United States: The rich win, environment and people lose in ‘debt ceiling’ deal

June 12, 2023
Mountain Valley Pipeline
Environmentalists, First Nations and communities have campaigned against the Mountain Valley Pipeline for nearly a decade. Photo: appvoices.org

There was much media hype about the threat of the United States defaulting on its debt repayments if Congress did not raise the “debt ceiling” on how much the government can borrow.

This was a false crisis, as there never was any doubt that the two capitalist parties would come to an agreement to prevent a default — as they always have done.

President Joe Biden hailed the deal as a “big win” for the country. But just who “won big” and who lost?

Mountain Valley Pipeline

One big winner was the fossil fuel industry, with the deal including the approval of the Mountain Valley Pipeline. Climate activists have been opposing the project for more than a decade. The White House demanded the go-ahead for the pipeline be included in the Debt Ceiling bill and was responsible for its wording, according to the New York Times.

The US$6.5 billion project will carry fracked gas from the Marcellus shale field in West Virginia 483 kilometres across about 1000 streams and wetlands to southern Virginia.

The Sierra Club and other environmental groups argue the pipeline should be subject to stronger Clean Water Act reviews, which will not happen now.

The burning of this gas would release about 40 million tons of carbon dioxide a year, equivalent to the annual emissions from 9 million cars.

Six Virginian Democratic politicians, seeking to amend the bill, said the project “would disproportionately impact the most vulnerable … including low-income, the elderly and tribal and Indigenous communities”.

The bill contains an onerous provision making it impossible for any judicial review of the pipeline — no lawsuits by those affected, or legal challenges to its impact on global warming.

It turns out that Biden made a promise last year to the main proponent of the pipeline, West Virginian Democratic Senator Joe Manchin, to pass this provision.

Manchin is a coal baron and champion of fossil fuels. One of the companies behind the pipeline, NextEra Energy, is a major contributor to Manchin and to Chuck Schumer, the Democratic Majority Leader in the Senate.

The debt ceiling deal forces federal agencies to approve any outstanding permits for the pipeline within 21 days and exempt those permits from judicial review, according to the NYT.

Biden said the pipeline’s approval was needed for reasons of “national security” — a euphemism for the interests of US capitalists.

Biden talks big about doing something about the threat of global warming, but is going full steam ahead on approving new drilling and fracking permits. In March, he opened up federal land in Alaska to oil drilling by Conoco Phillips.

All this can set a precedent for the approval of other environmentally dangerous projects.

Other winners and losers

The deal didn’t cut the “defence” budget, but raised it to $886 billion in 2024 and $895 billion in 2025. When military spending by other departments is added in, the figure comes to more than a trillion dollars a year, which will only rise in Washington’s “forever wars”.

The deal cuts so-called “non-defense discretionary spending” for social needs for 2024, and allows spending to rise by only 1% in 2025, failing to keep pace with inflation and “effectively a budget cut”, the NYT reported.

Banks and other private providers of student loans for college tuition are also big winners in the debt ceiling deal, with agreement reached to end the moratorium on student loan repayments, introduced during the COVID-19 pandemic. One major private lender’s stock price began rising as the deal was finalised.

The high cost of tuition means many students are saddled with paying back loans for years, whether they graduate or not.

Past Congresses made drastic cuts to corporate tax and to what the rich pay in income tax — two reasons for the rising national debt (another being the super-bloated war spending). These cuts are preserved in the deal.

It is estimated that hundreds of billions of dollars owed in taxes by the very rich go unpaid each year. Corporations easily avoid tax by using legal loopholes and not-so-legal shenanigans.

There was talk in Washington of raising the number of Internal Revenue Service (IRS) agents and the IRS budget to begin updating its antiquated technology to fight tax evasion, but the deal goes in the opposite direction.

It immediately rescinds $1.38 billion from the IRS, and over the next two years will repurpose $20 billion from the $80 billion it received from last year’s (misnamed) Inflation Reduction Act.

“The clawback will eat into the tax collection agency’s efforts to crack down on rich tax cheats,” the NYT reported. “This is also a win for Republicans, who have been outraged by the prospect of a beefed up IRS and approved legislation in the House to rescind the entire $80 billion.”

The Republicans passed their version of even steeper cuts in taxes for the rich and social programs for the rest in the House, as a bargaining chip in the negotiations with Biden over the debt-ceiling.

The deal also imposes new work requirements on people over 50 yeas old who receive food stamps and are aided by the Needy Families program. Under current law, work requirements only apply to people aged 18–49.

While there are work requirements, there is no provision to provide work.

Democrats get what they wanted

Before the Midterm elections in November last year, the Democrats had a slim majority in the Senate and House, and they had the presidency. They lost their majority in the House as a result of the elections. But until the new Congress was seated in March this year, the Democrats still controlled both houses.

The Democrats knew there would be a vote to raise the debt ceiling this year. They could have simply voted to raise it before the new Congress was seated, so the whole fake “crisis” could have been avoided. But the establishment Democrats, led by Biden, wanted this outcome, this debt ceiling deal.

This is further indicated by the fact that the 14th Amendment to the Constitution, which is still in effect, clearly states that the “validity of the public debt of the United States … shall not be questioned”.

It was raised with Biden that this not only gives him power to honour the US government’s debts, it requires him as the chief executive officer to do so — whatever the Congress voted on. Biden openly refused to consider this option.

Throughout his career, Biden has made it clear that he wants to “work with” Republicans on the US government’s budget. The debt ceiling deal is the latest proof of that.

When the deal was reached and Biden signed it into law, he told the country that passing the agreement was “critical” and that “[t]he only way American democracy can function is through compromise and consensus, and that’s what I worked to do as your president … to forge a bipartisan agreement where it’s possible and where it is needed.”

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