People pay for US budget crisis

Issue 

By Eva Cheng Some 800,000 federal workers were forced to stand down from November 15 after US President Bill Clinton, a Democrat, vetoed two related funding bills passed by the Republican-dominated Congress. The bills were structured to deprive emergency funding needed to keep the federal government going unless Clinton accepts Congress' budget resolutions for 1996. In a calculated move, Clinton refused to compromise, triggering the cutting off of funds. It is estimated that this exercise will cost US taxpayers more than US$200 million a day. The wrangle has been widely portrayed as being driven by conflicting visions for the future of the US, the role of government and, specifically, strategies for managing the country's long-standing budget deficits. The Republicans say they want to eliminate the federal budget deficit in seven years and Clinton claims he wants to do it in 10. But they differ little in their fundamental budget priorities. Both want to hit lower income groups and shift benefits to businesses and the rich, while maintaining the massive military spending which has contributed decisively to the almost $5 trillion US debt. Clinton's different "vision" only surfaced as jockeying for the November 1996 presidential election intensified and after the Republicans unveiled their breathtakingly conservative "Contract for America", an ideological package which promises tax and welfare cuts and increased military spending. The Republicans said this was necessary to eliminate the budget deficit in seven years. Clinton has tried to score political points by dramatising his disapproval of some of the worst aspects of the Republicans' pro-rich agenda. The US$961 billion worth of spending cuts the Republicans want during this period, include extensive welfare cuts (most noticeably in education and training) yet leaves room for US$630 billion in tax concessions over 10 years. Even the pro-establishment British Economist says these tax concessions will mainly benefit the rich. The Republicans also plan to transfer most responsibilities for the poor to state governments, leaving those much needed services at the mercy of local politics. Also on the chopping block are Medicare and Medicaid, health care for the old and the poor respectively. These are to be cut by US$432 billion. The long-standing subsidised school lunch program, cash assistance for teenage mothers, assistance to immigrants, dole entitlements after two years and the earned-income tax credit scheme (which provides crucial assistance to the working poor) will also go.

Clinton's cuts

However, Clinton's record is not much better. His last budget proposed spending a smaller proportion of GDP on education, public housing, food stamps, income security, community and regional development, pollution control, conservation, agricultural and energy research as well as other welfare entitlements. Meanwhile his administration increased the "advancement of commerce" subsidies to business and "administration of justice" expenses for more cops and jails to "fight crime". As well as a regressive energy tax, Clinton also sought to increase tax on social security benefits and introduced disguised cutbacks which shift US welfare away from the more socially progressive entitlement system to one based on means tests. Clinton also has plans to cut spending in the current budget, though less drastically than the Republicans. He also offers "modest" tax cuts for the rich. His plans to increase spending on education and training do not make up for the overall regressive nature of his budget scheme. Both camps are pushing a pro-rich agenda despite the fact that income disparity and joblessness are now at one of the fastest rates the country has ever experienced. A Federal Reserve report in 1992 revealed that the top 0.5% US families held as much wealth as all the bottom 90%. The real hourly wage of average workers dropped by 15%. Homelessness increased massively in the 18 years to 1991 while the GDP has grew by almost 50%. Meanwhile, the official definition of "full employment" rose from 3% in the 1960s to 6% in 1994.

Military expenditure

Military expenditure, which has been a dominant element in US government's finance, totalled US$4.6 trillion in the four decades to 1990. This has funded Washington's armed interventions overseas — predominantly in the Korean, Vietnam and the Gulf wars — and its military bases around the world. These military manoeuvres helped extend and protect US big businesses' extensive interests overseas but at great cost to the nation's poor and working people. The military spending not only diverted valuable resources from urgent social needs, it also inflated the interest bill. This benefits the richer Treasury bond-holding US citizens or companies but — because of a rich- and business-friendly tax system — leaves poorer US citizens worse off, shouldering a disproportionably higher share of the debt servicing bill. The diversion of resources to military spending has ironically hurt the competitiveness of US big business, whose interests the military spending are geared primarily to serve, absorbing a large share of skilled personnel and capital goods into the giant war machine. A second irony lies in Japan's quick revival as an imperialist power, helped by massive US military orders during wars in the '50s and '60s. Huge amounts of surplus capital that Japanese capitalists could not invest more profitably have been attracted to US Treasury bonds which were offered at high interest rates to attract buyers. This has made Japanese capital the biggest creditor of the US government. Since the end of World War I, the US has gone from being the biggest creditor to the biggest debtor in the world. Declining competitiveness of US products has also led to big US trade deficits, especially with Japan. The US debt-driven policy to maintain high interest rates also aggravated the explosive "Third World debt crisis" in the '80s which, in yet another irony, inflicted major losses on big US finance capital and threatened to bring down the capitalist world monetary order. The US remains the biggest economy in the world and produced US$72 trillion worth of products in the four decades to 1990. Yet the majority of US citizens have ended up relatively poorer, and have experienced an astounding rise in social injustice and social disintegration. Despite clear evidence that the US decline in the past decades has a lot to do with its massive military spending, neither Clinton nor the Republicans (nor any previous administration) has taken decisive steps to break this vicious cycle. This demonstrates the basic irrationality of the capitalist social order and of US imperialism in particular.

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