Obama ’s budget reveals the bankruptcy of American capitalism

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Obama’s budget reveals the bankruptcy of American capitalism
3 February 2010

There is one overriding message in the budget proposal released by the
Obama administration Monday: American capitalism is in decline and
faces national bankruptcy.

The budget forecasts the doubling of the US national debt over the
next few years, even on the assumption of a rapid recovery from the
financial crisis and slump. It projects that high, long-term
unemployment will become a permanent fixture of American life.

Assuming a growth rate above 4 percent, historically rare, the budget
estimates that the jobless rate will still top 8 percent in 2012.
Lower growth or a return to slump will mean double-digit unemployment
rates as far as the eye can see.

Even the American media has been forced to take note of the historical
significance of the deficit figures. A news analysis by David Sanger
of the New York Times, under the headline “Huge Deficits May Alter US
Politics and Global Power,” points to the long-term implications of
the deficit numbers, which will persist long after such triggering
events as the Bush tax cuts, two wars, the bank bailout and the
recession which followed the 2008 financial crash:

“By President Obama’s own optimistic projections, American deficits
will not return to what are widely considered sustainable levels over
the next 10 years. In fact, in 2019 and 2020—years after Mr. Obama has
left the political scene, even if he serves two terms—they start
rising again sharply, to more than 5 percent of gross domestic
product. His budget draws a picture of a nation that like many
American homeowners simply cannot get above water.”

Sanger points to the global consequences of this protracted economic
decline, which will erode US influence and its ability to conduct
military operations, like the war in Afghanistan, without the approval
of foreign creditors such as China.

Gerald Seib, the Washington columnist of the Wall Street Journal,
expands on this theme, observing that the federal budget deficit “has
become so large and persistent that it is time to start thinking of it
as something else entirely: a national-security threat… These numbers
are often discussed as an economic and domestic problem. But it’s time
to start thinking of the ramifications for America’s ability to
continue playing its traditional global role.”

The enormous borrowing by Washington from foreign creditors, he
continues, “weakens America’s standing and its freedom to act;
strengthens China and other world powers including cash-rich oil
producers; puts long-term defense spending at risk; undermines the
power of the American system as a model for developing countries; and
reduces the aura of power that has been a great intangible asset for
presidents for more than a century.”

The conclusion being drawn from this analysis in US ruling circles is
that if American imperialism is to maintain its position of world
domination, domestic politics and social relations within the United
States must be radically restructured. The resources required to
sustain a global military posture and prevent undue dependence on
foreign creditors must be extracted from the American working people,
through the gutting and effective destruction of the programs which
consume the bulk of the federal budget—Social Security, Medicare and
Medicaid.

This is spelled out explicitly in a recent issue of Foreign Affairs
magazine, in an article, “The Dollar and the Deficits,” by C. Fred
Bergsten, a leading analyst of the US role in the world economy at the
Peterson Institute for International Economics. “The root of the
United States’ problem is domestic,” he argues. “There are at least
three reforms that fall under the category of ‘decide now and
implement later.’ The most important is containing long-term medical
costs, an integral component of overall health-care reform that could
save several percentage points’ worth of GDP. The second is
comprehensive Social Security reform, including gradual increases in
the retirement age and an alteration of the benefits formula to
reflect increases in prices rather than in wages. When fully phased in
over a couple of decades, such changes could take another one to two
percent of GDP off the deficit. The third measure is raising taxes on
consumption, which would both generate needed revenue and provide new
incentives for private savings.”

Bergsten notes that the Obama administration “has signaled its desire
to move in this direction” and “has rejected the restoration of the US
role as ‘world consumer of last resort.’” Obama himself has touched on
this subject, most notably in his speech last fall on health care
reform, where he declared the rising cost of medical care—not the bank
bailout, military spending or the economic slump—to be the number one
fiscal problem facing the United States.

While the Democrats and Republicans stage endless mock fights over
domestic policy and spending priorities, there is a consensus among
the political representatives of big business that any serious steps
to restore American capitalism to fiscal stability require an all-out
assault on the working class. Corporate America is leading the way
with its destruction of jobs and wages in the current economic slump.
Wall Street is demanding that similarly brutal methods be carried out
against domestic social programs.

There is no alternative to this policy within the framework of the
profit system. Working people can defend decent-paying jobs and social
services like education and health care only if they reject the logic
of capitalism and launch a political struggle for a socialist program.
At the center of this struggle must be the question: who will pay for
the crisis of American capitalism, working people or the capitalists?

All the efforts of the corporate-controlled media and the official
two-party system are aimed at preventing any consideration of the
central fissure in American society—class. Thus, the official
discussion of the federal budget crisis takes it for granted that
exploding interest payments on the public debt, which go largely to
the wealthy, and the huge sums expended on the bank bailout are
untouchable, while all attention is focused on the rising costs of
Medicare and Medicaid, which underwrite health care for the elderly,
the poor and the disabled.

Likewise, the existing distribution of property and income in the
United States is taken as unalterable. No one in official Washington
proposes, for example, the doubling of taxes on the super-rich
(restoring them to levels that prevailed under Richard Nixon), or that
giant banks and corporations should be nationalized and turned into
public utilities, rather than being bailed out by the taxpayers.

Why, given the manifest incompetence and greed of the financial
oligarchy, should working people accept its continued domination? Why
should less than one percent of the US population own 40 percent of
the wealth directly, and control all of it indirectly? It is not that
American society can’t afford health care for all or a decent
retirement for the elderly, but that society can no longer afford the
death grip of the Wall Street parasites.

Patrick Martin

http://wsws.org/articles/2010/feb2010/pers-f03.shtml

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