US: Bipartisan Budget Cuts

Is There an Alternative to Cuts?

The Republicans are on the offensive. After sweeping the House of Representatives in the 2010 election, the Republicans and their detachment of Tea Partiers are looking to slash and burn government spending.

A New York Times editorial states: “If it was not clear before, it is obvious now that the party is fully engaged in a project to dismantle the foundations of the New Deal and the Great Society, and to liberate business and the rich from the inconveniences of oversight and taxes,” (4/17/2011).

In reality, the discussion around the 2011 and 2012 budgets has shown that both parties are committed to a program of savage austerity at a time of growing unemployment and economic uncertainty for millions. Both parties are bowing down to their Wall Street creditors, warning the public that the massive $1.5 trillion deficit must be reined in with massive cuts to social programs. But is there an alternative?

2011 Budget Debate

In February, the new Republican House leadership passed a budget with a massive $61 billion cut for the rest of 2011. It would have been the largest single cut to an annual budget since before World War II, and it promised to have a devastating impact on jobs and health care.

The ensuing debate in Washington nearly brought the government to a complete shutdown, angering millions of Americans who saw the possibility of a shutdown as a symbol of the complete incompetence of the corrupt politicians in Washington DC.

The Democrats opposed cutting $61 billion, yet agreed that some kind of deep cut was needed. Obama told the public, “We have to learn to live within our means.” Of course, this does not apply to the banks!

At the eleventh hour, the leaders of the Democrats and Republicans settled on “an historic agreement” cutting nearly $40 billion from the 2011 budget. Most of the cuts will come from social services. For example, federal funding for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) will be cut by $500 million, the EPA will be cut by 16%, and community health centers will lose $600 million.

Meanwhile, the Pentagon will get a $5 billion increase and nuclear construction spending will also increase. The Democrats were able to avert attempts by the Republicans to end funding to Planned Parenthood, but all funding for abortions in the District of Columbia will be completely cut.

The final bipartisan agreement was opposed by 59 members of the Republican House, including a dozen or so of the freshmen Tea Party class who claimed the cuts did not go deep enough. They are vowing to continue to push for further cuts in the weeks and months ahead as the federal government reaches the debt limit and the 2012 budget debate opens, putting the enormous $1.5 trillion annual deficit in the spotlight.

2010 Elections – A Mandate for Cuts?

The Republicans claim the 2010 midterm election was a clear message from the American people to make big cuts. But, as the LA Times pointed out, “Polls show Americans are broadly committed to the notion of deficit reduction, but their support dwindles when the details are spelled out,” (3/1/2011).

In an April 11 Gallup poll, only 46% of Americans supported cuts, but a much larger percentage, 59%, supported increased taxes on the rich to cut the deficit. A Washington Post poll found that 78% opposed cutting Medicare, while 72% supported raising taxes on incomes of $250,000 or more.

Yet, the Republicans have consistently opposed tax increases on the rich and, in April, the Republicans voted for a 2012 budget proposal that called for further cutting the top income tax rate from 35% to 25%!

The 2008 election did not provide a “mandate” from the public for deep cuts, never mind tax breaks for the rich. Rather, Republicans were elected due to demoralization among Obama’s supporters, right-wing demagogy by the Tea Party and Republicans, and the failure of Obama to provide an economic revival that made any dent in the massive level of joblessness.

Obama’s Bipartisanship

The “historic” agreement to cut $40 billion in spending is not the only option. There is enormous wealth in U.S. society, but it’s in the hands of a small group of the rich and corporations. Rather than balancing the budget on the backs of workers, the rich should have been forced to pay. But instead, the 2011 budget continues Bush’s tax breaks after the Democrats caved on this issue at the end of 2010.

These “historic” cuts only passed because of the Democrats’ complete failure to provide an alternative to budget cuts. Obama and the Democrats, with an eye on the 2012 elections, chose to take the middle ground.

Economist, Jeffrey Sachs, explained on DemocracyNow!, “The White House has played a game, basically. If the far right is holding the agenda, the White House says, ’We’ll be one step towards the center of the far right.’ But that means giving concession after concession after concession. What Obama is trying to do is to look reasonable, to look a little bit more reasonable than the extreme right,” (4/11/2011).

After the midterm elections, the Obama administration made a calculated turn to the right, enshrined in the rhetoric of “bipartisanship.” Obama caved on promises to end the Bush era tax breaks for the rich, and he nominated a former JP Morgan bailed-out and bonus-paid bank executive to Chief of White House staff.

Now, following the Democrats sell-out in the 2011 budget, the Republicans have put forward a slash-and-burn 2012 budget proposal that calls for cutting more than $4 trillion from the deficit over the next 10 years, mainly through massive cuts to social programs.

Medicaid would get a cut of more than $700 billion, Medicare would essentially be privatized through vouchers capped and indexed to inflation. Since inflation is far lower than the rising cost of health care, Medicare patients would have to pay far more out of pocket year after year.

Obama responded to the Republicans renewed deficit mongering by matching the Republicans’ $4 trillion cut over 12 years! This is a massive increase on his earlier proposal to cut $1.5 trillion over ten years. While Obama’s proposal calls for some modest tax increases on the rich, he still calls for major cuts in Medicare and Medicaid.

The Deficit

As the 2012 elections approach, the battle over the budget shows that the massive $1.5 trillion annual U.S. deficit figures to be a prominent issue in the debate between Obama and the Republicans. Both parties are pointing to the deficit, warning the public to prepare for deep painful cuts. However, the debate over the deficit in Washington is largely a political game as each party jockeys for power. Underneath that, the reality is that both parties are inflicting brutal cuts that punish workers for the crisis of a failing, corporate-dominated system, capitalism.

As Richard D. Wolfe explained, “Basic numbers tell the true story. The current (Fiscal Year 2011) budget spends about $3.5 trillion while receiving $2 trillion in tax revenues. The difference of $1.5 trillion (the equivalent of $1,500 billion) is this year’s deficit. The U.S. Treasury must borrow that from whoever will lend to the U.S. government. After much hot air, Republicans and Democrats reached an "historic compromise," namely a spending cut of $38 billion. That will reduce this year’s deficit from $1,500 billion to $1,462 billion, an economically insignificant sum. The sound and fury of Washington’s debates signified nothing was to be done about the actual deficit” (Monthly Review, 4/15/11).

In reality, the deficit is a product of the historic crisis of capitalism, compounded by the Bush administration’s wars and tax cuts, along with the mass unemployment and bailouts that followed the financial collapse in 2008.

Cuts won’t solve this crisis. But they will add to the problems of capitalism by undermining consumer spending, the engine of economic growth. The original Tea Party demand for $61 billion in cuts for 2011 was also insignificant in comparison to the actual size of the deficit. Yet, Mark Zandi of Moody’s, estimated a $61 billion cut would be devastating for the fragile U.S. economy, resulting in 700,000 jobs losses and a potential new downturn.

The recent debate showed that neither party was truly prepared to deal with the deficit, which would require taking on the logic of capitalism itself. However, with the Republicans on the offensive, and the Democrats shifting to the right, the best we can expect from either party is a long drawn out period of savage austerity.

A Socialist Alternative to Cuts

Cuts will have a painful impact on millions of people at a time of economic crisis. History shows that the deficit acts as a major excuse for both parties to dismantle social programs. In the 1990s, under the pressure of Republican deficit mongering, the Clinton administration slashed welfare spending, “ending welfare as we know it.”

The deficit is also a boon to banks at the expense of jobs, health care, and education. The larger it gets, the more the U.S. government spends tax dollars on repaying debt to major creditors, such as Wall Street banks and foreign government.

Deficit spending is not a problem for the ruling class when it lines up with their own interests. In 2008 and 2009, trillions of dollars in deficit spending were used to bailout the banks. The deficit increased enormously as a result, and is now being used as an excuse to attack workers. Why should working people pay for a crisis we did not create, while the banks that caused the crisis extort trillions in tax dollars?

We shouldn’t! The big business deficit-reduction approach of cutting social programs and jobs will only lead to more unemployment, more cuts, a deeper health care crisis, and a ruined retirement system. This, in turn, will deepen the social and economic crises facing working people.

We need to build an independent movement in the streets, in our schools, and in our workplaces against both parties carrying out cuts. We should call for massive increases in taxes on corporations and the rich. Instead of dismantling or privatizing Medicare, we need to remove the massive profiteering that is rooted in our for-profit health care system.

Harvard economists estimated that simply switching to a single-payer, public insurance system could save the country more than $400 billion a year. We need to slash military spending and reinvest in green jobs, putting millions back to work with a paycheck to spend.

Finally, instead of bailing out the banks to the tune of trillions, we need to take the biggest banks into public ownership under the democratic control and management of workers, consumers and local communities, and use their enormous resources in the interest of real job creation, not profit-making. This could be a step towards an economy and society that works for working people, not gigantic corporations and their Wall Street creditors.

The inspiring mass movement against Governor Scott Walker in Wisconsin shows working people are ready and willing to fight back. It’s time to fight for policies that make Wall Street and the rich pay for the crisis they created. By building an independent movement against both parties, running our own candidates, and building our own party, we can mobilize the enormous anger in the U.S. against corporate politics and carry out a much-needed system change.

Be the first to comment

Leave a Reply

Your email address will not be published.