The “Fiscal Cliff” and Dysfunctional Congress
As election day approaches, disinformation about what is called the "fiscal cliff" abounds. The fiscal cliff refers to upcoming automatic budget cuts, including to the military, increased taxes on the majority and once again reaching the "debt ceiling," all to occur during the "lame duck" session of Congress. The "lame duck" session refers to the period after the elections and before the new Congress is sworn in January 3, 2012. It is expected to begin November 13.
The ruling circles and their monopoly media commonly refer to several main elements involved in this "fiscal cliff." One is the automatic 50 percent across-the-board budget cuts mandated by the 2011 Budget Control Act, if no new budget is reached. These include 50 percent cuts both to the Pentagon budget and that for social programs. A main concern expressed is the need to make sure the cuts to the military are blocked. Simultaneously, more cuts are demanded to social programs. This is despite polls which show that a majority of the American people are against the wars in which the U.S. is embroiled and demand seriously strengthened social programs.
The monopoly financiers are claiming the country will drive "off the fiscal cliff" if drastic action is not taken. One such potential measure will be to form a committee of "moderates," under the Office of the President, to decide on the budget and prevent this "fiscal cliff." Two recent letters from the top monopoly financiers make threats about the "fiscal cliff." They too demand that Congress and the President must put the country's "fiscal house in order," or there will be more uncertainty and instability. The financiers, echoed by the media, all target Congress and demand that it act to make the necessary cuts to social programs. Former Secretary of Defense Gates called it a "make or break" situation. But what is to be “made” and what “broken?”
In 2011 Congress gave itself more than a year to resolve conflicts, but did not succeed. It is dysfunctional at this point. Old arrangements of resolving conflict, based on the two parties of the rich and their machinery — including power-brokers that could deliver, dividing up committee chairmanships, back room deals on pork — all no longer function.
The intense conflicts within the ruling circles are heating up leading to Congressional dysfunction and demands for the executive to establish an allegedly “bipartisan” committee to control the spending power. Obama is to be the champion who saves the situation by defending the union against the danger of civil war, which is why he is always quoting Abraham Lincoln to describe the kind of leadership required within the situation. Obama directly commented that "Leadership more than anything is about setting a course and describing a vision for people Abraham Lincoln understood that we were a single union. And it took a bloody Civil War and terrible hardship and sacrifice to achieve that vision."
Obama, as president and Commander in Chief is responsible for preserving the union, which requires maintaining the continuity of governance. Congress is dysfunctional, yet it has control of the public purse strings. A new arrangement is required, consistent with the huge increase in executive power under both Bush and Obama. The “lame duck” session of Congress, the last before the automatic cuts occur, is an arena for securing this arrangement. The fear-mongering about the “fiscal cliff” is a means to divert and deceive the public that great danger exists which cannot be resolved in any way other than the Commander in Chief taking control the public purse strings. Who this serves can readily be seen.
Among the key things left out of the “fiscal cliff” diversion are ending war funding and bringing all U.S. troops home as major ways to cut the deficit, strengthen the economy and contribute to peace worldwide. As well, there is no talk of even freezing debt payments to the financial oligarchy, another ready source of funds. Given that this financial oligarchy, bears the prime responsibility for the current economic crisis, and the workers are not responsible, freezing debt payments would be the obvious measure to take.
Instead, the main content of the proposals comes from the very same financial oligarchs for yet more massive cuts to social programs, including Medicare, Medicaid and Social Security. Their demands also mean government workers will likely face layoffs and cuts to benefits.
Their various tax proposals do not include increased corporate taxes or even guarantees these are paid. They do include requiring that whatever funds are secured by closing tax “loopholes,” or eliminating deductions, are used to pay down the debt. This means guaranteeing that the U.S. makes its payments to the financial monopolies on its debt, payments estimated at close to $500 billion yearly.
As many actions and demands among the people bring out, the stand needed is to Stop Paying the Rich, Increase Funding for Social Programs. This represents the independent politics of the working class and is the direction to fight for. It serves to direct government to provide for the rights of the people and utilize the wealth produced for this purpose, not for paying the rich. The economy does not have a problem of lack of money. Its problem is that it is a war economy serving the war aims of the rich which necessarily means attacking the rights of the peoples, here and abroad. A new direction is needed a direction that puts the rights of all at the center.
All of this confirms that the "coalition of centrists" which is likely to emerge to deal with the failure of Congress to function, will guide a "budget committee" under the office of the president. Members of this coalition of so-called centrists are also likely to be nominated to Cabinet positions. It is the next step in the take over of the public authority by private interests.
The promotion of the "cliff" is a means to justify such a move, to convince the public of its necessity at a time when people are devastated by the failure of the American dream, the promise of America to deliver economic prosperity, happiness and hope. This American dream was to be restored by Obama in the last four years, so that Americans could overcome the humiliation they felt as a result of the atrocities committed under the Bush administration, which left the American dream and American promise in tatters. Instead, the refusal of the ruling elites to permit the kind of changes which are warranted at this time and their actions to depoliticize the polity are such that the feelings of humiliation either get overwhelmed by feelings of hopelessness or must be turned into the kind of resistance which will bring about fundamental changes to U.S. political and economic structures.
Meanwhile, this election is all about how the ruling elites will continue to use the American state power to plunder and devastate both their own country and the peoples of the world to such an extent that it continues to devour even itself.
Top Financiers Demand Even More Cuts
The largest U.S. financial firms are demanding cuts to social programs, especially Medicare, Medicaid and Social Security, as necessary to lower U.S. debt. In two letters sent to Obama and Congress in October, these financial monopolies, who grabbed trillions of public dollars in the last “stimulus,” are again demanding more payments.
They state the U.S. credit rating will be downgraded, it is just a question of when. Such a downgrade would increase rates paid by the government to borrow money — meaning even more government payments to the rich in the form of payments on the debt.
As the one letter from 15 of the nation’s largest financial monopolies put it, “Another downgrade of our nation’s debt by a major rating service…could lead to significantly higher interest rates.” They add, “Higher interest payments would worsen our nation’s fiscal burden and likely increase uncertainty and instability in global financial markets.” Meanwhile these same financiers continue to get trillions from the Federal Reserve, interest free, under its “quantitative easing” program. The 15 monopolies included Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Wells Fargo and the financiers’ trade group, the Financial Services Forum.
The financiers make no mention of massive war funding as a main source of U.S. debt and no mention of cutting it as a means to lessen the “nation’s fiscal burden” and increase economic stability. Ending the $1 trillion in military spending could readily deal with the current calls for $1.2 trillion in cuts over ten years. Bringing all the troops home would immediately allow for such cuts, as the war funding and spending on the more than 700 military bases and facilities worldwide would no longer be needed.
JPMorgan Chase chief executive Jamie Dimon says he will use all the power he has as head of the country’s largest financial monopoly to press Congress for a plan to the financiers’ liking. Dimon is a major backer of a Washington-based campaign known as “Fix the Debt,” which is planning to spend $30 million to convince the public to support the massive cuts being demanded by the financiers. It is “Fix the Debt” that issued the second letter, called a “Deficit Manifesto” that is backed by 80 CEOs of major U.S. monopolies. These include CEOs of Alcoa, AT&T, Boeing, Caterpillar, Delta Airlines, Dow Chemical, GE, Merck, Microsoft, Time Warner, UPS, and Verizon.
The “Manifesto” calls on politicians to acknowledge, “that our growing debt is a serious threat to the economic well-being and security of the United States.” It calls for Washington to adopt “an effective plan [to] stabilize the debt as a share of the economy, and put it on a downward path.” The financiers again make no mention of cuts to war funding, interest free loans and/or freezing U.S. debt payments to the financial oligarchy, currently estimated at close to $500 billion. They instead argue that a plan must “Reform Medicare and Medicaid, improve efficiency in the overall health care system and limit future cost growth” and “strengthen Social Security, so that it is solvent and will be there for future beneficiaries.”
Social Security has its own separate funding, and these financiers want to get their hands on it, just as they are striving to get pension funds of both private and public sector workers. “Reform” and “strengthen” are code words for gutting these programs, which already are insufficient to meet the rights of the people to healthcare and secure retirement.
The CEO statement also calls for “comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.” The incoherence of such a plan was raised, with one commentator quoted as saying, “You can’t have lower rates and higher revenues,” at least “not without eviscerating pretty much all of the tax deductions which much of the middle class has learned to rely upon. Mortgage-interest tax relief, the charitable deduction, even the deduction for state and local taxes: pretty much all of them would have to go.” The “Manifesto” if implemented will mean greater chaos and uncertainty as further cuts to social programs are made and taxes raised on the majority while keeping corporate taxes and freezing debt payments off the table entirely.
The statement concludes by calling on Washington to implement the recommendations of the 2010 “bipartisan” Bowles-Simpson Commission. Those included some $4 trillion in cuts to be achieved almost entirely at the expense of the working population: new taxes on consumption and employee health care benefits, cuts to Social Security and Medicare, and to the jobs and pay of government workers.
Both Obama and Romney expressed support for these demands of the monopolies. The Wall Street Journal, which published the “Manifesto” cites the comment of Obama campaign spokesman Ben LaBolt: “There’s a strong and growing consensus that the only way to reduce the deficit while also growing the economy is through a balanced approach that includes both tough spending cuts and increased revenue.”
Romney campaign spokeswoman Amanda Henneberg told the Journal, “As president, [Romney] will bring his record of bipartisan success to Washington and put us on a path to achieve more than the Simpson-Bowles commission ever proposed.”
The independent politics of the working class demand rejecting this wrecking of society with its broad attack on public right. It is by defending rights and increasing funding for social programs that a path forward can be forged. It is by restricting the monopolies, such as through: anti-war measures like cuts to war funding and bringing all troops home; freezing payments on the debt; ending all payments to the rich, that public right can be defended.
In a recent speech at the National Press Club, New York Senator Chuck Schumer proposed significant cuts to Medicare. He referred to “reducing Medicare costs by hundreds of billions of dollars.” Reducing “costs” is code for major cuts to benefits. Schumer put forward his proposal for cuts to social programs in the context of upcoming budget debates during the lame duck session of Congress, which occurs after the elections but before the new Congress is sworn in.
He is presenting the cuts as part of getting Republicans to agree on a new budget. As he put it, “A grand bargain can be had: Republicans get entitlement reform (read massive cuts to social programs), while Democrats get revenue (from keeping the top income tax rate at 35 percent or higher).” The top rate is scheduled to automatically go up to 39.6 percent January 1, if Congress does not pass a new budget.
In previous battles on tax reform, Obama has agreed to lower the top rate to 28 percent, while others, like Republican Paul Ryan, have called for 25 percent. Schumer is staking out the higher rate as a starting point for the upcoming negotiations, meaning it will undoubtedly go down. He also is making it appear that he is in favor of taxing the rich, while in fact his proposals will guarantee more government payments to the financiers of New York’s Wall Street.
Schumer is calling for tax loopholes used by the rich to be closed, something common to proposals by Republicans and Democrats alike. Usually, such funds are then used to cover the cuts in revenue that occur from lowering the top rate. Schumer, unlike others, is calling for all funds secured through closing loopholes or reducing deductions to be used exclusively to reduce the deficit.
What is left out of the discussion entirely is that cuts to the massive military budget, which annually is close to $1 trillion is the best way both to contend with the deficit and strengthen the economy. War spending takes funds out of the economy, while that for social programs puts money into the economy. Further, a major source of the deficit is the interest payments made to the banks on U.S. debt they hold. Schumer’s proposal serves in part to guarantee these payments to the financial oligarchy will be made. Instead, all such debt payments should be frozen and all war funding stopped.
Schumer also brought out that the corporate tax rate, which should be a far greater source of government revenue than individual income, should not even be included in the budget discussions. He also did not speak to the need to close corporate tax loopholes, which make it possible for the monopolies to reap record profits while paying no corporate taxes or very low ones.
Schumer did say that a main source of income for the rich comes from capital gains. He said, “capital gains make up 60 percent of the income reported by the Forbes 400,” the top U.S. monopolies. But he said the rate for capital gains should not rise to the 35 percent level — that would be “too much” for the rich. While admitting the current 15 percent is the lowest since the Depression, he said only that the difference between the two rates should be narrowed.
All of Schumer’s proposals come in the context of the upcoming budget talks. They are being called, as he put it “talks on the fiscal cliff.” The “cliff” refers to contending with the “much larger, more dangerous deficit,” and the automatic budget cuts and tax increases that will occur at the start of the year absent a new budget. By law the new budget must include more than $1 trillion in cuts or tax increases.
For Schumer, a top Democrat from New York, to be putting forward “serious entitlement reform” as a major bargaining chip, means that massive cuts to social programs, including Medicare and Social Security are a done deal.
Further, the whole “cliff” scenario is designed to block debate among the people on alternatives, such as ending war funding and freezing payment on the debts. It is to instill fear about the future while blocking actual means to secure a bright future, by fighting for a new direction for the economy — beginning by taking it off a war footing and putting it on a footing to provide for the rights of the people. It is also to hide the fact that so long as the people themselves are not decision makers about how taxes are utilized, then changes to the tax code are primarily a means to favor one group of the rich over the other, while continuing to take wealth from the workers.
The problem is not a “fiscal cliff.” It is an economy and government serving the rich. What is needed is a new direction for the economy, beginning by ending war funding. What is needed are budget talks from the perspective of the people, which means, Stop Paying the Rich, Increase Funding for Social Programs!