Letter from the US: Debt deal sets stage for huge attacks

President Barack Obama address a joint session of Congress.

Discussing the last-minute deal in the United States Congress to avoid triggering a debt default, Gail Collins, a columnist in the New York Times wrote: “Well, um, yippie. Wow.

“Congress has decided it won’t trigger a global financial crisis out of pure pique. Can’t get any better than that.”

Much could be written about the antics of the far right in the Republican Party on display for the world these past weeks.

But beyond these grotesqueries, personal animosities, horse-trading and the seamy side of capitalist politics, the deal to end the government shutdown and avoid a default will open the way to a further bipartisan attack on the living standards of working people.

The deal included funding the government through to January 15, and avoiding default to February 7.

It is possible, therefore, that in a few short months we will be back where we started. I think a fresh threat on the scale of recent days is unlikely, but not impossible. The Republicans sought to stop the Affordable Care Act (“Obamacare”) by a partial government shutdown and threat of default, but suffered a major defeat. They achieved nothing on that front.

The great majority of Americans blame the Republicans, and if they try it again it could prove fatal to them.

Already, the crisis has revealed deep fissures in the Republican Party between the ultra-right Tea Party, who actually favored a continuation of the shutdown and a default, and the more sober-minded right-wingers.

The partial government shutdown has already hurt the economy. A front-page article in the NYT reported: “Containers of goods idling at ports. Reduced sales at sandwich shops in downtown Washington. Canceled vacations to national parks and to destinations abroad. Reduced corporate earnings forecasts. Higher interest payments on short-term debt.

“Even with the shutdown of the United States government and the threat of a default coming to an end, the cost of Congress’s gridlock has already run well into the billions, economists estimate. And the total will continue to grow even after the shutdown ends, partly because of uncertainty whether lawmakers reach another deadlock early next year …

“But economists said that the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.”

The Financial Times ran the headline: “Uncertainty and Disgust Set to Endure.” The business paper quotes a fund manager: “The fact that the narrative in Washington is even about whether we extend our debt ceiling is just not acceptable.

“If you are a debtor nation, your job is to make sure your creditors like you. Even with a deal to avoid a default, the damage has been done and the result will be a slowdown in economic growth.”

Another part of the deal, its most important aspect, is that Congressional leaders and the administration will now meet behind closed doors to reach a budget agreement by December 13.

The deal to reopen the government stipulated that it was to be funded at the level before the shutdown. That level was part of a previous compromise between the Democrats and Republicans that slashed funds for social programs known as the “sequester”.

Capitalist politicians and economists like to use words that obfuscate reality. In my Webster’s dictionary, “sequester” means to “set off or apart”, not to slash social programs, which is what they are actually doing.

Before the deal was reached, the Financial Times noted: “Highlighting the cost of the political deadlock over U.S. fiscal plans, a Financial Times analysis shows automatic U.S. government spending cuts that took effect in March are causing most damage in regions that weathered the recession better than the rest of the country.

“Cuts under so-called ‘sequestration’ have hit federal funding for scientific research, forced civilian government employees into unpaid leave [these workers will not be rehired under the deal] and reduced anti-poverty programs including jobless benefits, housing vouchers and early childhood education.”

In the secret budget negotiations, which started the day after the deal was passed, the Republicans will seek to deepen the “sequestration’s” cuts, while the Democrats starting point in the negotiations is the “sequestration”.

The Republicans (not just the Tea Party faction) have made it clear that they want deep cuts in the “entitlement” programs, such as Medicare, Medicaid and Social Security.

Both the Democrats and Republicans now refer to these programs as “entitlements,” with the understanding that the word now means it’s opposite — what workers are not entitled to.

Obama has asserted all along that he agrees with the Republicans that these “entitlements” can and should be cut in pursuit of a “balanced budget”. He repeated that as he signed the deal.

A “balanced budget” is the code word for austerity on working people — in the US, Europe and elsewhere. If they really wanted to go toward a balanced budget they could raise taxes on the capitalist to achieve it.

Obama points to a recent decrease in the federal budget deficit as proof of his commitment to a ‘balanced budget,” and the Republicans answer this was because of “sequestration”.

Social Security, Medicare, Medicaid and other social programs such as unemployment benefits, food aid to the very poor, public education and so forth were won through struggle. They are all under attack.

The results of recent elections put the White House in the hands of the Democrats, the House of Representatives with a Republican majority containing an ultra right Tea Party faction, and the Senate with a Democratic majority.

The Tea Party pushes hard to the right. The whole Republican Party moves to the right in their wake but not as far. The Democrats move rightwards in the Republicans wake, but not as far.

That is the dynamic of the budget negotiations. If they succeed, the likely result will be what Obama has called a “grand bargain” to slash the “entitlements” and other social programs, in what will be called a “compromise” between the two parties of capitalism.

[Barry Sheppard was a long-time leader of the US Socialist Workers Party and the Fourth International. He recounts his experience in the SWP in a two-volume book, The Party — the Socialist Workers Party 1960-1988, available from Resistance Books. Read more of Sheppard's articles.]