The January 1 deadline for the so-called fiscal cliff has come and gone without resolving anything.
In a last minute agreement, taxes were raised a little bit on the wealthiest, with rates going back to what they were under the Clinton administration in the 1990s. But nothing was done to close the “loopholes” through which the rich evade taxes, and indeed, some new loopholes were created.
"Loopholes" is a euphemism. It is a term derived from small openings in a fortress designed to allow defenders to fire at attackers. The many holes in the tax code that allow capitalists to evade taxes are in reality massive breaches -- to use the military analogy, large enough for truck convoys and tanks to drive through.
At the same time, the across-the-board spending cuts mandated by the fiscal cliff agreement set up by the Democrats and Republicans were postponed for two months. So the atmosphere of crisis continues.
The con game that is playing out between the Obama administration and the Republican right can be summarised as: The Republicans want drastic cuts to the social wage workers receive, especially to the miserable government pension program for the elderly called Social Security and to the inadequate government medical insurance program for the elderly called Medicare and to the even more miserable government medical program for the poor called Medicaid.
The Democrats, on the other hand, want less drastic cuts.
How this plays out is that the Republicans control the House of Representatives and can block any legislation. Republicans can also block any legislation in the Senate through what is called a filibuster. Thus Obama and the Democrats claim they have to “compromise” with the Republicans on how drastic the cuts will be.
The whole setup is undemocratic. Whichever party has the majority in the House can refuse to even allow a vote on any legislation. The Republicans are using this completely undemocratic rule to demand concessions from the Democrats or they won’t even allow a vote.
In the Senate there is a rule that a super majority is required to end debate on any legislation and bring it to a vote. The Democrats do not have that super-majority in the Senate, and so the minority can block any legislation.
These rules were established by both the Democrats and Republicans.
So when Obama “compromises” with the Republicans on how deep to cut social programs and which ones will be cut, he can say “the Republicans made me do it”. And make no mistake; he will make such a “compromise”. The fix is in.
Obama and the Republicans are using the threat of the huge spending cuts due to take effect in March under the agreement the Democrats and Republicans set up to frighten the population into accepting the “compromise” cuts.
The “crisis” is one that the Democrats and Republicans fabricated.
Both parties are also saying that cuts to the social wage are necessary because of the deficit in the government’s budget. This is trumpeted as a massive problem (it isn’t) to further whip up the crisis atmosphere.
Meanwhile there is a real crisis facing workers ― the drawn-out hardships they are living with that began with the financial collapse over five years ago, which led to the Great Recession and then the anemic recovery.
For workers facing high unemployment and the resultant lowering of wages, there has been no recovery. It feels like the recession continues.
The ruling capitalist classes in the US, Europe and elsewhere are making the workers bear the costs of the economic catastrophe wrought by the workings of the capitalist system itself. This is called "austerity" -- austerity for the workers and middle class while profits are again rising for the class that owns for a living.
Some capitalist-minded pundits are worried, however. Wolfgang Munchau, in an opinion piece in the Financial Times titled “US Joins Europe’s Misguided Pursuit of Austerity”, writes: “When viewing the U.S. fiscal standoff from Europe, it all looks eerily familiar. The U.S. has become very European.
“But for me the main problem is not an inability to deal with the structural deficit … but rather the contrary. I fear the U.S. is blindly rushing into semi-automated austerity, which is exactly the mistake we have made in Europe.
“The problem is not the size of the national debt as such, which is manageable in both cases, but our policies in dealing with it…
“The gross fiscal contraction of the U.S. will be larger than the U.K.’s in 2013, though not as large as that in Spain, Portugal or Greece. Still, this would make the U.S. an honorary member of Europe’s austerity club.”
The US is becoming more like Europe politically, too. Europe’s politicians squabble about how much austerity to impose, and lurch from one “cliff” to the next with band-aid solutions until the next one looms.
While the US is a single country unlike Europe, the same sort of squabbles and inability to find solutions that Europe puts on display are becoming evident in the US, too, and for the same reason.
The world capitalist system is going through a long economic depression for which there is no easy policy solutions for the capitalist politicians in Europe or here. When will this end? When workers’ wages and ability to fight back are eroded sufficiently and enough capital has been destroyed to merit a new wave of investment?
Will the workers mount a sufficient fightback to turn the tables?
[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.]