'Debt crisis' pretext for attack on working people


San Francisco – The US mass media are awash with the Congressional wrangle over the “debt crisis”. The Republican Party in the House of Representatives is threatening to refuse to raise the ceiling on how much the government can borrow. The deadline for raising the ceiling is August 2. The Obama administration claims that if the ceiling is not raised by then, the government will begin to default on its obligations to pay the interest on the national debt. Should this happen, it is true that it would be another blow to the economy, and intensify the crisis atmosphere.

Various pundits point out that the government has ways to circumvent Congress and unilaterally avert the debt ceiling “crisis”. One method bandied about is to utilise the Fourteenth Amendment to the Constitution, which mandates the government to pay all its obligations. Another would have the Federal Reserve Bank default on the Treasury bonds it holds – a big part of the national debt being what one entity of the government owes another. Whether the courts would back either course is another question.


But the markets are betting it won’t come to that. The likelihood is that Congress will make a so-called compromise with Obama. The outlines of that “compromise” have already been laid out by Obama himself, and have the backing of many Republicans in the Senate.

Obama’s plan is to agree with the Republicans that taxes would be further lowered on the super-wealthy and raised on working people. At the same time, there would be further massive cuts to the social wage, to the tune of three or four trillion dollars over the next 10 years. In Obama’s gun sights are the already woefully inadequate national pension called Social Security and medical insurance for the elderly known as Medicare.

Obama plans some purely cosmetic cuts to war spending, of a few weapons systems that are obsolete. But the trillions poured into the military and the wars in Iraq, Afghanistan, Pakistan and Libya will continue.

Black Princeton professor Cornel West, who did 65 campaign events for Obama in 2008, now expresses his bitter disillusionment by describing Obama as “a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. And now he has become head of America’s killing machine and is proud of it.”

But Obama calculates that however angry those disillusioned with his policies get, they are trapped in the Democratic Party machine. The liberals in Congress will support Obama’s plan, with some peeps and squawks.

Welfare and job cuts

In short, the con game Obama is playing is to whip up concern about the national debt to force through a further drastic lowering of the standard of living of working people.

Already there have been cuts in federal government spending that ripple down through the states, counties and municipalities. Hard hit have been education, various programs for the poor and disabled, infrastructure projects, fire departments and even police.

These cuts have already resulted in big lay-offs of government workers, who are swelling the ranks of the unemployed. The increase in the official unemployment rate in June was attributed to such lay-offs at every level of government. Cuts in government employment already in the pipeline will continue and will be greatly augmented by Obama’s plan.

The official unemployment rate in June was 9.2%. The real unemployment rate, which takes into account workers who have not applied for a job in the past four weeks, as well as underemployment, is near 17% – and that’s trusting government figures.

Especially hard hit are African Americans and other people of colour. The official unemployment rate for black people is about 16%, double that for whites. The real rate is over 30%. In some cities the official rate is much higher. In Milwaukee, for example, the official rate for African American men is 34%.

Unemployment for black women is rising because many have been employed in government. Government jobs have greater guarantees against discrimination against people of colour and women than is the norm in the private sector.

Why is the government deliberately adopting policies that increase unemployment?

The unemployed or underemployed constitute what Marx called the “industrial reserve army”. This sector of the working class is a necessary part of the capitalist system. If there were real full employment (which has never existed under capitalism) where everyone had a job, the downward pressure on wages exerted by the industrial reserve army would evaporate, and capitalist profits would suffer. As long as there is mass unemployment, the capitalists hold over all workers’ heads the threat of replacing them by hiring the unemployed at lower wages.

The larger the army of the unemployed, the greater the downward pressure on wages for all workers. The cuts in the social wage Obama is championing thus immediately lower that part of workers’ wages, but also exert downward pressure on regular wages. When the total of workers’ wages goes low enough, the conditions will be created for a new period of capitalist expansion and renewed hiring at the new low wages.

So the increase in unemployment is not in itself a bad thing for capitalism. It is bad for the rulers only if the workers begin to fight back because of it. That’s why the capitalist politicians demagogically try to steer workers’ discontent in a rightward direction. Obama is doing this by raising the spectre of even worse plans by some Republicans.

Global economic crisis

Underlying Obama’s drive against the working class is the worldwide crisis of the capitalist system. Marxist economists of various trends are grappling with explaining the current situation. But what is becoming clearer and clearer is that we are living through the greatest crisis of the system since the Great Depression of the 1930s.

While the US economy is in a technical recovery, the wealthy are getting richer and the stock market has recovered, working people know they are still in a recession for them. The evidence is beginning to show that we can expect upturns to be shallow, like what is happening now in the US and some of the other advanced capitalist countries. Downturns will be deeper. This new period will be what we will live through for some time.

The weaker advanced economies, like Greece, Portugal, Spain, Ireland and Italy, will suffer harsher realities. But throughout the capitalist world, the new norm is massive austerity drives. The ruling class is on an offensive to make the workers pay for the crisis.

The problem for the workers in the advanced (imperialist) countries is the lack of leadership, of real socialist parties with a mass base in the working class that could fight to resist the capitalist drive to make the workers pay for the capitalist crisis, and from there to pose the socialist alternative to the crisis-ridden capitalist system.

The lack of such leadership is graphically illustrated by what pass for “socialist” parties in Europe. In Greece, the Socialist Party runs the government and is the driving force behind the austerity drive. (The same government prevented the flotilla designed to breach the Israeli blockade of Gaza from sailing from Athens.)

The Spanish Socialist Workers Party does the same. In France, the chief Socialist Party spokesman was the head of the IMF, an architect of the worldwide austerity drive, who was kicked out of that job only when it became known he is also a serial rapist. What passes for a left in Italy is unable to present any real alternative to the right-wing government.

In the US there is no mass party even claiming to be socialist. The trade unions have shrunk drastically due to their leaderships’ policies for decades of concessions to capital. In Wisconsin, there was a massive response when the public workers unions called for strikes and demonstrations. The union tops were so frightened of this display of anger and fighting spirit of the ranks that they called off the struggle. The potential for a fight back is there, as Wisconsin demonstrated, but the leadership isn’t.

In Greece and Spain there have been massive actions in the streets against the austerity drives. It is out of such elemental struggles that we can see the potential to get out of this quagmire. It will take time, but the potential is there for new workers’ parties to take shape and begin to fight back.

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