Debt Ceiling Debate

What Does the Bi-Partisan Debt-Ceiling "Compromise" Mean for Workers?

Obama (right) and Boehner (left)
A deal to raise the debt ceiling has now been reached, after weeks of incredible fear-mongering on the part of both bosses’ parties and Wall Street, and will reach the President’s desk by the deadline on August 2nd.  The contents of the final agreement remain rather vague, but the broad outline is enough to make clear what it means for workers in the U.S.  It includes $2.4 trillion in spending cuts.  President Obama stated on the 31st of July that “everything will be on the table,” and he has previously stated that Social Security and Medicare would not be spared cuts (in the name of “compromise”), so we can safely assume that a large portion of the $2.4 trillion in “savings” will be from the coffers of these vital public programs.

It is already clear that there will be significant cuts to student loan programs, totaling $22 billion over the next 10 years.  Tuition fees are already too high for many workers to attend institutions of higher learning. The defenders of the deal are already running damage control, saying that the cuts are necessary to preserve Pell Grants to the poorest students, but why should any students or workers have to pay for an economic situation entirely not of their doing.

Like a boastful comic book superhero having rescued us all from a burning building, lawmakers and party leaders on both sides of the Big Business aisle are currently patting themselves on the back for a job well done in “averting a national disaster.”  But these representatives are no Super-Men and -Women.  The debt “crisis,” as it was repeatedly referred to in the media, was a “manufactured crisis” as Mark Weisbrot of the Center for Economic and Policy Research pointed out.

As Weisbrot pointed out on, the short term deficit problem is the product of the economic crisis, and as we have explained elsewhere, in the current economic crisis, the capitalists wish to push through massive cuts in social services, in order to place the burden for recovery onto the working class. This is a situation that is not unique to the United States, but is currently being seen around the world.  In Greece, Italy, Spain, etc., the march of austerity has crept across Europe and has now made its way across the Atlantic to our shores.

We saw the first symptomatic expressions of this tendency, this tactic on the part of the most virulently right-wing elements of the capitalist class, at the state level; first in Madison over Walker’s anti-union bill, then in the state shutdown in Minnesota over billions of dollars in cuts to the state budget, and currently the debate continues in state after state, with austerity facing the working class everywhere.  At each point, these state crises were and remain episodic brush-fires in what is in fact a developing much larger conflagration.

The real danger that the working class faces is the program of austerity, not the debt ceiling.  The country’s debt limit was merely a convenient excuse used by the ruling class, stroked with misinformation and fear through the medium of its politicians and media apparatus, much in the manner of a gun to our heads, in order to push through the cuts that they deem necessary to preserve the solvency of their system and the continuation of their rule.

What is the Debt Ceiling?

The debt ceiling is set by Congress and is the amount of money the country can borrow.  It has risen considerably from its initial cap of $11.5 billion in 1917 to its now incredible $14.29 trillion level, but nonetheless, it has risen 74 times since 1962 and 10 times since 2001, according to the Congressional Research Service.

The debt ceiling is raised every time a Congress agrees to increase spending or approve a tax cut.  The fact is that spending has already occurred at the time of a budget bill, so in actual fact, what any “debt ceiling” debate amounts to is whether or not the US will pay its incurred bills or not.

To not do so would badly effect the country’s “credit rating” around the world.  It is a sure bet that, as representatives of the Wall Street interests who would also suffer losses from such an outcome, neither the Democrats nor the Republicans would have allowed the country to “default” by not raising the debt ceiling and paying its debts.  However, the ruling class remains steadfast at the present moment about the need for cuts in spending.  In order to push this through, it was necessary for the Republicans, who express the needs of their class for cuts in a much more purified form, to use the threat of default, which would also have effects on the economy as a whole, to scare any wavering Democrats into full-scale surrender on a program of massive cuts, free of any (however minimal) taxation of the rich, placing the burden for their crisis squarely on the workers.

Did the Democrats Offer an Alternative?

Harry Reid
Now, we have a bipartisan compromise deal, which is full of the expected massive cuts and full-scale surrender anticipated by anyone who has drawn the necessary conclusions from the legislative debates during the recent period (particularly the health care debate).  Many are now going to ask if things could have gone differently.  Did it have to be this way? Why didn’t the Democrats put up a fight?

By Friday the 29th, the House (or Republican) bill called for $2.5 trillion in largely unspecified cuts to be recommended by a special congressional committee and would have increased the debt ceiling by the same amount.  It also included a call for an entirely ceremonial “balanced budget amendment” to the Constitution.  At the same time, the Senate (or Democratic) bill called for spending cuts of “only” $1.8 trillion initially, however it proposed to increase the debt ceiling to $2.7 trillion with the promise to increase cuts to match the increased ceiling in the final version of the bill, a sort of classic “bait-and-switch.”

While one can make all of points they want about how $1 trillion of the Democrats cuts would have come from planned withdrawals from Afghanistan and Iraq, the fact remains that $1.7 trillion in other cuts would remain, after the full balance of cuts were brought up to match the $2.7 trillion spending ceiling.  On whose backs would those cuts in necessary social services have rested?  Certainly not the rich.

Even if more cuts were not promised in the Democratic plan and if there were only 800 billion in non-military spending cuts proposed, in a situation where education, health care, Social Security, and other programs suffer from under-funding, this would be 800 billion in spending cuts too many.

Obama, the Democrats, and their media supporters tried to present themselves as supporting a “balanced approach,” including not only cuts, but also increased taxation of the rich.  However, the reality was far different.  The bills which reached Congress on the 29th were almost indistinguishable. The bickering, it seems, was entirely a sideshow.  As Representative Jeff Flak, a Republican from Arizona, told The Huffington Post, there was “not much difference” between the two bills.

The So-Called “People’s Budget”

If the Democrats did not offer an alternative, then was no alternative possible?  Was the acceptance of the evil of two lessers really the only possible outcome of the debt ceiling debate?

In fact, there was an alternative.  The current mess is a product of the economic crisis caused fully by the capitalist class and its system.  It is not the fault of workers, and we shouldn’t have to pay for it.  The full responsibility should be placed at the feet of Wall Street and the Fortune 500.

On this, millions of Americans actually agree.  In a recent poll, it was found that a majority of Americans actually favored a solution to the budget problems that did not only include cuts, but also explicitly included “tax increases,” understood to be aimed at the wealthiest Americans.  However, this should not be seen as support for the President and the Democrats’ “balanced approach” that claims to “share the burden” for solving the budget shortfall between ever so slight tax increases on the wealthy combined with slashing of social spending.  Rather, presented with these two alternatives, the Republicans’ spending-cut-only approach and the Democrats’ supposed “balanced approach,” the vast majority of Americans favor the latter.

However, were a bold presentation of a viable alternative on the table, such a proposal would definitely gain massive public support.  The Progressive Caucus drew up a bill called a “People’s Budget,” which went half-way towards this goal in many respects and actually would have gone further towards actually “balancing the budget” than either the Democratic, Republican, or bipartisan compromise bills, but nonetheless failed to gain any public exposure.

The “People’s Budget” proposal would have increased spending on construction, through a program of spending on public works, slashed military spending by $700 billion, created the “public option” that was removed from the final health care bill passed last year, ended the Bush tax cuts on the wealthiest Americans, returned the estate tax, and eliminated the Social Security loophole that allows no further taxation towards Social Security on all income over $100,000.  The bill left a lot to be desired, e.g. military spending could be further cut and what is needed is not a “public option,” but Medicare for all, however, this would have been a major improvement on the cut-cut-cut “solution” that Congress and the Senate compromised on.

It was, however, entirely ignored by the mainstream media outlets, not least of which because it did not even represent the view of a sizable chunk of the Democratic Party leadership and certainly not the political goals of the party.  The mainstream coverage one could find of the “People’s Budget” was limited to outlets such as The Huffington Post or the UK published The Economist magazine.

A Working Class Alternative

Those Democrats who support such ideas as making the rich pay for their crisis, providing a massive program of public works, real universal health care, proper funding of our public schools, and an end to imperialist wars overseas will always be largely ignored in the media.  So long as they continue to subordinate themselves to a political party of big business they will be obscured.  The Democratic Party is a party that has as its goal not the defense of workers’ interests, but of the interests of the wealthy and the powerful; it is a party that is used as the “good cop” in order to squeeze more out of workers. The only class capable of challenging the bipartisan rule of the twin parties of big business is the working class.  It is, therefore, essential that labor break entirely with the Democrats and form its own party.

Senator Bernie Sanders (I-VT), an “Independent” himself who nonetheless caucuses with the Democrats in the Senate, was angered by Obama’s immediate caving on Social Security during the course of the debt debate and has called for “progressive” challengers to Obama in the Democratic primary.  This is not the solution, as the failure of the Progressive Caucus’s “People’s Budget” to get any media traction clearly shows.  Due to the capitalist crisis, it is becoming increasingly difficult for the Democratic Party to foster illusions among workers. The only role “progressive” challengers within the Democrats can play is that of cleverly chaining honest workers to a party that has never represented the their interests. Inside the Democratic Party, there is nothing.

Labor held rallies in Washington, some gathering several thousand people, in support of a budget solution that did not include any cuts.  These rallies were at times awkward when Democratic speakers either had to speak in opposition to their own party’s proposal or only about “taxing the rich,” avoiding entirely the question of cuts (if, for example, they were supporters of the Democratic majority proposal in the Senate).  If labor had its own supporters in the halls of Congress, backed by its supporters on the streets outside, the situation could have played out much differently.

The fact is that the money for not only preventing cuts to, but rather increasing spending on, social programs, exists.  The means to it though is barred to either the Democrats or Republicans, as both are constrained by the limitations of the system that they defend.  The wealthiest 1% own 42% of the wealth, while the top 10% own 85%.  The wealthiest 400 Americans average only an 18% rate of taxation.  2/3 of U.S. corporations, 1.2 million companies, paid nothing in taxes between 1998 and 2005, according to a report from the Government Accountability Office, which also reported that these “no tax” corporations made $2.5 trillions of dollars in sales.  25% of these “no tax” corporations were “large corporations” by the GAO’s standards.

The aforementioned Bernie Sanders has even compiled a list of large U.S. corporations that don’t pay any taxes.  They include the likes of Exxon Mobil, Bank of America, General Electric, Chevron, Boeing, Valero Energy, Goldman Sachs, Citigroup, ConocoPhilips, and Carnival Cruise Lines.  While this is obviously far from a comprehensive list, if one were seriously concerned with “balancing the budget,” “averting national crisis,” “meeting our obligations,” and “paying our debts,” the corporations listed above should be the first to “tighten their belts.”  However, we should keep in mind that, as workers, the “national” debt is not our debt.  The Workers International League demands that the national debt be cancelled, except for bonds held by pension funds, workers, and poor people, which is a very limited part of the overall debt, the rest of which is held by the rich and big banks, as well as foreign investors (a large part of the national debt is owned by China).  It is the bosses’ debt and crisis, we should not be the ones that have to pay!

A mass party of labor could fight for a program for expenditures for quality health care and education for all and an end to unemployment, through a massive program for public works that would create jobs and improve our infrastructure, and could pay for everything through increased taxation on the wealthy.  Not only that, through the nationalization of the commanding heights of the economy, the top 500 corporations, we could create the basis for a new democratically run economy, based on a rational plan of production, and run in the interests of people and not profits.  This may sound far-fetched, but it is in fact the only realistic solution to our current impasse.  The fact is that the money and resources exists, but they are in the hands of the capitalist class. Join the Workers International League in the fight against austerity and for a budget that puts workers first!

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