U.S. Debt Ceiling Crisis: Political Wrangling While the Global Economy Burns

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Throughout the month of July and into the early days of August, the bourgeois media inundated us with discussion and analysis of a veritable existential crisis for the entire global capitalist system, should the U.S. political class fail to resolve its differences and agree to an extension of the legal limit the U.S. government is allowed to borrow.

Should the U.S. have failed to extend the so-called “debt-ceiling” and default on its debt, all manner of hellish consequences for the national and global economy were predicted: Social Security beneficiaries might not get their checks, there would be no more money to pay unemployment insurance benefits and even active duty military members might have to go without a paycheck. Moreover, a U.S. default would cause a dramatic rise in interest rates on everything from credit cards to student loans, threatening to send an already dismal economy off the cliff. Internationally, investors would supposedly flee U.S. government treasuries and the U.S. dollar in general, causing a massive devaluation of the world’s reserve currency. With such dire consequences, many bourgeois analysts continued to assure us that a U.S. default was simply impossible; there was no way the U.S. political class could prove so irresponsible and masochistic that it would allow for such a dramatic self-inflicted—perhaps mortal—wound. That didn’t stop CNN—in a scene out of a 1990s disaster movie—from running a “Debt-Ceiling Countdown Clock” during the weeks leading up to the August 2nd deadline—the date when Treasury Secretary Timothy Geihtner said the U.S. would run out of money to pay its bills if no extension was authorized by Congress and signed into law by President Obama. While the spectacle surrounding the possible failure to extend the debt ceiling may not have been as dramatic as the prospect of a giant asteroid hurtling through space towards Earth, we were continually assured the consequences of default were about as dire as a “Deep Impact.”

In the end, the U.S. bourgeoisie—in a classic display of brinkmanship—was able to finalize an agreement just one day before the deadline. This agreement allows for the extension of the debt ceiling to 2013, removing the immediate threat of default for the rest of President Obama’s first term, in exchange for federal budget cuts that will see 1 trillion dollars slashed from the federal budget immediately. This is to be followed by the establishment of a bi-partisan commission of Congress tasked with identifying another $1.5 trillion in additional cuts, under the threat that a failure to agree on specific deficit reduction measures would lead to automatic cuts across the federal budget—including defense spending. In one fell swoop; the U.S. state has gone from the last defenders of Keynesian stimulus faced with the global economic crisis, to the architect of massive austerity.

Nevertheless, the U.S. bourgeoisie’s debt-deal has ultimately proven too-little, too late for at least one bond rating agency, with Standards and Poor downgrading U.S. government debt from AAA rating to AA+, just days after the agreement was reached. The downgrade, coming around the same time as a massive sell-off on Wall Street, confirms that the global markets now recognize political instability in Washington as a fact. [1]

Much of the analysis of this crisis in the bourgeois media, has focused on the role played in the debt-ceiling negotiations by the freshman Tea Party Congressman elected in the 2010 mid-term elections. According to this narrative, the Tea Party bears ultimate responsibility for the crisis, as they approached the debt-ceiling negotiations with a no-holds barred, take no prisoners, reach no compromise approach that would refuse to allow the debt ceiling to be raised without corresponding budget cuts.[2] Against the “balanced approach” to budget deficit reduction pursued by Obama and the Democrats—and tacitly acquiesced to by Republican Speaker of the House John Boehner—that combined targeted budget cuts with certain “new revenue” [3], the Tea Party Congressmen refused to budge on their promise to balance the federal budget without raising any taxes. Slash and cut was the only method to fiscal sustainability the Tea Party would accept, as they proposed a “Cut, Cap and Balance” plan that included the passage of a Constitutional Amendment requiring the U.S. federal government to run a balanced budget. This plan was roundly ridiculed in the bourgeois media as politically impossible, with even Republican Senator John McCain labeling those who take a balanced budget amendment seriously as emanating from “bizzaro land.”

The bourgeois media charged the Tea Party with willingness to send the country into default and economic calamity in order to achieve its ideological aims. Clearly, a party—or a faction of one—that is willing to do such damage to the national capital in order to fulfill an ideological pipe dream is not a credible party of government. The problem for the U.S. bourgeoisie, as the media never cease to point out, was that the Tea Party now has a stranglehold on the GOP itself, threatening to render the entire Republican apparatus politically obsolete. With Vice President Biden stating that the Tea Party acted like “terrorists” [4] and Democratic Senator from Iowa Tom Harkin bemoaning the destruction of the U.S. two-party system as the Republican Party morphs into a “kind of cult,”[5] the ideological meltdown of a significant faction of the U.S. political class is now an acknowledged fact in Washington, just as the main factions of the bourgeoisie struggle to control the damage they seem intent to do to the national capital. As one commentator noted, “the Tea Party movement did not come to Washington to govern and compromise in the traditional spirit of American politics; they came to demand and threaten.”

However, the Tea Party is not the only faction of the bourgeoisie that has come in for harsh criticism in the media over the debt-ceiling debacle. President Obama himself has come under fire from all sides. The right continues its relentless crusade against the man they consider “the worst President in American history,” while the left grows increasingly frustrated with his willingness to sell-out his base in every negotiation with Republicans, giving away the store to a political faction that poll after poll shows most Americans now reject. [6]

Most importantly, however, a consensus has begun to emerge among bourgeois opinion makers that Obama is simply not able to deal with the threat to the national capital posed by the Tea Party faction. Accusations of “weakness,” of valuing compromise itself over substance and giving in to the Tea Party’s economic terrorism now haunt the President as he prepares for his 2012 re-election campaign. On the debt-ceiling deal, it is widely acknowledged that the President suffered a grave political defeat, his only saving grace being the fact he avoided an unthinkable default. However, by acquiescing to the Tea Party’s “terrorism,” he has failed to comprehend one of the cardinal lessons of bourgeois politics from the 20th century: “negotiating with terrorists, only begets more terrorism.” Now that the Tea Party has learned they can get a lot of what they want by threatening to tank the entire global economy, there is no reason to believe they won’t do it again. [7]

So how should the working class and its revolutionary minorities make sense of this crisis that has forced the political difficulties of the U.S. bourgeoisie to the surface in such a dramatic way? What is the likely trajectory of the U.S. political class in the aftermath of this conflagration, faced with the 2012 Presidential election? What does this crisis say about the ability—or willingness—of the U.S. bourgeoisie to manage the economic crisis that continues to eat away at U.S. global hegemony? What political tactic might the main factions of the U.S. bourgeoisie attempt to employ in order to confront the twin threats to the national capital of the class struggle and the ideological decomposition of parts of its own political apparatus? How might the U.S. bourgeoisie attempt to make use of this crisis to impede the development of the class struggle in an environment where the attacks on the working class’s living and working conditions can only be expected to worsen?

While the full implications of this crisis—on the political, economic and social level—are not yet clear, we will attempt to give some preliminary analysis here to what is perhaps the most serious manifestation yet of the trend towards the political decomposition of the U.S. bourgeoisie—a trend Internationalism has been tracking since at least the disputed the Gore/Bush Presidential election over one decade ago.

Confirmation of Our Analysis of Political Decomposition

In our opinion, the U.S. debt-ceiling crisis stands as a remarkable confirmation of the analysis Internationalism has been developing of the insidious effects of social decomposition on the political life of the U.S. bourgeoisie itself. In particular, this crisis confirms our analysis of the difficulties of the U.S. political class since Obama’s election in 2008.

As we analyzed at the time, in 2008 the U.S. bourgeoisie was able to achieve a major success by organizing a massive electoral circus around Obama’s historic candidacy as the first African-American President. The Obama campaign successfully blunted the full appreciation of the developing economic crisis and successfully integrated scores of young people and minorities into the dead-end of bourgeois electoral politics for the first time in their lives. On that level, the Obama campaign marked a momentary brake on the tendency for the U.S. bourgeoisie to lose control of its electoral circus, as it succeeded in reviving the electoral illusion for the time being, after 8 years of the disastrous Bush administration.

However, simultaneous with Obama’s historic victory, a parallel movement was taking place within the American political class in direct opposition to the President. Starting with the nomination of Sarah Palin as John McCain’s Vice Presidential candidate, Obama’s candidacy was to prove as polarizing as it was inspiring. Decades of repressed racist impulses, paranoid fantasies and wild conspiracies theories surged to the surface, as the new President faced constant challenges to his legitimacy from an emboldened right-wing. A new Tea Party movement emerged early in 2009. Claiming the legitimacy of grass roots energy, it was quickly endorsed by many mainstream Republicans gearing up for the divisive health care reform debate, in order to exploit it for political advantage.

The situation reached a head in the 2010 mid-term elections, as the Republican Party gained control of the House of Representatives largely on the back of Tea Party based enthusiasm within the smaller and more conservative mid-term electorate. Now it has greater influence over the government, the Tea Party has revealed its true nature as the party of extreme austerity. While the racist rhetoric concerning the President’s ethnic origins has been downplayed, the radical ideology of economic libertarianism has surged to the surface. Backed by long standing anti-tax think tanks like Grover Norquist’s “Citizens for Tax Reform,” most Republican/Tea Party legislators have signed a pledge to never vote to raise taxes under any circumstances ever. The only method to fiscal sustainability they accept is to dramatically cut back the size and scope of the federal government.

Clearly, when one party in a two party system has become so ideologically rigid, this seriously impacts the state’s flexibility to arrive at the best policies for managing the economic crisis for a given political and social moment. This difficulty was played out in dramatic fashion in the debt ceiling crisis, with Republican and Tea Party legislators refusing to vote for any deficit reduction plan that included any tax increases, including the closing of so-called “tax loopholes.” As a result, in order to avoid a catastrophic debt default, President Obama was forced to agree to a debt reduction plan that currently contains not one cent in tax increases, despite the fact that virtually every poll of the American public has shown a strong willingness to raise taxes on the wealthy. 

Clearly, the debt ceiling deal was not the resolution to this crisis that the main factions of the bourgeoisie would have preferred. While it is clear that all sides recognized the need for the U.S. state to take strong measures to tackle its enormous debt load, the passage of a deal which accomplishes this through budget cuts alone is totally out of step with the American public, serving to further alienate it from the state. Moreover, the totally ham fisted and botched negotiation process has itself served to rile the American public’s anger at their elected officials, with some commentators beginning to talk of a crisis of the American democratic system itself. Meanwhile, many foreign observers look in horror at political events in Washington, realizing that in a world marked by global interconnectedness, their own economic and political fates are just as much subject to Republican/Tea Party fanaticism as is the U.S. credit rating. The response of the Chinese was particularly strong, calling on the US to protect the value of the $1tn China has invested in the US by cutting military and social spending, and even suggesting that a new global reserve currency may be necessary, adding that, “It should also stop its old practice of letting its domestic electoral politics take the global economy hostage and rely on the deep pockets of major surplus countries to make up for its perennial deficits.

Clearly, the growing influence of the Tea Party has not made the task of managing the economic crisis any easier for the main factions of the bourgeoisie and has only served to accelerate the process of the decomposition of the U.S. state. Of course, in line with their extreme libertarian ideology, this has been the Tea Party’s goal along. Is it any surprise that in an age marked by social decomposition, the bourgeoisie coughs up a political movement whose very goal is furthering the political decomposition of the state? Dialectics has come back to haunt the bourgeoisie in menacing fashion.

However, we should be careful not to exempt other factions from the U.S. bourgeoisie from our analysis of political decomposition. There is an element on the bourgeois left that continues to argue that in an economy marked by stagnation, unemployment and a “demand deficit” that the only recourse is more government spending. This faction is as wedded to its Keynesian ideology as the Tea Party is to their Lockean individualism. It is between these two opposed positions, that continue to hardened around its flanks, that the main factions of the bourgeoisie—headed up by the Obama administration—attempt to steer the ship of state, hoping to find some way out of the morass that avoids the pitfalls of both extremes and that keeps the American public believing in the myth of the democratic state.

Still, while we shouldn’t let left-wing Keynesian myopia off the hook in terms of demonstrating the increasing inanity of bourgeois politics, we should not make the mistake of equating it with the extremely irresponsible and immediately deleterious approach of the Tea Party. The Tea Party may have a point when it says the U.S. is addicted to spending, but there is a difference after all between the addict who, faced with the pains of withdrawal, searches out another hit of the drug, and the one who decides the only appropriate way to deal with addiction is to slit one’s own throat. [8]

The arrival of the Tea Party marks a major moment in the ideological decomposition of the U.S. state. Is there a way out of this mess for the U.S. bourgeoisie? While we cannot predict with certainty the future evolution of U.S. politics, it seems likely that despite whatever temporary reprieve it may win through the machinations of its electoral circus, the ideological deterioration of the bourgeoisie is an inescapable feature of the overall period of capitalist social decomposition that is likely here to stay.

All of this does not bode well for the U.S. bourgeoisie heading into next year’s Presidential election. The danger of giving control of the government over to the Republican Party is very real. Yet, Obama himself has proven to be a real lightning rod, emboldening the most ideologically hardened elements of the Republican Party. Moreover, his conciliatory style of governance has not stood up well to the challenge of Republican/Tea Party intransigence, and many bourgeois commentators have openly spoken of a “crisis of leadership” in Washington. While it is unlikely the main factions of the bourgeoisie would move to dump Obama if his opponent is a radical Tea Party Republican, the prospect of a more moderate Republican President, who can enact austerity, while at the same time cooling the Tea Party insurgency, is probably the best hope of the U.S. bourgeoisie at the moment. However, given their overall political difficulties and the dynamics within the Republican Party, it is uncertain they will be able to obtain this. [9]

What Policy In Face of the Crisis?

The debt-ceiling debacle stands as a clear demonstration of the stark economic policy contradictions facing the U.S. bourgeoisie as it attempts to manage the worst economic crisis since the Great Depression. On the one hand, two years after the official end of the post-2008 financial crisis recession, growth remains abysmal, business investment is low (despite the facts that businesses supposedly sit on mounds of cash) and unemployment is still sky high. Liberal economists, such as Paul Krugman and Robert Reich, continue to call for more government stimulus in order to get the economy moving again and put people back to work. More and more their calls are beginning to be echoed in the mainstream media as talk of a “demand crisis” in the economy is heard more frequently on the Sunday morning talk shows and cable news outlets.

However, on the other hand, the deficit hawks—backed up by Republican/Tea Party anti-government rhetoric—see the federal government’s enormous debt as the main threat to the country’s economic well being, weakening the U.S.’s long-term position in the bond markets. For this faction, only massive government budget cuts and austerity measures can improve the nation’s attractiveness to investors, free businesses’ creative potential and put people back work. In this view, tax increases on “job creators” are to be avoided at all costs, as they can only serve to kill jobs.

In short, these two contrasting policy alternatives highlight the fundamental contradictions dogging state capitalism in the United States and elsewhere in the face of the global economic crisis. While government stimulus may serve as a momentary shot in the arm to an ailing economy, it only serves to worsen the overall debt picture. If austerity and government contraction might momentarily reassure investors, it only serves to worsen the underlying economic contraction and threatens to increase unemployment and possibly provoke a genuine social crisis.

As has been pointed out in the bourgeois media, the debt ceiling deal reached by the U.S. political class falls squarely into the camp of cruel austerity and government contraction. Cutting trillions of dollars out of the federal budget, while failing to include any stimulative measures, threatens to send the nation deeper into a double-dip recession, increase already high unemployment numbers, putting the U.S. closer to the brink perhaps sooner than would have otherwise happened.

All of this begs the question of the fundamental ability of the U.S. state to manage the economic crisis that has now beset it for the last three years. Given the content of the debt deal, one could be forgiven for concluding that the U.S. bourgeoisie has just given up attempting to solve the economic crisis, choosing instead to run headlong into the fury of a permanent slow growth/low wage/high unemployment economy. In a world that requires choosing between on the one hand the wrath of millions of unemployed workers and millions more who hang on to their jobs by a thread and on the other the scorn of the bond markets and rating agencies, the U.S. political class appears to have decided to take its chances with the class struggle.

Herein lies the real social danger for the bourgeoisie of the debt ceiling deal Obama agreed to with the Republicans: It is all stick and no carrot. While Democrats may boast that the deal does not, for the moment, include cuts to Social Security or Medicare, Congress’ bipartisan Super Committee now has a mandate to propose cuts to whatever federal programs it sees fit, under the threat of across board the cuts to the federal budget. As Obama has said, “everything is now on the table.” The President himself has come out in favor of making “modest changes” to Medicare, as a way to bring the federal deficit under control.

Statements from the President like this, taken together with his history of caving into Republican demands time and again, have caused many on the bourgeois left to wonder out loud if, rather than being played like a fool in the debt ceiling negotiations, Obama didn’t get just what he was looking for all along. After all, it was the President himself who originally proposed a much larger 4 trillion dollar deficit reduction package. The difference of course with Obama’s plan was that at least it contained a series of “revenue increases” that might have been sold to the American public as a “balanced plan” of “shared sacrifice.”

Nobody should doubt that Obama and the Democrats wanted to make cuts, they only sought a package that would be more politically marketable to the population at large; something that contained new forms of tax revenue that could presented as part of a plan to “make the rich pay” part of the cost of balancing the budget. The fact that Obama was unable to secure a deficit reduction plan that contained some carrot along with the stick is likely a central reason behind the recent questioning of his leadership by many bourgeois pundits.

Regardless of whatever new revenues the Democrats may be able to secure in the future, this likely won’t lessen the burden on the U.S. working class as the state struggles to get its fiscal house in order. In the end, it will be the proletariat that feels the real pain from the state’s debt problem and the resulting downgrading by the rating agencies. More unemployment, less secure work when it can be found, attacks on retirement conditions, higher interest rates on consumer debt, reduction in unemployment benefits fewer government services (particularly at the state and local level), more tainted food and unsafe products, etc. are all likely outcomes of this drama for those who work to make a living.

With so much social pain sure to follow, the U.S. bourgeoisie finds itself in a very difficult position in its confrontation with the working class. With each cave in to Republican demands, with each political crisis that sees Obama and the Democrats appear feckless and without a backbone against Republican/Tea Party intransigence, the U.S. two-party system loses more of its legitimacy in the eyes of the population as a whole. The ideological division of labor between the Democrats and Republicans ceases to function. Rolling Stone columnist Matt Taibi expressed this developing sentiment well, labeling the Democratic Party, “a bunch of hired stooges put in office to lend an air of democratic legitimacy to what has essentially become a bureaucratic-oligarchic state.” [10]

A state that does not have a political entity that can do a credible job appearing to fight for the interests of the common-man is ultimately a state in trouble. Such is the fate of the U.S. political class at the moment. The longer they have to rely on the Democratic Party to enact the austerity the historical moment requires—appearing in the process to be doing the bidding of Wall Street, while ignoring “Main Street”—the more it weakens the democratic mystification itself. Unfortunately for the U.S. bourgeoisie at the moment, a Republican administration might be out of the question.

Political Decomposition Against the Class Struggle

Whatever the U.S. bourgeoisie’s political difficulties at the moment, we should expect nothing less than for it to attempt to use its own political decomposition against the working class to the best of its abilities. Primarily, this will take the form of a series of ideological campaigns around the national debt, debt reduction, the economic crisis and the role of the various political parties, as the bourgeoisie attempts to manipulate the outcome of the 2012 Presidential election.

On the one hand, Obama and the centrist Democrats will utilize the debt ceiling crisis as a way of terrorizing the populace into supporting them over the radical Republican/Tea Party right, who have clearly lost all semblance of credibility as a governing party. The spectre of further “economic hostage taking,” the stoppage of Social Security checks, drastic cutbacks to Medicare—or to put it in terms used by some Democrats “the repeal of the 20th century itself”—will be used to fuel an electoral campaign to stop the Tea Party insurgency in its tracks. The themes of this campaign will be “shared sacrifice,” a “balanced approach” to deficit reduction as well as the endorsement of modest stimulus programs such as a further extension of unemployment benefits that have long since run out for millions of unemployed workers and which will expire for millions more at the end of the year.[11]

Meanwhile, the left of the Democratic Party—angered over Obama’s perceived spinelessness—will likely launch a parallel campaign, urging support for “progressive candidates” who will stand up to the corporations, make the rich pay for the crisis and protect valued social programs. This campaign will endorse heavy taxation of the rich, massive Keynesian infrastructure investments and a national jobs program, all of which have little chance of ever coming to fruition. While sharply critical of Obama, in the hopes of playing a kind of left in opposition from within the Democratic Party, this faction will still ultimately endorse his re-election against the menace of Republican/Tea Party revanchism.

Finally, the Republican Party, depending upon its ultimate Presidential nominee, will conduct a campaign blaming Obama’s lack of leadership for the country’s economic woes, citing the need to free business from government regulation and unleash the country’s stunted entrepreneurial spirit. This campaign will talk tough on the deficit, scolding the federal government for its profligate ways and reminding everyone that it must accept pain now in order not to leave the fiscal mess to our children and grandchildren.

However, ultimately the real threat to the working class from the debt ceiling crisis and the resulting deficit reduction mania lies in the further brutalization of social life that will inevitably result. In a country already marked by a “no excuses” mentality, the further attacks on the social safety net are likely to add fuel to the fire of the one society among the major powers that has always come closest to the libertarian ideal of “everyman for himself.” Its not surprising that the breakdown of social solidarity that characterizes the epoch of capitalist decomposition has, in the U.S., thrown up a political movement that takes social solidarity—even its corrupted representation in the capitalist state—as its chief enemy.

For the working class, there is only one remedy to this downward spiral into the abyss—autonomous struggles on our own class terrain, outside the unions and all bourgeois political parties. We must reject the rhetoric coming from all sides of the bourgeois political spectrum. Against “belt-tightening,” against “shared sacrifice” and against “make the rich the pay,” we must pose the alternative of a different society beyond all these slogans that do not transcend the bourgeois horizon. Only the united action of workers coming together as a class in the struggle for a different world can provide a counterweight to the assembling forces of capitalist barbarism, which now expresses itself so clearly in the continuing dramas of the U.S. political class.

--Henk

08/19/2011

 

 


[1] As early as January 2010, NY Times columnist and “globalization” guru Thomas Friedman reported hearing talk of “U.S. political instability” at the World Economic Forum in Davos Switzerland.

[2] For readers familiar with the history of the Communist Left, the theme of “no compromise” that ran throughout the debt ceiling crisis probably reminds them of the struggle of the left factions in the Third International against the galloping opportunism of the Communist Parties. It would be all too easy to compare John Boehner’s position to Lenin’s, as he struggled to control the insurgency in his party and force the Tea Party to play by the rules of parliamentary politics. Of course, any comparison of the Tea Party to the CL is not appropriate and can only serve the bourgeois campaign that seeks to dismiss the CL as an immature faction not to be taken seriously. Still, one wonders if Boehner and other GOP insiders aren’t considering their own manifesto: “The Tea Party: An Infantile Disorder of Libertarianism”?

[3] Talk of “tax increases” is a political impossibility in the U.S., unless it is to pillory your opponent for being in favor of them.

[7] Central to this attack on Obama from the left was the Democrats’ Progressive Caucus in the House of Representatives, but also former President Bill Clinton, both of whom criticized Obama for failing to fully consider the option of invoking the 14th amendment to the Constitution’s provision that the public debt of the U.S. shall not be questioned in order to make an end run around Tea Party obstructionism. Clinton’s volunteered opinion on this issue stands in sharp contrast to his work selling Obama’s compromise extending the Bush tax cuts in December last year. Many in the main factions of the bourgeoisie are probably privately wondering if a President Hillary Clinton would have handled the debt-ceiling issue with greater political skill.

[8] The metaphoric comparison of deficit spending to drug addiction has been rife in the bourgeois media the last several weeks.

[9] See our article, Political Decay and Economic Crisis: US Ruling Class Faced with No Easy Options in Internationalism #159 for more on the dilemmas facing the U.S. bourgeoisie as it prepares for the 2012 Presidential election.

[10] Talk of political parties in supposedly democratic countries being “put into office” to perform a particular function used to be limited to the pages of left communist journals. Nowadays, these ideas are casually asserted in the pages of respectable bourgeois cultural magazines.

[11] Obama recently came out in favor of another extension of unemployment benefits in the days following the S&P downgrade, after remaining silent on this issue for the last 7 months.