FRFI 223 October/November 2011
Although the Presidential and Congressional elections will not take place for more than a year, political posturing by both the bourgeois parties, Republican and Democrat, is already under way. Our last report (see FRFI 222) concluded with the cliff-hanging debate over the US government’s debt ceiling: would they agree in time to prevent the government shutting down? Once again, as we go to press, both parties are at loggerheads, threatening to shut the government down at the end of September. US correspondent STEVE PALMER reports.
This time the dispute is over a continuing appropriations bill which includes relief funds needed to pay for disaster recovery after recent widespread flooding on the east coast. Opposition to any tax increases at all has now become part of the Republican credo, and they are demanding that the funds be paid for by extra cuts. Unless appropriations are passed, relief operations will halt within days and the government as a whole will have run out of money on 30 September.
The debt ceiling debate was eventually resolved at the last minute by a compromise in which the Republicans prevailed, and the same is almost certain to happen in the current battle. In exchange for raising the debt ceiling by $2.1-$2.5 trillion until 2013, the compromise had three main parts: $900 billion in immediate cuts, a further $1.2-$1.5 trillion in cuts in late November, and a vote on a balanced budget amendment to the Constitution. The balanced budget amendment now needs to pass the Republican-dominated Congress with a two-thirds majority, so that won’t be happening this time round. There will also be no agreement on the $1.5 trillion of cuts supposed to be drawn up by a bipartisan ‘Joint Committee’ (be prepared for some very public political histrionics as the deadline approaches). This means that a package of $1.2 trillion of cuts over 10 years will automatically be triggered. Surprisingly, the cuts not only savage education and social programmes, but the Pentagon takes a $350 billion hit in the first package of cuts and $600 billion in the second.
What stands out is that there are going to be no tax increases. But Obama got what he wanted, which was for the debt ceiling debate to go away until after the next election – and he gave the Republicans exactly what they wanted, too. This has infuriated left-wing Democrats who are outraged that the rich have yet again got away without being taxed. For the first time, Obama’s approval ratings in California, traditionally a solid Democratic State, have fallen below 50%, and it is clear that Obama’s continued accommodation of the Republicans is driving many of his supporters away.
What the majority of people in the US are concerned about is unemployment. The economy is stagnating. The latest unemployment figures show that the overall unemployment rate is unchanged at 9.1% and that among Hispanics the rate is 11.3%, among black people 16.7% and among teenagers 25.0%. The total number of jobs lost since January 2008 is 8.7 million, while only 1.8 million have been added. Some 450,000 government jobs have been lost. Real GDP has still not returned to the pre-recession peak and growth in the second quarter was revised down to 1.0% at an annual rate. The housing crisis continues, with 10.9m homes worth less than their mortgage – 22.9% of the total. The Federal Reserve reports that manufacturing activity is weak. Small business confidence indices have been in decline for six months. The consumer price index has risen by 3.8% during the last year, due mainly to rises in food and energy prices.
There is clearly no chance of this economy reducing unemployment on any significant scale on its own. Consequently, on 8 September the White House announced the American Jobs Act. This legislation is clearly crafted as an attempt to satisfy Republicans. The Bill budgets $450bn of stimulus money, to be paid for by closing tax loopholes and increasing the deficit reduction target. Payroll tax cuts of $240bn target small business. There is aid of $60bn to help States retain up to 280,000 teachers who would be laid off, and to modernise 35,000 public schools. There is additional aid for improving infrastructure ($75bn), an extension of unemployment benefits ($49bn) and a number of other provisions. However, Republicans argue that the last stimulus didn’t work, that closing the tax breaks is a tax increase, and that anyway the schools don’t need repairing. Prepare for more political squabbling.
Obama also introduced a deficit reduction package designed to cut $3 trillion over the next ten years. The plan includes $1.5 trillion in tax increases, primarily on the rich, by closing loopholes and limiting deductions. It also includes $580bn in ‘adjustments’ (ie cuts) to health and entitlement programmes including $248bn from Medicare (health programme for the elderly) and $72 billion from Medicaid (health programme for the poor). It also counts savings of $1.1 trillion from ending the US occupation of Iraq and withdrawing troops from Afghanistan. It was immediately welcomed by left liberals who were jubilant that the President was (at last!) showing some ‘spine’. In fact, the package seems designed simply to provoke Republican rejection since there isn’t a snowball’s chance in hell that it will pass the Republican-dominated House of Representatives. Obama will then be able to turn round and blame ‘Republican intransigence’ without having to take any responsibility for the Federal cuts which will be made. All part of the bourgeois posturing for the 2012 elections.
None of these ‘initiatives’ makes any serious difference to the working class. The economy needs to generate 350,000 new jobs each month even to restore unemployment to the official ‘natural rate’ of around 6%. That is not going to happen – in August there was zero net job growth.
Huge cuts are under way in education. Of 24 States for which data is available, 21 are providing lower funding than last year, 17 are lower than pre-recession levels and 10 are more than 10% below pre-recession levels. Three States – Arizona, South Carolina and California – have reduced funding to public schools by more than 20%. State and local governments are expected to shed up to 110,000 jobs in the third quarter of this year. Universities and colleges are hiking tuition fees by significant amounts – 10%-15% – while cutting the grants and aid to poorer students. Some States are amending their unemployment insurance programmes, cutting the duration of benefits, reducing average cheque amounts and tightening eligibility. Other State budget cuts reduce health care, services to the elderly and disabled, and higher education. In other cases ‘deals’ have been struck with public sector unions reducing pay and benefits, increasing health care costs and adding unpaid furlough days.
At one end of the scale, unemployment, poverty and misery are growing. 14 million people were unemployed in August; a further 8.8 million were forced to work part-time for economic reasons and a further 2.6 million people who wanted to work were not counted as part of the labour force. Median household income has fallen, even without adjusting for inflation. In real terms median household income fell between 2009 and 2010 by 2.3% and was 7.1% lower than its previous peak in 1999. While median income for all households in 2010 was $49,445, that of black households was $32,068 – 3.2% lower than in 2009. Where the head of the household was disabled, the 2009-2010 decline was 8.5%. During the one-year period, the number of people without any health insurance rose from 49 million to 49.9 million – disproportionately hitting poorer families. The percentage of the US population with incomes below the federal poverty threshold increased from 14.3% to 15.1% – the highest level since 1982. A better measure of poverty is half median income, and by this criterion 22.1% fell below this level in 2010. Some 48.8 million people lived in food insecure households in 2010 (up from 36.2 million in 2007), of which 16.2 million are children (21.6% of all children). Black (25.1%) and Hispanic (26.2%) households experienced food insecurity, far higher than the national level (14.7%). In June 2011, 45.1 million people received SNAP/Food Stamp aid – one in seven of the population and 3.8 million more than in June 2010.
At the other end of the scale, capital and the capitalists are prospering. In 2008, corporate profits were 9.9% of national income; by the second quarter of 2011, they had grown to 14.4%, from $1,248.4bn to $1,933.7bn. A survey of 100 corporations with the highest paid CEOs found that 25 of them received more in salary and other compensation in 2010 than their companies’ paid in federal income tax expenses. The poor are getting poorer, the rich are getting richer and the bourgeois politicians are scrapping over who gets to organise the oppression of the working class.