United States: Debt deal stake in the heart of welfare state

August 5, 2011
Many liberals were aghast at President Barack Obama’s deal with the Republicans.

The article below is an abridged August 2 editorial from Socialist Worker (US).

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If your eyes are glazing over at the large numbers and the complicated mechanics of the deal to cut US$2.1 trillion from the United States federal budget over the next decade, here’s a short summary of the agreement: Screw the sick, poor and the elderly while imposing a permanently lower standard of living for working people, all while helping bankers and the rich grab a greater share of society’s wealth.

But wait, there’s more.

The cuts could add up to as much as 10% of US economic output. That’s a body blow to an economy that’s still rife with mass unemployment and hardly growing more than two years after the recession.

Many liberals were aghast at President Barack Obama’s deal with the Republicans. Ninety-five Democrats in the House of Representatives, half the total who voted, rejected the deal in an August 1 vote because it went too far.

They joined 66 Republicans who were opposed because they thought it didn’t cut deeply enough.

But with big business twisting arms, the measure went through on a 269 to 161 vote.

The debt ceiling limits how much the US government can borrow to fund its operations. That amount — now $14.3 trillion — must be raised periodically as the US economy grows and the government’s financial obligations increase.

With Obama already agreeing to implement previously unimaginable spending cuts, the Tea Party gang in the House tried to up the ante.

They insisted that an amendment to the US Constitution forcing federal budgets to be balanced be part of the bill to allow any rise in the federal debt ceiling.

But the hyperventilating debate among House Republicans was what football coaches call a “misdirection play” — an effort to get people to look one way while the real action takes place elsewhere.

As the media focused on the spectacle of a handful of right-wing Republicans threatening to hold the US economy hostage, the real deal was quietly being cut between Obama, Senate Majority Leader Harry Reid and the Republican House Speaker John Boehner and Senate Minority Leader Mitch McConnell.

The agreement stipulates a $2.1 trillion cut in spending over the next decade — $900 billion now through an immediate cap in domestic and defense spending, and between $1.2 and $1.5 trillion over the next decade, to be decided upon later this year.

Those cuts would be made by a bipartisan commission of Congress with the authority to make cuts that the House and Senate must approve or reject, with no amendments.

So much for democracy.

Members of Congress, supposedly elected to carry out our interests, passed a law that specifically bars them from reflecting the majority opinion on key questions — taxing the rich, for example, or protecting Medicare and Social Security from cuts.

The stage-managed debt ceiling “debate” was intended to negate democracy. Both sides agreed at the outset that social spending must be slashed.

The difference was that the Obama administration sought tax increases on the rich that would have, at most, restored the top tax brackets to the already-low 1990s levels.

But Obama enthusiastically joined Republicans in tying an increase in the debt ceiling to deep cuts in social spending — and he was ready to give up on tax increases to get a deal.

US politicians are borrowing the austerity script from Europe. There, unelected central bankers and bureaucrats are dictating the terms of devastating cuts in social spending in Greece, Portugal, Ireland, Spain, Italy and beyond.

At least the government of a small country like Greece can blame the European Union and the International Monetary Fund for demanding crushing budget cuts in exchange for a financial bailout.

What’s Obama’s excuse? He’s apparently at the mercy of a few dozen Republican ideologues in the House of Representatives.

Thus after the White House caved to the Republicans, New York Times columnist Paul Krugman called Obama’s decision an “abject surrender”.

In fact, Obama didn’t capitulate to Republican right-wingers. Instead, he greeted them as liberators.

They freed him from the high expectations of voters who elected him to bring “change” amid the worst economic crisis since the 1930s.

That’s why Obama was willing to up the ante in negotiations with Boehner for a “grand bargain” that would have cut social security benefits for future retirees and raised the age of Medicare eligibility.

Glenn Greenwald noted in a July 26 Salon.com article that Obama boasted about alienating the Democratic base as he moves to the right in order to capture independent voters in the 2012 election.

“It’s not merely that he lacks a fear of liberal dissatisfaction; it’s that he affirmatively craves it,” Greenwald wrote.

Obama ruled out a number of legal manoeuvres that could have sidestepped the debt ceiling limit and blocked Republicans from pushing their budget-cutting agenda.

Instead, he chose to negotiate with the Republicans on their own terms. He helped manufacture a crisis that he not only used to adopt Republican policies, but also to one-up them by putting social security and Medicare cuts on the table as a “grand bargain” .

His supporters claimed Obama’s “grand bargain” offer was a ploy to expose the Republicans as intransigent. Yet even a cursory look at the record shows otherwise.

In a column published four days before Obama took office in January 2009, Wall Street Journal columnist Gerald Seib wrote a column headlined: “Obama Targets a ‘Grand Bargain’ to Fix Budget Mess.”

He noted that even as the new administration prepared an economic stimulus program that would increase the budget deficit in the near term, it was already preparing the ground politically to cut social spending.

In the end, Republican right-wingers gave up almost nothing. Even so, they blocked the Obama-Boehner grand bargain because it would have modestly increased taxes on the wealthy. So the president gave the Republicans what they wanted: an all-cuts solution.
Even that wasn’t enough for the hardcore Tea Partiers in the House, who wanted to rewrite the Constitution to suit their aims.

Finally, the CEOs stepped in. Acting like the referee in a fixed professional wrestling match, Wall Street called an end to the staged contest and prepared to dole out prize money in the form of campaign contributions in the 2012 elections.

With federal tax revenues as a share of the economy at their lowest level in decades, raising taxes has all but been ruled out.

New York Times blogger Nate Silver surveyed the polling data and concluded: “Much to the chagrin of many Democrats, the mix of spending cuts and tax increases that Mr. Obama is offering is quite close to, or perhaps even a little to the right of, what the average Republican voter wants, let alone the average American.”

And that was before Obama signed on to the cuts-only final deal.

Welcome to Austerity, USA, ruled by a single party of big money that goes by two names. Don’t like Obama’s cuts or the Democrats’ swing to the right? Then how about any one of the top Republican presidential contenders, who promise even bigger cuts?

If Obama is confident about maintaining his liberal base, it’s because the hope of 2008 has been transformed into the great fear of 2012.

There was plenty of liberal outrage at the deal. Former labour secretary and author Robert Reich said: “Added to the cuts already underway by state and local governments, the deal’s spending cuts increase the odds of a double-dip recession.”

The chair of the Congressional Black Caucus, Representative Emanuel Cleaver, called the deal “a sugar-coated Satan sandwich”.

Raul M. Grijalva, co-chair of the Congressional Progressive Caucus, also denounced the deal because it “does not even attempt to strike a balance between more cuts for the working people of America and a fairer contribution from millionaires and corporations”.

Labour leaders also decried the agreement.

Rose Ann DeMoro, executive director of National Nurses United, condemned the deal.

She called on Congress and the White House to “create jobs and reduce the suffering for those millions of American families who can’t pay their medical bills, are losing their retirement savings, and face the loss of their homes while more and more resources are transferred to big corporations and the wealthy who need it the least”.

Obama’s decisive swing to the right will be disorienting and demoralising millions of working people, including activists central to social struggles from trade union shop stewards to people who organise around issues from housing rights to defence of public services.

Right-wingers such as Republican Govenor Scott Walker of Wisconsin will be further emboldened in their attacks on unions and the poor.

Democrats such as Chicago Mayor Rahm Emanuel and govenors Andrew Cuomo of New York, Jerry Brown of California and Pat Quinn of Illinois will have even greater political cover from the White House for their own labour-bashing, budget-slashing programs.

At the same time, intensifying attacks will produce resistance of the sort that erupted in Wisconsin in February, where hundreds of thousands mobilised for weeks against Walker’s attack on public-sector union bargaining rights.

Countless smaller, local struggles have continued since, from the fight against evictions in cities like Chicago and Boston to protests against school budget cuts and corporate-driven education “reform”.

And there’s a broader sentiment for social justice, particularly among young people. The recent SlutWalk protests around the US, for example, highlighted the growing anger among young women who are fed up with the rising tide of sexism.

Racist police violence, a perennial issue in US cities, has also been a focus of activism.

These fightbacks — and anger at Obama’s swing to the right — are creating new militants who have concluded that a political alternative to the left of the Democrats is necessary.

The challenge is to link that sentiment to practical struggles in an effort to rebuild an independent left that’s prepared to fight back against the austerity agenda — pushed by Democrats or Republicans.


And the liberal solution is borrow and tax and spend and spend and spend. Has not worked in the past but maybe if we do more of it everything will be OK. Nobody should have to be responsible for anything.

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