From the Belly of the Beast: A 'new norm' for US working people

The US government has announced that the Great Recession ended in the northern summer of 2009. What it means is that the contraction of gross domestic product that began in late 2007 stopped, and GDP began to increase slowly.

President Obama touted this as “things moving in the right direction”. He has stopped saying that recently, because for the overwhelming majority, the Great Recession is not over, and the Pangloss routine just makes people angrier. The fact that the stock market has made a big rebound since its low of March 2009 likewise is no consolation and seems to workers to be rubbing their noses in their discomfort.

Liberal commentator Frank Rich, writing in the October 24 New York Times, notes “the country’s fatalistic sense that the stacked economic order that gave us the Great Recession remains not just in place but [is] more entrenched and powerful than ever. No matter how much Obama talks about his ‘tough’ new financial regulatory reforms or offers rote condemnation of Wall Street greed, few believe there has been real change. That’s not just because so many have lost their jobs, their savings and their homes. It’s also because so many know that the loftiest perpetrators of this national devastation got get-out-of-jail-free cards, that too big to fail banks have grown bigger and that the rich are still the only Americans getting richer.”

Jump in poverty

Those on the bottom are suffering the most. The Census Bureau released figures in September for 2009. It found a big jump in the number of people in poverty. It defined poverty for a single worker as an annual pre-tax income of $10,830 or less, and for a family of four as $22,050 or less. In the US that is quite poor! The number of people living below the poverty line in 2009 reached 44 million, and included one in five children.

Erik Eckholm wrote in the September 17 New York Times about the Census Bureau results: “Interviews with poverty experts and aid groups said the increase appeared to be continuing this year.” The numbers would be even higher except that “the temporary increases in aid provided in last year’s stimulus bill eased the burdens on millions of families”. Those funds are not likely to be renewed by Congress.

Another factor holding down the number has been the “sharing [of] homes with siblings, parents or even non-relatives, sometimes resulting in overused couches and frayed nerves”. The census found an 11.6% increase in such multifamily households in 2008-09.

The Census Bureau also noted an increase in the number of people who have no health insurance. The figure discussed during the health care debate was something around 42 million. That rose to 50 million in 2009. This number too will grow this year, as workers continue to lose jobs where employers have provided health benefits. The number of employers who do so is dropping, as the costs of private health insurance continue to rise.

An Australian reader might be surprised: wasn’t a health insurance reform law passed that was supposed to guarantee coverage for everyone? That reform would force everyone not covered by employer plans to purchase private health insurance or pay a fine, but this wouldn’t go into effect until 2014. The government would supposedly help the poor to buy such insurance. The insurance companies like this plan for obvious reasons: it would bring in more customers and lock in the insurance racket’s hold over the medical “industry” for years to come. Whether or how any of this will actually unfold is not clear. There will be moves in Congress to limit or eliminate government funds to aid the poor. But in the meantime the number of uninsured will continue to climb.

Unemployment remains persistently high. The official rate is between nine and 10%. If workers forced to take part-time jobs and workers who haven’t applied for a job in the previous four weeks are taken into account, the figure hovers around 17%. Long-term unemployment remains high. High unemployment is a downward pressure on wages. When many unemployed workers do find jobs, often they are lower paying and without benefits like health insurance.

Social wage

While wages are being pressured downward, the social wage is being rapidly cut. This is most sharply felt in severe cuts to education, with massive lay-offs of teachers and nurses, crowded classrooms, not enough textbooks, deterioration in school buildings and the cutting out of whole programs such as art and music in many school districts. Other cuts are even to police and fire departments, programs to help people with disabilities and so forth. It is unlikely that there will be any further extension of the number of weeks the long-term unemployed will receive benefits.

Once again there is a rising clamour among capitalist politicians to make cuts in Social Security, the miserly government pension plan, as well as to Medicaid, the government medical insurance plan for the elderly. The claim is that these programs are “going bankrupt”. To help understand the con job being perpetrated, it would be useful to consider just what the social wage is.

Starting with the obvious, the various forms of the social wage workers receive come from government funds. These funds come from taxes. Taxes the capitalists pay clearly come from the profits they have extracted through the exploitation of workers. What about the taxes collected from workers?

The con job has been to convince the workers that they are themselves funding the social programs the government runs. For example, when, under the pressure of the labour upsurge in the 1930s and the existence of the Soviet Union, President Franklin Roosevelt introduced the Social Security program, he thought it would be politically expedient to introduce a tax on workers to pay for part of the program so they would think they were participating in a kind of savings plan for their future.

But all taxes on workers are taken by force, to bolster the government funds used to run the capitalist government and state. They are part of the profits squeezed out of the workers. The real wages workers have to spend on their needs are what remains after all the taxes they are subjected to have been deducted. So all taxes on the whole population, including workers, are that part of their profits the capitalists spend on their government.

Looking again at the figures for the poverty line discussed above, we should deduct the taxes these poor workers pay. While most or all pay small or no income taxes, they pay all kinds of other taxes on sales and so forth, so their real wages are below those cited.

It is true that working people have won in struggle various forms of social wages which the capitalists pay out of government funds. When workers pay taxes labelled “unemployment insurance”, that’s part of the overall profits the capitalists have wrung from them. When they receive unemployment benefits when out of a job, they are receiving a real wage, in this form. Very rarely will anyone receive in unemployment benefits an amount matching the “unemployment” taxes stolen from them by the capitalist government over a lifetime of work.

Bookkeeping tricks

Part of the scam has been to set up funds labelled “Social Security” and “Medicare” separate from the overall funds of the government. But this is a bit of bookkeeping fakery, designed to make it look like these funds will “run out of money” in order to argue that Social Security and Medicare payments should be cut. Whenever the government wants, it takes money out of the fake Social Security fund to cover the general fund, giving the lie to the scam.

Regular wages and the social wage are all paid out of previously accumulated profits, from both capitalist enterprises and the capitalist government. Other things being equal, it is in the interests of the capitalist class to lower both types of wages. That is why we see the present Great Recession being used to drive down both.

Some bourgeois economists have begun to recognise that the present crisis is not like any we have lived through since the end of the Second World War. They have started to say that a “new normal” is being established, of high unemployment and reduced social spending. “We” have to accept and adjust to this new reality.

Indeed, we have to look back to the Great Depression for some analogy to what we are going through now. There was a period, 1933-37, when there was an upturn in the economy and some rehiring. We can expect similar upturns in the present “new normal”. There will also be further downturns, as there was in 1937. The Great Depression did not end until massive spending for war dominated the economy. That particular way out doesn’t appear feasible now. War spending is already huge and will continue to spiral up as trillions continue to pour into the Iraq-Afghanistan-Pakistan war. A new world war is too dangerous now, with nuclear weapons aimed and ready to fire. In the 1930s, the US was a creditor nation; now it is sinking further into debt. It looks like the present situation will last years.

What it will take, I believe, is a new movement of the working class to rise up and begin to reject the “new norm”. Such a movement did eventually come into existence in the 1930s. At present the working class is stunned and atomised. People are desperately seeking individual solutions. In time — how much time I wouldn’t hazard a guess — more and more will come to see this “new norm” as the result of the capitalist system in its late stage of financial parasitism, and start to fight to demand that workers not continue to be the ones to pay. If we are willing to struggle by any means necessary, in time a majority will see the necessity of overthrowing the system itself.

[The title of this regular column, “From the belly of the beast”, was how the great Cuban fighter against US imperialism Jose Marti, signed his letters to friends back in Cuba when he was in the US.]