Is it a contradiction that the government is conducting “stress tests” on the nation’s banks in which it is predicting that the recession will last at least until 2011 to see if those banks are strong enough to weather the storm? Yes, it is a contradiction. Even the Federal Reserve does not see recovery coming as quickly as Obama’s budget. Neither do any economists. The budget is not an honest document.

It gets worse. The budget says growth will then continue as far as the eye can see—the projections go out to 2019, when we’ll have a GDP of $22.86 trillion, 61 percent higher than 2008. Happy days will be here again!

So go back to sleep, America. It’s official. The recession we are in right now will end soon and is the last one ever.

This means that the financial industry will soon be fixed, plenty of good jobs will be available, climate change and drought will be overcome, the government budget will be right-sized, and America and the world will be content and at peace. All because of the decisions being made by the Obama administration and approved by Congress during these few critical weeks we’re in the middle of right now.

But there are a whole swarm of flies in the ointment. I’ll mention just two.

One is that according to University of Massachusetts economist Thomas Ferguson, who spoke at last weekend’s Eastern Economic Conference national conference in New York, the Bush/Obama bank bailouts alone will cause a permanent addition of interest payments on the national debt of $100 billion a year forever. That means every American will pay, during the course of his or her lifetime, over $20,000 to rescue the banks from their bad loans. To put that number in perspective, it equates to 2-1/2 years of tuition at a state university that instead will be paid to the government of China or a similar foreign investor.

Yes, America, that is what your elected government just decided you will do.

Another is that the U.S. has had virtually no real economic growth since the early 1970s, because since then we’ve lived in a bubble economy. Look it up. Most of our industrial output has been flat or has declined. Whole industries, such as steel, are shadows of their former greatness. The automobile industry is on life support. We’ve imported huge amounts of foreign capital by selling them our real estate and businesses. As stated on the Economy in Crisis website:

The United States now no longer controls many of its domestic industries. Over the last 10 years alone foreigners have spent $1.2 trillion to acquire more than 8,000 key US companies. Already as of 2002, foreigners owned fully 20 percent of American manufacturing. In many high-tech and defense-related industries, the proportion is far higher. Such US industries as mining, cement, publishing, engine and power transmission equipment, rubber and plastics, and sound recording and motion pictures are now largely foreign owned. Even in industries like pharmaceuticals, chemicals, industrial machinery, transportation equipment, electronics, metal industries, and coal and petroleum industries, foreign ownership has recently become very high.

Until the last year, the biggest growth industry within the U.S. had been the financial sector, producing profits of over $500 billion as late as 2006. In other words, the U.S. has replaced working for a living with the manipulation of money and the extraction of interest, either by lending it or by brokering the lending and investment by foreigners. In order to enrich themselves, the financiers, with a lot of help from the government, created the merger/buyout bubble of the 1980s, the bubble of the 1990s, and the housing/equity/hedge fund/derivative bubble of the 2000s.

All this time, the federal, state, and local governments have tried to keep up by taxing every financial transaction they can get their hands on, including by raising property taxes on the inflated value of family homes. But now, with the last of the bubbles deflating, the tax base is vanishing. So governments, along with the private sector economy, which has been living on capital gains in the absence of job income for all but the very rich, have gone into the tank as well.

President Barack Obama’s economic recovery program, along with the budget just released, is an attempt to substitute a federal government bubble for the failed private sector ones. Like the private sector bubbles, this one is also based on debt. This is because debt is the only way anyone in the U.S. can any longer think of when it comes to creating a national money supply. It includes the president’s proposed $5 billion federal infrastructure bank for lending to state and local governments. This bank will probably offer better interest rates than the bond markets, but it’s still debt.

There was a time in U.S. history when other ways were known to create money; for instance, during the Civil War, when Congress authorized the Lincoln administration to spend Greenbacks directly into existence. The banks hated the Greenbacks, of course, so they got Congress to pass the National Banking Acts of 1863-64, which were the prelude to the Federal Reserve Act of 1913. Today, Greenback-type funding for the federal government is one of the chief provisions of the American Monetary Act drafted by the American Monetary Institute.

Another way to introduce debt-free money into the economy is through a dividend, such as the Alaska Permanent Fund, which in 2008 paid every resident $3,269 tax-free out of the state’s resource revenues. There is no good reason why such a dividend could not be paid by every state or by the federal government.

Greenbacks and programs like the Alaska Permanent Fund are part of what I call Dividend Economics. It’s why I’ve proposed the “Cook Plan,” which would be a system of vouchers for the necessities of life in the amount of $1,000 a month for any adult citizen who applied. A smaller amount would be provided as an allowance for children.

The vouchers would be taxed like any other income and would supplement other entitlements such as unemployment compensation, Social Security, etc. But taxes would be low for those who would use the vouchers as a main source of income. Under the plan, the vouchers would then be accepted as deposits at a new network of community savings banks that would lend at one percent interest to consumers, students, small businesses, local manufacturing establishments, and family farms.

This would introduce over $2.5 trillion of debt-free money into the economy over the next year, because under the “Cook Plan,” the dividend would be paid directly by the U.S. Treasury without borrowing or taxation. It would not be inflationary, because it would replace money from public bank lending and would result in new goods and services being created within the U.S. producing economy. In fact, we would see a renaissance of local and regional economic activity that would eventually transform the national economy as well.

You may ask, should we just be “giving away money?” My answer is that if the banks can create trillions of dollars in credit out of thin air for lending, why can’t the government create it for the people? The same goes with the trillions the government is borrowing to pay to the banks to reinflate the bubble economy. Give it to the people instead. Look at Obama’s economic recovery program that equates to $225,000 for each new job it hopes to create and probably won’t. Give that to the people too. Let them use the money as a dividend to live on during this emergency and create new jobs as well.

Right now there is nothing further from the minds of President Obama and his advisers than such ideas. That’s why his new bubble budget is America’s Last Picture Show.

Richard C. Cook is the author of We Hold These Truths: The Hope of Monetary Reform, scheduled to appear by September 2007. A retired federal analyst, his career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, and NASA, followed by twenty-one years with the U.S. Treasury Department. He is also author of Challenger Revealed: An Insider’s Account of How the Reagan AdministrationCaused the Greatest Tragedy of the Space Age. Read other articles by Richard, or visit Richard's website.

14 comments on this article so far ...

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  1. Don Hawkins said on March 2nd, 2009 at 9:23am #

    I think there are a few among us who are aliens sent to Earth to take over and so far they are winning. One big problem if they do win nothing left after they deplete the planet and they just move on to another World or maybe Iceland the far North. There numbers are few but powerful they are. They can be defeated but it will take a new way of thinking. There are a few of us who have seen the truth. We are trying to show you the World as it is and if you want to see the World the real World keep reading and witting. May the force be with you calm at peace.

    Many are trying to continue killing the truth’s in the twenty first century and this time the lies that are immortal brings us to the truth’s. We need to use the truth and the knowledge and soon. Read DV Barrack

  2. Max Shields said on March 2nd, 2009 at 7:42pm #

    We are in OVERSHOOT. It is the result of continuing to behave as if there was no limit to growth.

    The DotCom Bubble was a little taste of it in economic terms. But this is not just an economic meltdown. This is an utter collapse at every level. I’m talking about food shortages, and energy depletion, climate change which has tipped.

    We will know we’ve collapsed several years after it happens. Just like early fall was when the free fall was recognized with the sub-prime housing and then financial meltdown – it had actually begun years earlier.

    This is NOT recoverable. It is down the chute. We don’t have a clue what it will look like at the other end.

    This overshoot began in the 1970s. We knew then and now what’s needed but the very polity/culture/economic systems in USA are incapable of responding to the warning, the feedback was there, the alarms have been going off, but all is fastforward…

    Aside from Obama’s obvious immaturity on matters of state and economics, perhaps HE should have been vetted before running to see if he understands the fundamental principles of accounting. HE would have failed, then. But it’s irrelevant because we’ve already passed the point of return.

    It’s playing out like this: The patient has been told he has lung cancer and so decides to chain smoke to the very end.

  3. anthony innes said on March 2nd, 2009 at 10:48pm #

    As the USA prints its currency into irelevancy and the citizens there do not grasp that decisions are no longer made with concern for outcome advantageous to the USA the Bank of International Settlements and its cartel plunders the planet.
    Hedge funds and derivatives collapse (unavoidable) will finish the USA dollar.China will get Taiwan as the SCO negotiates the NWO .
    The Foriegn USA bases will be a new source of illicit arms as troops pawn their equipment as the Russians had too when their roubles became worthless.
    Max is correct in his anlysis.France ,Britain,USA and most of the G7 are in denial that the BIS insanity can be maintained.
    China is facing ecological collapse on a daily basis and has real concerns for social order.The MSM in the west are just about to have to reverse their position as they had to on climate change.Confusion about this could be overcome by a move to ecologically sustainable accounting in all transactions.Net energy is about to be as much of human discussion as sport.
    What is clear that rule of Law is coming back into vogue.
    The Bank of International Settlements is where the money trail leads and this planet has had enough of its infantile corruption.The USA unlike when its hegemony fell after WW2 bankrupted the UK is in the full glare of world opinion.Transparency will be mandatory if any financial order is to be trusted.If a financially based distribution system is to succeed (and it must if millions and millions of decent innocent people are not to perish) Interpol must have international support to haul perps to the Hague for trial.War is a crime we can no longer,glorify,afford tolerate or condone.Its swords into ploughshare time and a civilian based economy now has to come into the basis of social contract.We cannot continue with politics as usual.It is a completely failed evolutionary strategy.We can continue down the path of insects and oblivion or remember our duty to human progress.
    The BIS agenda must be exposed for the authoritarian sociopathological insanity it has become and soveriegn Nations move on free of the Tyranny of Corporate Colonialism and its inherent violence.No Nation,Individual or legal entity is above the Law .This planet has natural boundaries and systems that we MUST RESPECT and our laws as creatures have to move beyond the historically determined shambles our various mythologies have created.All equal before the lAW of this planet .War is a crime.

  4. Deadbeat said on March 3rd, 2009 at 3:36pm #

    I’m talking about food shortages, and energy depletion, climate change which has tipped.

    The problem of “growth” is not that there are food “shortages”. This Malthusian rhetoric is one of the reason why “environmentalist” lose credibility and retard solidarity especially with people of color. This leads to the false notions of “overpopulation”, “carrying capacity” and “energy depletion”. Energy depletion is dubious especially “peak oil” that was used a “Leftist” tool to mislead activist that the war in Iraq was a “war for oil” and not a zionist enterprise.

    The big problem with “growth” is that it is achieved via vast labor exploitation and a race to the bottom. In order to have “growth” there must be an adjoining level of POVERTY. In other words there is no “growth” but a huge TRANSFER of WEALTH that doesn’t count the externality of despoiling and exploting the environment — both people, animal and nature — or as Marx labelled the “exploitation of everything”.

  5. bozh said on March 3rd, 2009 at 3:46pm #

    i have been saying for six yrs that US did not invade iraq to obtain oil.
    as to who wld make profit from the invasion, that’s a diff’t story; of which i know very little.

    ‘zionists’ had avowed to obtain jordan and parts of leb/syr. i do not know that they want also parts of iraq. thnx

  6. Max Shields said on March 3rd, 2009 at 5:38pm #


    If you don’t understand something ask. You are obviously not familar with dynamic systems theory. That’s ok. No one knows everything. But rather than tossing out your politically charged views, you should try to understand what is being said.

    The ‘growth’ I’m addressing has NOTHING to do with labor or Karl Marx.

    Population is an issue with all species. Your “Malthusian rhetoric” is a misunderstanding, or lack of careful reading of what I posted. I talked of Overshoot. After 10s of thousands of years the human population reached just under 2 billion. Within a short 100 years it is tipping the scales at nearly 7 billion!! That is one of thousands of examples of overshoot. But some overshooting are relatively innocuous, like turning on the shower water and stepping in only to realize it is scolding – that is an example of an easily rectified overshoot. Human population, and energy depletion is an extreme and civilization threatening example.

    Now maybe from your cozy abode that doesn’t mean a whole lot. But in real terms it does. A study of our global food system, for examplem will tell you just how precarious that system is. It is well documented, but you refuse to care about these things because your world view is all about racial/class struggle. There’s a world, a planet that doesn’t care one iota about this struggle. The politics which keeps this all a struggle, does not allow for problem solutions.

    WTO agreements have created monocultural arrangements that have devastated indigenous farming. The latter fed communities. The replacement does not. Food is cheap and dumped into markets like Mexico forcing farms to come North away from their villages to become “illegal aliens”.

    If you are Earl Butz you may think our food system is working just fine. Earl gave us this wonderful monoculture/military industrial complex global food system.

    By the way, Mathus was pretty much on track. What happened in Britain to stop the crash he predicted was fathom, disease and migration that altered the local population.

  7. Suthiano said on March 3rd, 2009 at 6:06pm #


    So population growth and activities like monoculture farming (the WTO created monocultural arrangements) had/have nothing to do with labour and/or the industrialization that resulted from the capitalist system?

  8. Shabnam said on March 3rd, 2009 at 6:08pm #


    I have written for almost the past two years that Iraq war was for Israel to change the map of the region to benefit Israel. This change comes with destabilization and partition of the regional states including Iraq. If you have read two of my comments you would have not asked “I do not know that they want also parts of Iraq.” Of course they do. One of the reasons for Iraq war is to partition Iraq to create non-Arab puppet state like Kurdistan. The Kurds are PAWNS to transfer north of Iraq with its oil resources to Israel as part of the ‘Greater Israel’ fantasy taken from bible, manmade hoax, like they have done in Palestine, of course using the empire as a PROXY. You should read the zionist plan for the Middle East which is under title “A strategy for Israel in the Nineteen Eighties” by Oded Yinon. Hurry up please.
    Wayne Madsen has written:
    {Israel reportedly has plans to relocate thousands of Kurdish Jews from Israel, including expatriates from Kurdish Iran, to the Iraqi cities of Mosul and Nineveh under the guise of religious pilgrimages to ancient Jewish religious shrines. According to Kurdish sources, the Israelis are secretly working with the Kurdistan Regional Government (KRG) to carry out the integration of Kurdish and other Jews into areas of Iraq under control of the KRG.
    Kurdish, Iraqi Sunni Muslims, and Turkmen have noted that Kurdish Israelis began to buy land in Iraqi Kurdistan, after the U.S. invasion in 2003 that is considered historical Jewish “property.”
    The Israelis are particularly interested in the shrine of the Jewish prophet Nahum in al Qush, the prophet Jonah in Mosul, and the tomb of the prophet Daniel in Kirkuk. Israelis are also trying to claim Jewish “properties” outside of the Kurdish region, including the shrine of Ezekiel in the village of al-Kifl in Babel Province near Najaf and the tomb of Ezra in al-Uzayr in Misan Province, near Basra, both in southern Iraq’s Shi’a-dominated territory. Israeli expansionists consider these shrines and tombs as much a part of “Greater Israel” as Jerusalem and the West Bank, which they call “Judea and Samaria.”}

    You must read the basic on the question of “greater Israel” to understand why people strongly believe that Israelis’ policy and genocide is not limited to Palestine. Israel has her own goals and interests different from American’s interest based on world domination

  9. Shabnam said on March 3rd, 2009 at 6:10pm #

    If you had read two of my comments you ….

  10. Max Shields said on March 3rd, 2009 at 6:55pm #

    I suspect your question is a bit rhetorical (though I could be wrong).

    Monocultural farming, it could be argued has contributed to the total global population growth. That is in fact my point. It is also my point that industrialization is what most large scale (dominate) farming is today. So yes industrialized agriculture is central to both monocultural farming and global food system and contriubtes to population growth.

    My post was about systemic changes, not about “labor” and “exploitation. Do you see what I’m getting at? Deadbeat doesn’t, but I hope you do. I am offering a systems view rather than a world view or ideological one.

    You can apply what I’m saying to all living things, not just humans. I don’t think nats or catapillars or dinosaurs or eagles are thinking about survival as a Marxist dialectic.

    By the way, was Marx against industrialization?

  11. Suthiano said on March 3rd, 2009 at 8:39pm #

    Thank’s for the response Max… Intonation is an important part of language….

    Marx was certainly a fan of industrialization, it was his golden ticket to freedom for the masses…. who I assume would spend their extra free time producing children and fueling an overshoot.

    It is important to recognize limits of ideological thinking.

    These are all interesting ideas to me, thanks for posting.

  12. Deadbeat said on March 3rd, 2009 at 9:57pm #

    Marx was certainly a fan of industrialization, it was his golden ticket to freedom for the masses…. who I assume would spend their extra free time producing children and fueling an overshoot.

    Get some schooling before posting ridiculous rhetoric.

    Marx’s ecology in historical perspective

  13. Deadbeat said on March 3rd, 2009 at 10:07pm #

    Max writes …

    By the way, Mathus was pretty much on track. What happened in Britain to stop the crash he predicted was fathom, disease and migration that altered the local population.

    Yes Max and since you put the environment for rich first world folks like yourself about all others you would like to embrace the Ebanezer Scooge school of the “surplus population” dying off in order to reduce humanity’s footprint.

    CAPITALISM with its imbalance of power and access to resources is why there was and still is POVERTY and disease and misfortune and all of the ills of society. Your rhetoric Max is to shift the blame to the poore especally the third world poor whose desparate condition and especally the powerless of women in these region to have more children. The statics shows that there is population declines among the first world nation while at the same time their take of the world’s wealth and resources consumed has increased. This is clearly an imbalance of power and it will take an immense struggle especially from below to alter this course.

    Everyone out there has “solution” but if it does not address POWER then all of the so-called “good ideas” will never emerge.

  14. Max Shields said on March 4th, 2009 at 5:27am #


    Perhaps the issue with your reading what I say is that you are a linear thinker or something of the sort.

    When I asked if Marx was “against” industrialization it was a “tongue in cheek” to Suthiano. My point then and now is that industrialization is not simply a capitalist “virtue” but one Marx hand no issue with. He had issue with ownership.

    Your second post is irrelevant red herring regarding anything I said or intended.