The “fiscal cliff” legislation that Congress passed in early January was the latest act in a long-running farce composed of alternating political gridlock and jury-rigged agreements. It exemplifies the crisis of leadership in the American ruling class. More importantly, it is a prelude to far-ranging attacks on the working class.
There are serious differences over how to prosecute the class struggle – as well as over more technical aspects of managing the troubled economy. These differences have become increasingly difficult to resolve through meaningful compromises, even short-term ones. The patchwork of measures in the fiscal cliff deal was nothing but a band-aid pasted over the gaping political differences and the broader economic crisis. This band-aid won’t even stick, as is evident by the incessant political bickering over the debt ceiling and the budget matters soon coming up again.
In 2011 Washington had agreed to schedule a series of extensive spending cuts through a process called automatic “sequestration.” This process was supposed to have commenced on January 2, 2013 – if no fiscally equivalent omnibus budget cut deal was passed by Congress prior to that. However, despite the bipartisan agreement backing that approach, these potential cuts that were on paper supposed to be “triggered” starting in 2013, were never really intended to go into effect. The idea was that sequestration would never actually happen because the ruling class and its political representatives considered the content too alarming – the steep cuts in the military budget above all.
As it has turned out so far, the steep cuts were avoided by the January 2013 “fiscal cliff” deal that was scrounged together, but only by kicking the most contentious issues down the road — and not very far down at that. (The consideration of an omnibus budget cutting deal comes up again in March 2013, with the question of the debt ceiling coming up again in May 2013.)
Despite the rancorous and dysfunctional atmosphere in Washington, despite the hesitations and procrastinations, there is agreement in the ruling class on the most fundamental issue. An intensified political attack on workers, the poor and even large sections of the middle class is looming, primarily through slashes in social programs. The attack is partially obscured by the recent enactments of “sweeteners” at the end of 2012, such as small tax hikes on wealthy Americans which supposedly represent an effort toward “fairness” in our society. As well, the conflict between the two capitalist parties is used to obscure the truth that the main conflict is between the working class and poor on the one side, and both capitalist parties on the other.
Democratic as well as Republican proposals embody a program of punishing cuts on the working class as a whole, with the worst effects on the most oppressed. But the Democratic terms are somewhat less severe. The conflict can make the Democrats look like the “good guys” to many hard-pressed working people. But in reality the Democrats are part of a “good cop/bad cop” duo that is out to give the working class a beating.
This fact of political life underscores the crisis of working-class leadership. The leaders of the trade unions, as well as organizations that claim to represent oppressed people, continually fail to lead a mass defense of workers and the oppressed. Their futile alternative is to support and beg favors of the Democratic Party. Thus they accepted, if not openly supported, the wretched fiscal cliff deal in January. This only set the stage for the next wave of attacks. The working class desperately needs a leadership that serves its own interests independent of the capitalist parties, a revolutionary party leadership.
In the fiscal cliff legislation, the retention of extended unemployment benefits and the earned income credit programs were pointed to as gains for the poor and jobless. But the most publicized “victory” was the very modest raising of taxes for individuals earning over $400,000 a year (and families earning over $450,000). The fact that Congress would enact any tax hike for the rich while rejecting wholesale budget cuts was trumpeted as a victory by liberal commentators.
But the new tax levels only end some of the giveaways under the Bush II administration. Lots of millionaires will see no increases at all. And estate taxes for those over $450,000 were barely bumped up, remaining at historically low rates. Meanwhile, working people were given a nasty tax jolt themselves by the ending the payroll tax cut extension. Worse, the earned income and unemployment benefit extensions were limited to 5 and 1 years respectively, while the still-generous income and estate tax levels for the wealthy were made permanent.
There were also measures that have been given much less attention in the press. These were important giveaways to banks and corporations, a standard practice in Congressional bills. This time there was an estimated $40 billion of them, including an extension of Research & Development tax credits and a program to allow businesses to write off one half of the value of new investments. And banks retained a key offshore tax loophole worth more than $150 billion a year.
The most scandalous giveaway in the fiscal cliff bill so far was exposed by a New York Times article on January 19: an obscure provision gave the Amgen biotechnology corporation a handout that will cost Medicare $500 million over two years. This came two weeks after the firm agreed to pay $762 million in criminal and civil penalties for illegal marketing practices. The provision was stuck into the bill by a cabal of Democrats and Republicans on the Senate Finance Committee, proving once again which class these politicians serve.
Overall, a sober look at the deal makes clear that it amounted to no real concession to the anger expressed in electoral polls last fall. The polls showed widespread contempt for Mitt Romney, approval of higher taxes on the super-rich and support for Medicare and Social Security. Obama’s victory and the Democratic gains in the House and Senate were in large part due to these sentiments. Thus Obama was in a position to negotiate from strength, yet he delivered little.
It is not a matter of his caving in to the Republican leadership (and indirectly to the Tea Party wing) under the hammer of the fiscal cliff threat, as many claimed in the summer of 2011. No, he and the bulk of congressional Democrats have for a long time agreed with the Republicans and the political right that major cuts are necessary. The Democrats just hope to continue with the game of diverting all the anger about the cutbacks onto an anti-Republican path. They do have some real differences with the Republicans as to how far they want to cut the entitlements. As well they try to cover up their willingness to make cuts with their very minimal “tax the rich” ideas – as if one balances out the other. This game allowed Obama to win the election, despite the fact that he had already made it clear that he was for big cuts too, if not as big as the Republicans. There is little question but that they will come up with some more cruel bipartisan attacks, even if the haggling over what and how much proves to be intense.
The historical context once again demonstrates how the Democrats have partnered the attack with the Republicans. Obama’s bargaining position on raising the tax on wealthy Americans is roughly a return to the tax rates of the Clinton presidency. But the rates of those years, if higher than under the Reagan and Bush regimes, were lower than the rates of the 1960s and 1970s. And those rates in turn are lower than in the middle of the century when, under the impact of mass class struggle, tax reforms were enacted which made a more sizeable portion of wealth from the ruling class available for governmental purposes.
A similar pattern, with some differences in timing and emphasis, holds for social programs – both those listed under “entitlements” and those listed under “discretionary spending.” Even in the heyday of the 1960s, Democrats joined with Republicans in wanting to limit programs for the poor, such as Food Stamps or Aid to Dependent Children, which were categorized as “discretionary” spending. Such “poverty” programs were distinguished from “entitlement” programs, which are Social Security, Medicare and Medicaid.
In general the notion of “entitlement” programs was of benefits geared to the relatively stable sections of the working class and middle class, even though poor people would be helped by them as well. Social Security and Medicare benefits were largely based on employment history. The “discretionary” programs have been subject to a sustained attack over the last few decades by Democratic and Republican administrations alike (including the ending of “welfare as we know it” by Democratic President Clinton). The cruel slashing of such programs continues even amidst growing poverty and long-term unemployment.
But those programs once considered untouchable, like Social Security and Medicare, have also become serious targets. Obama has struck the pose of an ardent defender of Social Security and Medicare against the Republican knife, at least when it has suited him. But he has at various points since the beginning of his Presidency signaled his willingness to use such cuts as the basis for bargaining. This has ranged from the recommendations of cuts made by the Simpson-Bowles commission he put together to the Affordable Care Act (which indirectly led to cuts in Medicare). The “Chained CPI” as a way to reduce outlays for Social Security (fancy math that added up to real cuts) was on the table for the fiscal cliff deal and is reportedly on the table for the next round. And in December 2012 Obama, not for the first time, publicly stated his openness to tampering with Medicare. In an ABC News interview with Barbara Walters, Obama noted that lifting the Medicare eligibility age from 65 to 67 is “something that’s been floated,” and that he was “not dismissing the idea outright.” “When you look at the evidence, it’s not clear that it actually saves a lot of money.” he said. “But what I’ve said is let’s look at every avenue, because what is true is we need to strengthen Social Security, we need to strengthen Medicare for future generations, the current path is not sustainable because we’ve got an aging population and health care costs are shooting up so quickly.” Obama talks of “strengthening” Medicare by “reforms,” such as upping the eligibility age or reducing payments to hospitals and doctors, which will actually eat away at the program.
The broad flows of government taxing and spending through Democratic and Republican administrations have been an important though subordinate aspect of the increasing proportion of the national wealth flowing to the capitalist class so far. Much of the attack to this point has been centered at the point of production, including cuts in wages and benefits, speed-up, layoffs and attacks on shop floor rights. These things are most certainly still going on, and have actually intensified over the years. But they have been increasingly supplemented in recent years by an erosion of the “social wage” of the working class.
Historically, benefits from free public schools to welfare have been yielded to the working class by the capitalists in response to social struggles. None of these benefits are handouts but rather they are gains of the class struggle. The direct wage is the actual paycheck workers bring home based on their exchange of labor time for money. However, under modern capitalism there has been the need for the state to step in and provide a social wage to maintain the workers beyond what any individual boss could do. Now the question of downgrading that social wage is very much posed – and that will be the subject of the upcoming debt ceiling negotiations in March and beyond.
The debt crisis is real, and the fiscal cliff deal did precious little to address it. It is a reflection of the weaknesses of American capitalism and the problems confronting the international system. But the clamor for cutting government spending is no real “cure” for mounting debt; its main purpose is to serve as a rallying point for the capitalist political assault on the social wage. The Republican Party that most strongly advances this knows no depth to its hypocrisy. The growth of the debt began under Bush II, with the massive tax breaks for the rich and the swelling military budget under the impact of two wars and occupations in the Middle East; and it was greatly aggravated with the trillion dollar bailout of Wall Street. Republican spokesmen prattle about “planning for future generations,” while opposing even modest measures in areas like green industry and infrastructure repairs that are and will be so needed. But the Democrats, in only a slightly modified version, share the same aim. One of the first acts of the Obama administration was to continue and expand the Wall Street bailout, even as it joined the growing chorus for spending cuts.
A general downturn of the economy that signaled the end of the post-war boom nearly 40 years ago is the backdrop for the ensuing capitalist offensive. There is a genuine need of the capitalist class to try to solve the crisis of their system by increasing the exploitation of workers and oppression of the poor and minorities. But this has been mixed, often indistinguishably, with a raw greed greatly encouraged by the successes of that offensive. The changes in the income tax structure over time are a notable demonstration of this base avarice. Such changes resulted not in advancement of the capitalist economy but of the already monstrous fortunes of those sitting at the top of society. The long-term offensive is a sure sign of the system’s inability to be anything but a burden on the further development of society.
The working class needs to mount a defense of existing government programs. An environment of fiscal crisis has in part been orchestrated by arbitrary debt ceiling limits and other means. Part of that has been designed to increase the anxieties of the masses. But the masses do have reasons to be anxious. Only mass pressure and action, focused on a defense of existing social programs, is going to prevent the next round of cuts. We say hands off Social Security, Medicare and Medicaid! Hands off all “entitlements” and “discretionary spending” that aid workers, the poor and people of color! We present the need for immediate measures of defense, while recognizing that the existing social programs are grossly inadequate and reflect in their own way the injustices of capitalist society.
Since the issues directly involved are government policies, this is necessarily a political struggle. But more generally workers and their allies need to focus demands on the capitalist state to address in a serious manner the intense needs the crisis and attacks have generated. Now more than ever, government control of resources is needed to begin to meet human needs. One critical area of need is the provision of good jobs at decent pay for all, along with the increased production of goods, the rebuilding of the infrastructure, the replacement of hydrocarbon with green energy, and so forth. Also desperately needed are fully funded quality health care, education, housing and social services for all.
We know this state will never be able or willing to carry out such tasks in a systematic manner. Indeed, its main function will be to protect the capitalists and their need for intensifying attacks on the masses, not to create a caring society based on an economy that really aims to serve humanity, not a few profiteers. We say as much to our fellow workers and youth. In the course of struggle for demands under capitalism and in conjunction with whatever victories can be achieved in this system, we work to convince the working class and oppressed of the need for revolution.
Only with workers’ revolution and the establishment of a workers’ state will our class and its allies be able to seriously implement the type of measures so critically needed to further the interests of the masses of humanity and indeed the survival of the human race. We dedicate ourselves to the establishment of the revolutionary working class party so necessary for this mammoth endeavor.
The alternative to this revolutionary path – the desperate, patchwork maintenance of a rotting system – is cruelly unfolding before our eyes. Capitalism has always meant a miserable existence for billions of workers, peasants and others, especially in oppressed regions of the world. But increasingly the more privileged workers and middle strata in imperialist centers and particularly in the U.S. are having their living standards and their dreams of a relatively comfortable existence shredded. The objective workings of the economy are the underpinning, the main reason.
The increasing attack on better-off workers in addition to the most beleaguered sectors can provide the material basis for a united struggle that is opposed to racism and pro-imperialist national chauvinism, as well as all the economic and social attacks. The budget cuts are just one aspect of what is happening. The LRP has always argued that Republicans and Democrats are two parties of racism and imperialist wars abroad as well as anti-worker austerity and other attacks at home. But we revolutionary socialists say that there is an alternative to all this misery. The working class needs to begin to prepare itself to fight against the current and future attacks, including on its living standards at home. But the working class cannot fight most effectively if mass organizations like the unions continue their strategy of passive electoralism and their support for the capitalist and imperialist Democratic Party. That is why we need to fight for an internationalist revolutionary party and strategy instead. We urge workers and youth interested in our ideas to get in touch.
Defend Social Security, Medicare and Medicaid! Defend All Social Services!
1. See Behind Washington’s War on Workers and the Poor for extensive background information on that deal.
2. www.nytimes.com, Fiscal Footnote: Big Senate Gift to Drug Maker
3. See 2012 Election: Obama No Answer to Republican Reactionaries for our pre-election exposé of Obama and the Democrats.
4. See Stop Workfare – Jobs for All!.
5. For a detailed explanation, see www.nationaljournal.com, Chained CPI Could Relieve the National Debt. So What Is It?.
6. abcnews.go.com, EXCLUSIVE: President Obama Predicts GOP Will Cave on Taxes
7. See Bankrupt System Drives
Toward Depression PDF for a full discussion of the economic crisis.